Finance Writer



What I Learned In Three Months Without Trading

At the start of this year I decided that I would stop pursuing trading for the immediate future. Poor capitalisation and family commitments meant it had gone from being a dream that would one day yield financial independence, to something that was causing too much stress.

Three months on I’ve had time to get a fresh perspective. What follows is where my head is at with trading and what I’m working on behind the scenes to eventually bring me back to trading.

2018 — The year of the unplug

Giving trading up was a hard call for me. I’ve been actively working on my trading goals for so long now it felt like I was throwing an old friend out into the cold.

Don’t get me wrong, my trading friend and I had some rocky spells. Initially we misunderstood each other, argued about our goals and disagreed on our view of the world.

Later, we became closer. I began to understand trading and respect the mechanics of how it works and in return, trading gave me an honest appraisal of what can be achieved and it let down it’s guard. Slowly I started to see Trading and the markets for what they really were.

Eventually though my friend and I parted ways, the financial markets of course still yield riches for a special few, particularly with the volatility that returned in February, but at least for the mean time, I stood aside. I’ve been busy with other things. With work, with parenting, being a husband, trying to reduce stress and with putting some long overdue time into the house.

I’ve resisted the pull to dive back into Trading a number of times. “You’ve committed to having a clean break” I told myself, “you need to focus on your plan for life”.

Things would be easy if I didn’t miss trading, I’d be able to accept that it was a rewarding, yet ultimately unsuccessful endeavour, and look to a future without trading with a sense of calm, peace and excitement. But I do miss trading — a lot.

Trading — The wise old teacher

Trading is an amazing teacher. The satisfaction of minor gains are euphoric, but it also doesn’t waste any time whipping you when you make mistakes. Trading is the ultimate meritocracy, one where the only illusions involved are the ones you choose to build yourself.

A friend once told me that coaching is the art of getting the student to answer their own questions, to bring out their own wisdom in order to give them meaningful direction. This for me is exactly what trading does.

Provided you are honest with yourself, and provided you listen, trading is the best teacher you could ever hope to have.

Primarily it’s this teacher that I miss. Learning something that is naturally so different to my usual path in life has been so rewarding. No matter how slow the progress it’s been a top class education. Like Aviation, Trading isn’t just about the job at hand. There are so many peripheral areas of knowledge, so many topics of interest that you never stop learning. I’ll admit, having a future where Trading doesn’t feature gets me down.

Don’t get me wrong, having no pressure to do anything outside work than be with the family has been amazing. I’ve been able to help with getting my wife’s business off the ground and have even been able to watch a few movies. I’ve also started gardening, trying to get on top what feels like a jungle. Perhaps trading is easier.

All that said, my mind is hardly ever at rest. The space that trading used to occupy has been quickly filled. Annoyingly, rather than having one consistent goal, one area of interest, I’ve become the magpie again. Everytime I see an ad for this way to make money or that online venture, the excitement is back. It builds until I look into whatever new thing has grabbed my attention, realise it’ll take a stack of work, and instantly miss Trading. I miss it because it’s what I know, it’s a journey I understand. That is something I never thought I’d say.

When I am at rest, I find myself drifting into thought about what we need to do to the house, how to dig up and re-seed our lawn, plan for retirement amongst all the other conundrums of life.

When the night comes, my mind turns to entrepreneurial dead ends. Should I get started in e commerce? What about Amazon selling? Obviously these ventures do very well for some, but I can’t help but feel that I’d rather finish what I started with Trading than make a fresh start with something that I know nothing about.

Metaphorically, I’d rather water old friendships than cultivate new ones.

I’m glad I feel this way. Part of me was worried that I wouldn’t miss trading at all, and that it would fade out of my life easily, with nothing to show for the time and effort invested.

Initially it was great to have a break, a clear head gave me some perspective to address how Trading was negatively impacting daily life. I worked on how to combat the problems that ultimately lead to me still not being a consistent or profitable Trader.

Latterly though, I’ve started to miss my old friend. I’ve seen my favourite educator go from strength to strength and I get the feeling I’m missing a good time to be in the game, learning the markets. I want back in for sure.

Resist temptation, remember the long game

Previously, I’ve not been a fan of Trading Simulators. I don’t think they emulate well the psychology of being in the market and they often don’t represent order fills properly. That said, The company who’s software I use have released a new Simulator that does represent order fills properly.

I think for new traders especially this is an excellent facility. Coupled with the company’s members leaderboard (which I found very helpful for accountability), I think it’s a really comprehensive package. This is especially the case if you can’t commit funds to the market.

It’s at this point you’d expect me to say I’m making a return to Trading using this new simulator. This is something definitely I’ve considered, even been pulled towards. But alas no, I’m not.

If I were to make a return to trading now, I would be doing it simply because I miss it, because I miss the quest. I’d be doing it because of the worry that the Order Flow space is moving forward without me on board. To do this I think would be wrong, it would be detrimental for my own long term goal, and at odds with why I stopped trading.

What’s more important is to stay focused on the path I’ve set myself, so that when I do return to trading I can do it properly, and safe in the knowledge that I’ve stayed true to my word and put myself in a position to succeed.

That all said, I do think I should shed some more light on what this path is, and some background to how I ended up having to stop trading in the first place.

Closing Out, Debt and Better Decisions

I had to stop trading because I ran out of funds, thats it. I ran out of funds because I had a stupidly small account. I ignored all the advice I ever got about capitalisation and went ahead with a tiny account funded by some overtime at work.

I found it very hard to be in the market because one tick swings had my heart racing. The stress clouded my judgement and lead to stupid actions. I could contain losses and was starting to make good calls and even get a good read on the market. Then a couple of bad days wiped my $1100 account out.

Why did I have such a small account I hear you ask? Because that’s all I had, why? Because financially I’d made bad decisions since I can remember. Like millions around the world I’d never learned the rules of money had a complete misunderstanding of how to manage it.

Whilst I’ll caveat what I’m about to say with the statement that my situation was by no means extreme, I think it’s important to address some key issues with finance, investing and trading.

Top Gun meets The Joneses

When I was younger I had a completely warped view on how to manage any of it, I’d also bought into a lifestyle image I couldn’t afford. It was true, I was pretty irresponsible with money.

Being short is about the only thing I share in common with Tom Cruise, but that didn’t stop me trying to emulate the Top Gun image. It wasn’t just me, most other young Navy Pilot’s I knew did the same. Spend money on cars you can’t afford and big TV’s. I drove a TVR, lived in a beech flat and kept terrible track of money. Looking back, I cringe at how I spent my income. Maverick, I certainly was not.

Youthful Exhuberance

Youthful Exhuberance

Youthful Exhuberance

Previously I’d have said some of this was just down to youthful exuberance and the learning curve of life. Not now though, now I’ve done some learning, paid attention and tried to make better decisions. I don’t think that ignorance is a great excuse and I intend to teach my children differently.

When I was young, I bought toys I couldn’t afford, relied on loans to make big purchases and put nothing away for retirement. I spent more each month than I got paid. By the time I was married and in my thirties I had pretty much nothing to show for twelve years of a good salary.

A couple of years later we bought our first house. What our money got us was a struggle for me because it wasn’t what I thought we’d have at that stage of life. A year later I became a father, was still using credit cards and overdrafts frequently and the only money I had for a Trading account came from some unexpected overtime at work. Not a well thought out Trading Plan.

Back in my early days of being interested in trading if I had concentrated on getting my financial ship back on course rather than what screen set up I was dreaming about, maybe I’d have had more capital to play with and subsequently would have had less stress.

I’d have had more time in the market and ultimately would have made more progress. On my cessation of live trading I was pretty down about how I’d played things financially. But what’s the use in getting down about it? At 34 I’m not over the hill yet and I figured I had a responsibility to sort things now, both for my family and our future. I also owed it to myself so that I could return to trading one day and enjoy the journey for as long as it takes, without the stress of not being able to afford it. So I made a plan.

That plan was to get out of debt, save money for the uncertainties of life and put a solid plan in place for retirement. Rather than looking to strike it lucky, I’m looking to play the long game of investments.

Investing has always been a hard nut to crack for me. I’ve struggled to find people and strategies I trust and found it hard to forge a clear, focused way ahead. I’ve misunderstood where I should focus my efforts and how, if at all, it fits in with Trading. Recently it clicked, Trading is the battle, investing is the war.

If Trading has taught me one thing it is the importance of simplicity. Like anyone, I’d love to make gains well above the market for retirement over the next thirty years, but it’s unlikely. Instead I think I’ll just embrace the long term Index Fund. If I can match the market, compounding will look after the rest, at least in theory.

To that end once we are on our feet and in the black investing will be simpler. I’ll be looking at Traditional Index Funds to try and capture the majority of the market’s gain, at low cost. I’m not new to the Jack Bogle school of thinking, but in my naivety I’ve always thought there was a faster track to the big bucks.

Now with the humility of fatherhood I’ve come down on the side of just making sure the future is taken care of, with as low cost and low risk as practically possible.

So were does Trading fit into all this? For me, I can’t trade knowing the money in the account should be elsewhere, knowing that we have financial stress. So sadly I can’t do anything until I deem us able to move, able to commit capital that isn’t critical. This isn’t that far off really, but will still take longer than I’d have liked it to, but I guess thats the price I’m paying for my youthful folly.

Progress, paying it off and the plan for the future

Since August last year I’ve been trying to get this plan in action, we’ve done well so far. Since then (nine months) we’ve cleared over 10k in debt, sold two cars and have drastically cut our outgoings.

By the end of the year we will be looking to have our consumer debt totally wiped out, focus on saving a nest egg for emergencies and then save for a Trading account. Initially I think 5k is the minimum and it might take some time to get there.

To me, being able to trade in the comfort that the capital associated with the account was saved specifically for trading will be a big relief. Now I know why all those in the know say to do it this way.

Obviously, this all reflects a bigger shift in how we as a family view life, we intend to pay off our mortgage as quickly as possible and don’t want to ever go into debt again. The plan is not solely geared around getting another Trading account.

I’m aware that it might take a year or two to get to the point I want to be at before I trade again, that is a lifetime in trading and I’m sure things will have moved on. I’ll need to learn a lot and work hard, probably from scratch to get profitable, but for me, it’s a journey worth walking.

To some it might seem drastic to adopt these measures, to others it will seem obvious, but I see our families attempts to address these issues, plan for our future prosperity and work hard towards the goals we set ourselves as doing things properly.

Not only do I think I’m doing the right thing by the family, but I think I’m also doing the right thing for my Trading. I’m showing by my actions here that I’ll take an absence from the market now, for prosperity in the markets later.

Ideally, with hard work these goals will arrive quicker than expected and I’ll be able to make a return sooner. Ultimately it’s up to me to make that happen. I look forward to the road ahead, I’m genuinely excited.