What It Takes To Become A Full Time Trader

It is the dream of many traders to one day quit their job and become a full time trader. Trade With Precision founder Nick McDonald did exactly that nearly 6 years ago and in this newsletter we will share with you some of the advice he gave to readers of Traders' Magazine when interviewed in November 2007 on how to achieve the same goal. The advice today remains unchanged.

For a full transcript of the interview with Traders' Magazine click on this link: Nick's Interview with Trader Magazine.

TRADERS´: Did you commence trading with a small or large account size? (Of course, those terms are relative.)

Nick McDonald: I went out on a limb and left my job when I probably should not have. I could not really afford to live off my profits and only had a small account. I knew that I was never going to be anything other than a trader, so why go on working in a day job which I did not like? Somehow, I managed to get by during the early stages although it was tough. Less than two years later I had a two month period where I made more money than I would have previously made in 12 months. I realized then that I was no longer trading on a small account.

TRADERS’: Many traders who start with small accounts are blown out of the market in a few weeks or months. You started with a very small account and trade full-time now. Do you think that’s a feat that many traders can duplicate?

Nick McDonald: I think if you are determined enough to achieve something and burn all the bridges for the alternative then yes, you can find a way. Determination and persistence will usually get people there if it’s what they truly desire. I left my job and did not ask for a reference letter, I deleted my CV from my files and ceremoniously destroyed all traces of it… I knew that was the last job I was ever going to have. This is what I mean by burning the bridges. I did not leave myself an option of returning to fulltime employment.

TRADERS’: What are some of the lessons you learnt while you traded with small money? In other words, what enabled you to survive this part of your career?

Nick McDonald: Money & risk management is crucial. I used to work on a system of very low risk but very high reward. My risk was usually 1% or less per trade on a small account. I stuck to this rule religiously so that I rarely lost more. I stood to make a lot more, however, when I got on the right side of a good trade. While of course I had many losing trades, most good trades would make around 3 to 4 times the amount lost on a loser and the odd trade made 10 or even 20 times and that was what really boosted the account.

By having limited risk with unlimited reward, I managed to build my account to a stage where I could live off it. Also, after each profitable trade my account grew and so did the 1% that I could risk on the next trade.

I now trade slightly more conservatively but the point remains the same, money & risk management combined with the discipline to stick to the rules are essential elements if you are first to survive and then succeed.

TRADERS´: What are some of your market concepts or trading ideas?

Nick McDonald: The main concept is to always have as many reasons to enter a trade as possible. Many people trade divergence, others trade trends, some trade Fibonacci levels, others pivot points and others again trade clusters of support and resistance. The problem with this is that most traders are looking for these setups in isolation.

It may sound complicated but I look for all of the above to be setting up precisely the way I like it at exactly the same time. Initially this could sound like a lot of information but once you understand all aspects of the trade then you can analyse all of the above in a matter of seconds and it is in fact very simple. It also results in only very high probability trades.

I don’t want a lot of trades. I want a lot of winning trades and am prepared to wait until the very best setups occur.

TRADERS´: How do you determine when you are wrong in a trade?

Nick McDonald: I am wrong if I don’t trade exactly according to my plan. If I trade according to my plan then I do not differentiate between winners and losers, which I think is what you may be asking about. I know my entry, stop and target in advance, I know them all before the trade is even triggered. Hence, I lose money if my stop is hit and I make money if my limit is hit. However, a losing trade is not necessarily one that loses money. A losing trade is a trade that is not executed according to my trading rules. I know that if I execute precisely according to my plan I will make money over the long term and am hence winning. Even during non-profitable periods, I still consider myself to be winning provided I have not deviated from my plan. This is the only self- check that I make.

TRADERS´: What do think is the difference between you and so many other traders who were kicked out of the game?

Nick McDonald: Most people don’t want it badly enough. They may think they do but if they don’t make it then they probably didn’t really want it as much as they thought and gave up too soon. I don’t think I have met a person whose life goal was to become a trader who has not eventually made it. By that I mean those who REALLY want it above all other career moves will get there eventually. Persistence and determination are the keys. If someone wants something that badly then whether it takes weeks, months or years, they will keep on going until they get there. The average person will stop at the first hurdle, after the first failure or rough patch in the market. We all face those patches, every single trader does. Therefore, to answer your question in a nutshell – the winners will never give up, the losers give up at early signs of failure. If as a kid when you fell off your bike, you never got back on it then you would never learn to ride the bike properly.

You must learn from your mistakes and get back on the bike to give it another go. Starting to trade again after a period of losses and learning from it, makes a trader stronger. As with riding a bike, making mistakes is the only way to learn. People are often focusing on a dream of making millions in the markets rather than the reality of hard work, disciple and persistence required to achieve success. If you come to the market prepared to work hard then there is light at the end of the tunnel and fun to be had along the way!
 

For a full transcript of the interview with Traders' Magazine follow this link:  http://www.tradewithprecision.com/files/Nick_TM_Interview.pdf

Regards,
Trade With Precision Team
www.tradewithprecision.com

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