The Part-Time Trader (23 page)

That is not the only way to scale in and out, obviously, but if you choose to get in as the price moves against you with the belief that your average price will be less, you will find that your best trades will very rarely be on full positions, and every stock you get stopped out on will come with increased commissions and at full positions. The reason I say that is that your best trades will typically do their best right out of the gates. The longer a trade drifts below your entry price, the less likely it will be successful.

My best trades always tend to do what they are supposed to do in quick order. Stocks that languish are not worth trading, and when you scale into those positions, you will find on the whole that your positions and the capital that you commit will be toward those stocks that languish or, even worse, fail, while your best stocks will give you only limited exposure to their potential gains.

The math just does not support scaling in and out. Like I said, unless you can systematically prove that your trading strategy will benefit you in doing so, and is provable over, at least, the past five years, there is no reason to do so. Besides, trying to work and trade successfully by doubling, tripling, or even quintupling the number of trades you place can create some major headaches for you when it comes to trading successfully.

One thing I learned early on is to avoid meaningless interaction with others as much as possible. There are plenty of people out there that would chomp at the bit to spill the beans on a part-time trader while they undoubtedly spend 10 times the amount of time at the water cooler, coffee maker, and everyone's office trying to get their fill of the latest workplace gossip. Even worse are the chronic smokers who believe it is their constitutional right to take a smoke break every 15 minutes while the company pays them to do otherwise. While I would not consider myself one who entertained himself in the affairs of others, I could get bored enough with my job where it would be quite easy to shoot the breeze with some of the folks around the office as well.

One step that I took about halfway through my corporate career was to eliminate any and all chairs except for my own in the office. When you have chairs in your office, it leads to people putting their butts in them. And most people in the office keep their butts staked in that chair until it seems fitting for them to get up and leave. I did not like office confrontation, and asking someone to leave would be more harmful (think creating enemies) than just letting them hang around for five minutes . . . or two hours. Also, I might miss a trade that I would have liked to take because someone came in and jimmied themselves into my chair. So I got rid of them. Every last one of them were taken out. If someone wanted to come in and chit-chat, we would just have to see how long they could last standing up.

Another easy mistake to make is putting a snack on your work desk. You are just inviting anyone and everyone that gets the munchies to come in. I used to constantly have snacks in my office and never realized how much that interrupted my ability to trade. M&Ms were pretty bad, particularly those with the peanuts inside of them, especially if there was a pregnant lady in the office, God bless her, because she would get chocolate cravings that could wipe out a one-pound bag in the blink of an eye, and there is no way I am going to get in the way of a hormonal pregnant woman and her M&Ms.

But there is nothing worse than placing a bowl of pistachios out there for people to snack on. I love pistachios, but that almost undid me as a trader. It does not matter if you have chairs in the office or not, these guys—and, yes, most of them were guys—would come in there like it was the place to be on the 15-minute break and start chomping away at the pistachios. They did not want to take too many at a time; instead, they would just stand there and reach into the bowl repeatedly for more. Besides, my trash can was right there by my desk, so when they got the nut out of the shell, they had to dispose of the rest somewhere. Consequently, these people never left, and I would have to engage in meaningless conversations with them as well—because who eats pistachios without shooting the breeze with your coworker? No one eats pistachios with others in silence, and neither will your coworkers.

For some, having to worry about the chairs in the office is not a problem simply because they are stationed in a cubicle. But au contraire! You see, having the cubicle makes you even more vulnerable because, if you have any desk space, and typically you have much more desk space in cubicles, you end up having the guy with the 1980s retro mustache with thick-rimmed glasses coming in with his morning coffee that is half spilling over, only to place his derriere on your desktop spewing nonsense as he tries to tell you the latest corporate developments and intimate details about his job as if you were really interested in knowing anything about it.

The best way to avoid this scenario is to spread stacks of papers or folders across your desk. They will not move the papers to make room for themselves out of fear of messing something up that is important. So once again it comes down to how long they want to place their left hand on top of your cubicle wall to support their weight as they lean into it. At least in the office, you could either shut the door, which blatantly told people to stay out (unfortunately most organizations frown on that behavior, assuming you are up to no good and want no one to see what you are doing), or you could do what I did and just leave the door about a third of the way open so it allows people to come in if they really have to but sort of signaling to them that you have better things you would rather be doing than talking to them. In order to come in, they would have to knock on the door and then push it open, and for some people the psychology of the “one-third door open” maneuver is enough to keep the pesky guests out. In the cubicles, though, you are very susceptible to foreign intruders. Your surest way is to be bold enough to simply tell them you must get back to work. Hopefully, that person will get the message and visit you less frequently and not stay as long next time.

Another way around the all-too-frequent visitor is to have a nearby employee call your office. Each time he starts talking to you, you can politely tell him you have to take the call.

No one said trading while holding down a full-time job would be easy. It definitely is not. I did not have a guide for doing it, and instead I had to rely on a lot of trial and error. Now you have the one and only authority on part-time trading and how you can do it successfully. Understandably, not every situation is the same, and everything that worked for me will not work for you, and you will want to make sure that you recognize this and modify my strategies to suit your own workplace.

There will be new strategies that you come across, and I would love to hear about them at SharePlanner.com. Just shoot me an e-mail on our “Contact Us” page, and I'll be sure to read and respond to any insights you provide. My biggest hope is that you take what I have written and can find that hope that helps pave the way into full-time trading through successful part-time trading. It takes a lot of discipline, not just with the trading, but also managing a demanding job where everyone holds high and sometimes unreasonable expectations for your work performance.

If it comes down to it, sabotage the trade before you sabotage your job, and always make sure you are not trading so big, with positions that are too large, that you cannot focus on the work at hand. Anxiety from trading is real, and for traders it can be debilitating. When you are trying to manage a job at the same time, it can ruin your reputation and the credibility you have as a contributing member to your organization. Large sums of money, particularly money that you need in the short term, is something that you cannot afford to trade with. When the drawdowns happen (and they will happen), the realization of large sums of capital will paralyze your thinking and you will be far too susceptible to suddenly showing up on the corporate radar when your job starts to become affected by it. You will start watching market action far too closely, spending too much time trying to change what you likely cannot undo, and in the process forgetting about the fact that you ever had a job you were supposed to attend to.

Trade within your means, take what the market can give you, stop watching the dollars, and most importantly make sure that trading successfully also includes successfully managing your job as well.

I
came to have such a deep disdain for the job that I held that I had imagined the day when I would walk in to the office and give the boss man my two-week notice, and then walk out in a blaze of glory. I would come in with one of those 1980s' boom boxes mounted on my left shoulder with Johnny Paycheck's classic
Take This Job and Shove It
blaring so loudly that everyone would be able to hear it.

I would walk in and slap my resignation on the desk of the boss man and utter a Jim Cramer–like expression such as “Booyah Skeedaddy!” The buildup in my mind created a far more anticlimactic reality when that day finally arrived.

Coming to a final decision was not something that happened overnight—not by a long shot. It was more or less a process where if I was a pot of water on the stovetop, the temperature kept rising and rising to where I started boiling over. This is the point where the choice became more out of necessity and not out of a sudden revelation that came to me. The realization of my future as a full-time trader had dawned.

I had a lot of self-doubt to deal with as well. I was not sure if I could make it as a full-time trader or whether I would generate the necessary income that I set out to achieve. Having a paycheck that consistently comes in on the first and fifteenth of every month systematically is something that I have very much grown to appreciate since leaving the workforce. While I have no desire to ever go back and work for someone else, there have been weeks in my own trading where I wish that regular paycheck would reactivate itself.

My trading got to a point to where I could not just trade as a part-time trader. As a caterpillar transforms into a butterfly, I had transformed as well, to where suddenly, as the means was there to quit my job, my skill level and educational experience over many years of trading in the markets basically spoke for itself that I was ready for primetime trading.

A lot of people thought I had lost my mind, as I was doing something that people stopped doing back in the 1990s during the market's tech boom. There were plenty of people who tried to talk me out of my decision, and there is no doubt that it created apprehension leading up to my decision to leave and even after it had been made, when all the events were set in place.

I was going from being a full-time employee in a stable work environment into a very difficult career field that few succeed in. It is one of the most unpredictable professions that one can apply himself to, where no two days are ever alike, and each day offers a new challenge.

I made sure I would be ready from day one. I did not want to quit my job and suddenly be trying to figure everything out. Instead I built the computer I would trade off of. I did not want to skimp on the most important tool that I would need for my full-time trading career.

I recommend that you avoid buying an off-the-shelf computer from a store. Those machines typically come loaded to the gills with software that are like sexually transmitted diseases to your computer. They cause all sorts of problems, and once you get them on your computer you never seem to be able to rid yourself of them.

After building my first computer with a lot of help from a close friend, I knew I would never go back to a store-bought one again. Having someone who is skilled in the area of building computers is absolutely necessary. Perhaps your friend in information technology could help you with the task. But building your own computer gives you a clean and unadulterated platform on which to start your full-time trading career.

Processing power and random access memory (RAM) are two areas that you do not want purchase the minimum of. Look for the best processor out there on the market, preferably an Intel processor if you can. While it varies by computer, I would no doubt get as much RAM as I could. Otherwise, you will find that, as technology improves, your computer will lag more and more with each passing day.

Let's put it this way—my experience with store-bought computers is that they are good for about two years or so and they start breaking down, or they start to malfunction on their own. The ones that I have had custom built are typically cheaper, if you assemble them on your own and buy the parts from a wholesale retailer online. Doing this has resulted in triple the lifetime of my trading computers, and when something breaks down, I can just replace it without having to do anything to the rest of the computer. I have been able to modify my computer as I see fit. At times, it was to put in a new coolant system; another time, I decided I needed to replace the video cards, so that it would put off less heat. I have also recently swapped out my hard drive in favor of a solid-state drive that makes the machine run oh-so-much faster.

On the monitor front, you should give strong consideration to having multiple monitors as part of your setup. You don't realize how much you will benefit from having more than one monitor until you actually have more. I know traders who have managed to trade successfully off of a laptop, and kudos to them for achieving that. Multiple monitors will by no means improve your success in the markets, but it will allow you to see more, to view more charts, rather than having to constantly minimize and maximize your screens. I personally have ten monitors stacked five across and two monitors tall. While that might be overdoing it for some, it helps me as well with providing quality content each and every day on SharePlanner.com.

By the way, a word of advice on video cards: stay away from the high-end and high-performance ones if you are going to run multiple monitors. Those cards have a tendency to put out a lot of heat. I replaced my own with some el-cheapo ones and I went from a sweatshop-like environment to a nice and cool office for trading that did not force me to consider trading in my tanktop and skimmies.

I'll never forget that feeling of walking out the door, not being obligated to return the next day, and literally being off the grid and off the project teams that had controlled my Monday-through-Fridays for well over a decade. The opportunity was finally mine to prove my own worth, not hampered by the constraints of corporate policy, pecking orders, or the office politics that so easily ensnares us all.

I woke up the next day and I went to work—for myself and for my family. It was the first time that my potential had no ceiling to it. What I wanted to become I could make happen with the dedication and hard work that the job would no doubt require of me.

Like any business, I have had my ups and downs, but would not trade the experience for anything, and can only be excited about what the future holds and how it will look 10 years from now. The days are exciting, and the market provides a new story each day for me to trade.

There is plenty to consider when it comes to leaving your job. One aspect I hated leaving was the employee benefits. I had some of the best that you could find, particularly with the health care. Obviously, we had to get our own coverage, and I honestly thought it would cost me an ungodly amount. To my surprise, though, it was not all that bad. A few hundred bucks a month and my family and I were insured. Now that will change as we get older and the susceptibility to different kinds of illnesses becomes far greater. For now, though, if you are still relatively young, you should shop around and find the insurance plan that will benefit you and your family the most.

Then you have the implementation of Obamacare; I have no idea what that is going to do in terms of our ability to acquire quality health insurance on our own and as full-time traders. If history is any indication, massive government programs like Obamacare will result in an equally massive failure and a huge bill for the American taxpayer to foot.

The fact that you are leaving your job does not mean you should not continue contributing to your retirement account. Frankly put, you are not retiring, you are starting a new career in full-time trading, and therefore you need to account for life after your trading days are done and over with. Making sure you have an individual retirement account (IRA) or some other form of savings to support you later in life is absolutely necessary.

There is no doubt that I could have stayed in the corporate realm and continued with my part-time swing trading. There probably would have been far less stress in many ways. However, the environment that was I was working in was far beyond my tolerance for nonsense, and kick-starting a web site called SharePlanner was another desire of mine that I wanted to be able to partake in. SharePlanner formed out of my experience as a part-time trader and caters to those who are still in that working environment and would like to make their way into the world of full-time trading.

I have experienced a lot of web sites, and subscribed to many of their newsletters, that simply created the framework that make themselves look like geniuses while covering up their own shortcomings as traders. Others would just flat-out lie about what they had to offer. I would honestly say that 90 percent of the newsletters and subscription-based services offered today in the world of online trading are flat-out garbage and, even if they were offered for free, would not be worth your time or effort. In fact, they would be detrimental to your trading account.

Under this belief, SharePlanner.com was created to show that transparency in individual trades that is lacking everywhere else. I provide my successes, my downfalls, my continued education in the financial markets, and, most important, my lessons learned, and I blog about it multiple times throughout the day, which also includes a daily trading plan that outlines my observations on the market at hand, my strategy for the day going forward, and the positions that I am currently in and how they are performing. This is provided every day, and countless thousands have benefitted from it in the process. Through SharePlanner I wanted to provide for everyone else the exact same information I was providing for myself. Watch lists, trade setups, observations, market analysis, technical analysis, stock screens, and educational lessons and tutorials are all there for you to have for free.

SharePlanner has been blessed as well to have some of the best traders that can articulate their trading and knowledge to their reading base as well. They provide daily trade setups, watch lists, and their own research that they go into each day to trade with. If you are going to trade and equip yourself with all the tools necessary at your disposal, I would highly recommend that you make SharePlanner.com a part of your daily routine.

There are other features to further your education, and those I consider to be my “premium” offerings. Despite the fact that it will require some of your own money to be spent on them, they will provide you with an experience at a discounted price that no other site can match. I am consistently in my chat room every day providing my trades in real time (via chat, text, and e-mail alerts), trade alerts, market analysis, and opportunities to trade on. For those looking for more of a long-term solution to managing their IRAs or 401(k)s, I provide a long-term investment system that continuously outperforms the market at large.

There are plenty of educational offerings, such as our online courses and do not forget the free knowledge base of my favorite articles on trading that I have written over the years and will teach you how to trade in different scenarios using strategies of all types.

I once had a conversation with a successful entrepreneur friend of mine, and the question that I asked him was, “When did you know it was time to leave your job?” I was expecting an answer that would reveal the exact time he knew it was right to leave. Instead, he told me, “Ryan, there's never a right time.” That answer took me aback. I was hoping to feel inspired by what he would tell me, but instead he told me that the decision to leave the steady paycheck for uncertainty would never come at a perfect time of my choosing. Instead, it will carry risk, and the best thing I could do is prepare myself to the best of my ability and increase my knowledge and understanding of exactly what I was entering into.

To think that I could just seamlessly transition into the world of full-time trading without there being any trials or setback would only be fooling ­myself.

The notion that you can quantify the perfect time for you to leave will instead leave you constantly waiting without ever actually realizing the opportunity that is yours for the taking. The risks will be there, and if you have taken the shortcuts that I have warned against, then you can expect that to finally catch up with you and possibly affect your chances at living out your dream.

Make no mistake, though—you will want your finances to be in order. At the point where you are contemplating whether you should give the two-week notice, you should have a fair amount of capital lined up and ready to go. This amount of capital should not be suddenly inherited or raised from some outside source, either. Make sure that the money that you are going to trade is an amount of your own that you can live off of from the profits of your success. If it indeed is a lump of cash you have inherited, then you need to get used to trading that kind of capital before you call it quits.

I have run into far too many traders who have inherited a large sum of cash from a recently deceased relative, and instead of taking the time to learn and gradually build up their comfort level of trading a large portfolio, they put all that money to use right away and try to successfully trade that large sum that they are inherently uncomfortable with.