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Should I Be A Trader?

>> Wednesday, January 13, 2010

Many envy the life a trader. Who wouldn't want to set their own hours and enjoy a nice income. So, should I be a trader?

A trader is entirely a label that one adopts for himself. Even some people who lose money trading consider themselves traders. Generally, one decides to be a trader for two reasons:

One, for the money. They feel that they can make more money trading than they could at any other occupation they could acquire.

Two, for the lifestyle. They simply enjoy the trader lifestyle.

The money aspect:

A good trader is fundamentally a businessman. He or she understands how to trade to maximize his or her income. Generally, the factors that affects a trader's income, as with most business start ups:

1. One's skill compared to others' skill
2. One's luck

Since traders are interested in making money, they must play against people who essentially are interested in losing money. Unless there is a significant advantage in skill, I believe most retail traders will fall in the "interested in losing money" category of the market, or else the "interested in making money" traders will have no one to win money from. An advantage would be like for institutions and fund managers who have the advantage of capital; insiders who have an advantage of non public information; professionals who have the advantage of cheaper transaction cost; and so on.

But there are so many retail traders out there who are successful, why can't it be me? Well, I'll answer the question with a question, there are people striking it rich at the casino, and half-millionaires are made twice every week by winning the TOTO, can it be you? I am not sure if one is born lucky or it can be nurtured, but denying the odds of succeeding in trading do not change them.

The lifestyle aspect:

First, it is not a very social activity. You are essentially playing at home, with little human interaction. You do not enjoy the chat with colleagues and other social perks associated with a regular job, like medical benefits.

Secondly, it becomes monotonous very quickly. A trader will probably stick to the same successful trading style over and over again. Needless to say, this can become very boring, fast.

Finally, trading can have a highly variable income. This is not appealing to many, who couldn't handle the stress of such fluctuations of income. The trader must not be phased by these fluctuations at all, or it will affect their emotions.

For the above reasons, most good traders do not trade for a living. Trading being a full-time job is not too appealing of a job.

But I still do enjoy trading, so a semi-trader will be my choice. To enjoy trading as a side income and hobby without relying on it as a stable source of income. I believe trading as a lucrative hobby is the route that most winning traders take.

Here is a link for an online test to determine what type of trader you are?
For those who took the test, do share them in the comments.


Createwealth8888 January 14, 2010 at 11:43 AM  

My test result:



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