PE Associate Trying to Understand the Truth Behind Retail Trading for a Living

Please give me the cold hard truth.

I am a PE associate who has a very nice comp and lifestyle, but am looking to transition to a point where I can become an entrepreneur and work for myself at some point (realistically in 5-15 years). I took on day trading as a side business about a year ago and it has gone pretty well but not well enough to quit my day job. I think as my account scales over the next 5-15 years, at some point I should reach a moment where I am good enough to do this FT. Is this possible or am I crazy? 

Everyone says "90% fail", "you can't compete against HFT and institutions", etc. I understand that the odds are low but I think I can accomplish this for the reasons below. Tell me if I'm naive: 

  • I understand discretionary trading for what it is - a pursuit of random probabilities where I don't need to know where the market is going in order to profit. I don't trade off of WSB, I avoid shit like AMC, I don't "diamond hand", I am not expecting quick riches.
  • I believe my edge can adapt to any market. I purely trade on market structure, price action and order flow. That's it. No gurus, no tweets, no indicators, no intuition. Just a repeatable system with a proven edge.
  • I only trade highly liquid markets (S&P and NASDAQ mainly). Sometimes I dabble in liquid equities but that's ~10% of my trades. 
  • I negotiated low commissions and fees from my broker. 
  • I set tight stop losses and don't delude myself into dreaming of big winners. Most of my trades are 3:1 R:R. Sometimes I let a winner run but I'll raise my stop accordingly. 
  • I understand that markets constantly evolve and that I always have to improve my system and my trading. I have spent countless hours over the last year studying technical analysis/psychology/risk management/reading charts/etc - and I am willing to continue doing this for the rest of my trading career. 
  • I relentlessly journal my trades and analyze my performance and psychology to ensure that everything is "working" and that I am constantly learning. 

When people say "90% fail", I think they're looking at literally a population of people who merely opened a brokerage account. When you narrow that population to people who take it as seriously as I do and run their trading like a business, the success factor appears higher. 

Am I crazy, or can I make this work at some point in my life where I can support a family solely on my day trading? 


Comments (7)

Green_Bananas, what's your opinion? Comment below:


"I'm going to make him an offer he can't refuse."

IcedxTaro, what's your opinion? Comment below:

I am actually quite curious myself.  

Perhaps there is a market for individual traders.  I remember reading on these forums a long time ago of successful day traders who made it a primary business.  However, it does come at a price.  If you can stomach the losses but also make a profit, why not?

Most Helpful
  • Associate 1 in CorpFin

You're strategy doesn't seem to actually have an edge or create any value. It seems more like structured gambling with a thesis behind your positions. The issue is you are using technical analysis. Everyone looks at/ knows about support/ Resistance, momentum, etc. under efficient market theory, if that strategy actually created alpha then the market would exploit it until the opportunity diminished. I don't think technical analysis is completely useless. I think it's helpful to give you an idea of what has happened historically and highlight inflection points. This isn't to say, you can't find something that works for you and be disciplined and make some money, but when you account for your time, transaction costs, and risk adjusted return I doubt it justifies pursuing this in the long-term. Personally, I think the only ppl who should consider active trading are quants who can identify an arb that is too small for institutions to Pursue. Just a thought, If you want to be more entrepreneurial and have a background in PE, check out the search fund model. According to the Stanford study on search funds, The model has generated an average irr over 30% since they started the model in the 80s. The industry is looking for young professionals search, acquire, and run these small to medium sized companies. I plan to pursue it when I'm done with my banking stint.

  • Analyst 1 in AM - Equities

There are very profitable day traders, they just don't have the time or need to hang out on forums and stuff.

I traded futures and options all throughout college and can't wait to drop my job once I develop a nest egg and can give it a shot.

The truth is part of trading requires high conviction and confidence in your setups and how you go about it, so I never cared about nerds quoting a theoretical study about why it's impossible or whatever. 

I love people who say "you're competing against HFT and institutions," kind of baffles me these dudes are in high finance and don't understand basic market auction theory…

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  • Associate 1 in CorpFin

I'm assuming you are partially responding to the last response, which I wrote. I also actively traded equities and options in college (was profitable). Like I said in my original post, it works for some ppl but I just wasn't recommending it. My point was related to outperforming on a risk adjusted basis after accounting for cost of your time and transaction costs. Pursuing a career in day trading a personal account is a whole different animal then doing it with a few thousand bucks in college or trading your portfolio on the side.

I've heard the argument for day trading a million times. Personally, I don't think that it should be solely used for thesis development but I do think it could be used to supplement position timing. I don't think anyone really says you are competing against institutions with technical day trading strategies per say but you are getting skimmed by the bid/ask spread by institutions, which is the point.

Love that you mention nerds referencing theory, but you proceed to do the same a few sentences down. Lots of super busy come back to this forum to try and give back since the forum was so helpful for so many. It's not that time consuming.

  • Quant in PropTrad

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