When the lockdowns started happening in March, I began trading the stock market. My YTD realized gains is equal to my base salary. About 140k. I am proud of all the trading I did. Living on the west coast it also turned me into a morning person, where market opens at 6:30am. Good side effect :)
Given this is a very strange year, extending into the markets, it is a very legit question to ask about sustainability. As I think about converting to full time trading in 2021, I ask myself this same question.
Let me clarify my situation first. I didn't have a bunch of cash to buy stocks in March. I worked at Google for 4 years and had all my cash sitting in GOOG stock via RSU vests. I didn't hold any other positions. Over the course of weeks I watched all the gains that had accumulated over those 4 years evaporate to nothing. There were a few days where these savings actually went red. By the time the bottom hit I didn't have a bunch of cash sitting around. I had a bunch of stock that had lost substantial value. I remember thinking "I am now officially losing money I had previously earned from hard work". I got really scared. I thought I was going to _continue_ losing money. The bottom never really looks like a bottom when you are in the thick of it.
This is the _starting point_ for when I began to actively trade around my equities. I thought, the markets are wild right now and here is my chance to come out ahead. I can sell all this GOOG stock tax free since there was no capital gains any more (consolation prize for me). Let's get going. It was difficult because I was so used to the comfort of just holding the same thing and watching it grow. It was like the autonomous car just handed over the steering wheel as it was going off course and I needed to get back on the track and learn to race at the same time. I now have a balanced portfolio, with tons of extra cash with a lot less exposure to GOOG. I also quit working for them.
I do think what I've proven to myself is that I can read environments, react accordingly and have the conviction to make good moves at the right time. The world will be different going forward and the same opportunities might not exist. I built confidence but most importantly I learned that I absolutely love waking up in the morning each day and getting into it. This is something I didn't have working at Google, and whether I can sustain this or not, I know I am moving in the right direction (away from there!).
Thanks for sharing that. Please don't get me wrong by the way, I do wish you luck and success in your new endeavor. I posed my question above, because a lot of people lose their hats by making some gains buying low during market crashes and then thinking they've got this thing figured out.
Sure! Yes, the one thing I am trying not to do is fall into this trap. Constantly telling myself I have nothing figured out and I need to figure it out the right way. Attributing everything to luck.
Congrats! Just be careful and don't quit your day job. Buying leaps on almost anything that dipped in march (and has since recovered) payed out 60-100% returns, and that's not likely to happen again anytime soon.
I did quit my day job :) I didn't do it because I think I can replace the income, but just realized I was very unsatisfied with my day job. I absolutely love the day to day of trading and investing. I'll figure out something.
I still hold all my LEAPs. I am up 60-100% on those but they are unrealized and don't want to pay taxes on them this year. We will see where things land when I sell them. Anything can happen.
I trade for fun as well. I am doing it with a rather small account, but if you feel like having a conversational partner from time to time feel free to email me.
No significant experience. I was just holding the stock that I had earned through my job. I was the person who would check their company stock every day because I had all my money in it but wouldn't care to do anything with it. When the market was tanking I sold it all for cash and then said "now let's make this grow into more than we started with this year". That was the beginning of trading.
Take all of my cash and break it into units/chunks. The size of the chunk should be the biggest size you can make it such that I wouldn't even raise an eyebrow to lose a whole chunk. I make decisions to invest/divest 1, 3 or 3 chunks at a time. When I decide to make a move I divide a chunk into about 5 parts and try to dollar cost average into a position. The time scale for the dollar cost averaging depends a lot of the events/contexts surrounding the trade.
I put money into a mix of long and short stock positions as well as long call options (LEAPs). The shortest call options I would do are quarterly, where I will listen to the earnings call, watch how the market reacts in the next day. and then set a call option that expires after the following earnings if I think the stock has been unfairly punished. But I usually stick to call options > 1 year. I have about 2/3's of my total portfolio in stock and 1/3 in options just to get good leverage.
This is sort of where I landed at right now. I didn't have any strategy going into all this. I am the kind of person that likes to learn for themselves and I knew I would lose money doing it. I just tried to know my limits and not lose too much when I thought it might happen. Looking back there was a time when I had maxed out my margin account buying AAPL as it was tanking in September. I sold that margin off for a big loss. I made some really stupid choices. But I learned and processed everything I did.
I am the kind of person that just learns by doing. I hear the word "call option" and I start chasing down what it means. I start buying them just to touch and feel the mechanics of how they work. I am a hands on learner who just plays with things. I want to build intuition. If I get stuck or having recurring thoughts/pains about something I will look on Google/youtube to get to the bottom of it, but it takes time and practice to arrive at these questions.
I recommend just getting into it. Dip your toes in the water, it'll feel a bit cold, let it warm up and eventually you will be swimming in the deep end.
Just want to add for anyone who comes after reading this, I think these types of recommendations are tied strongly to personality. If you have a similar personality, then take this advice. If you're more risk adverse, more anxious, more prone to depression, then it's possible that this advice is harmful. Obviously poster didn't intend any harm but it's hard to caveat everything with "this may not apply to you." Just be careful - some people have the resources and personality to learn "hands on" and some people would do much better with a lot more intellectual understanding or with a supportive community or with some other available resource. Know yourself.
Lots of Google searches that landed on Investopedia. Huge props to that site :P I subscribed to a bunch of things like Bloomberg, Wall Street Journal. I would say Seeking Alpha was probably the best value for money. It just gave me ideas for how to think like an investor/trader. Most of my research and learning wasn't in the mechanics of trading but building up mental models for how things might play out and thinking about risk. I spent a lot of time just watching and observing the markets without tacking action.
