The other day I made the announcement in one of my favorite non-trading sites out there www.reddit.com (this is a link to the comments section) that I will be undertaking a challenge of a lifetime. I guess I was expecting some pretty positive feedback, since I was following a dream of mine to really put in the effort and test myself, I mean how many times have you read about business owners who got started taking out loans to get up an running?
Well the article wasn't as well received as I had thought, after more downvotes than upvotes (latest count 15 up, 20 down), and some concerned comments which I addressed - it was clear that this isn't a very popular move. I certainly appreciate the feedback I received, because getting other opinions is very valuable to keep a fresh perspective. I just took me by surprise...so I figured this would be a good time to write out the risks that I am taking, as I understand them.
Here are the risks I percieve to be taking by taking the plunge:
- Risk of total loss, or -$5,000.00
- Risk of delaying my retirement, having my 410k account go from 21k to 14k
- Risk that I will default on the loan, and have an early withdrawl 5k taxable event (plus 10% penalty) which amounts to roughly $3500 dollars in taxes, mind you this can only happen if I lose my job.
- Risk that the trading commissions will eat my returns alive, I am paying $8 dollars per trade, $16 for an round trade, thats .3% of my capital each trade.
- Risk that losses will make a recovery impossible without taking insane risks, again due to the size of the account.
I have read you should have an account worth roughly 25k to get started, because at this level I have to commit a large amount of my capital to each trade. I never said it would be easy! And to be honest, I planned on only being able to succeed after very careful trades, and some damn good luck. As for as my background, I have traded before in a personal account, was about net neutral as far as my returns went, plus some earlier stupid calls on financial stocks as they were falling apart. However, stupidity aside, I was always trading those accts knowing I needed to use the funds down the road for either a wedding or a house, so super tight stops and short day trades every so often. I have done quite a bit more homework since then, and I am back for my final exam with this project.
1 comment:
hey it aint all bad your still alive?, here debts not the best way to start but theres probaly no good way any how, if your trading technicals trade indexs and currencys these will hold smaller commisions and tighter stops, and change your broker, time your trades, all the major news is released at set times trade around or use your techicals to antisipate the move, and all ways look at the market as a whole not just the stock your trading as theres no point buying mining as the copper price is falling. anyway good luck hope this helps.
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