Episode 286: Take Yourself Off the Hamster Wheel and Trade on the Road to Greatness

by robbooker on September 3, 2014

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Welcome to The Traders Podcast, Episode 286. Your host Rob Booker and Jason the producer begin by reading an e-mail from Ryan, who asks how much profit you can take out of your trading account each month. Rob addresses the irrational fears that traders often have and their feelings of imminent doom. Next Jason talks about the concept of traveling the road to greatness. Rob and Jason explore the general goal or objective that most traders have in order to consider themselves successful. And as a mere side note, Rob also mentions how to become a millionaire in seven years. Don’t miss this one! Thanks for listening.

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{ 2 comments… read them below or add one }

Dave September 3, 2014 at 8:22 pm

“Do you want to make money now? or do you want to make money forever?!”

For whatever reason that quote blew me away.

Thanks Rob, Jason

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Brian F. September 6, 2014 at 8:42 am

I don’t disagree with the answer of removing your initial capital from your account, I don’t like it, I’d rather see someone address the issue of danger of drawdown through position sizing, but I acknowledge the answer of how much money to take out of your account is conditional, and personal.

How much to withdraw on a regular basis? First, you can’t make something from nothing. Second, you can’t make substantial money, let alone an income, without first compounding your account. Any withdrawals runs counter to that process, which takes time. Depending upon your income requirements, that can take a lot of time. The question which seems to continually pop up concerns how soon a trader can live off their trading income. I think the answer is the quickest way to do so is to wait as long as you can so your account balance is as big as possible, and cut your expenses to the bone, because any financial pressure can make this impossible.

As far as removing your gains at the end of the month and keeping a steady account balance, I had to scratch my head at that one. A swing trader or position trader who isn’t flat every night would be ill advised to do so, because one flash crash could wipe you out. If you have the means to replenish the account, fine. If you take some out and stash it, fine. However, if you take it out and spend it, it’s only a matter of time.

Maybe somebody out there has a method that’s profitable every month, but that’s kind of the exception to the rule. IMO, your withdrawals have to be lower than what you earn trading, so the account compounds and can recover from the inevitable drawdowns.

This argument ignores splitting your accounts between brokers. After MFGlobal, the wisdom of taking anything for granted is questionable. I know Rob said the customers were paid back, but getting $.96 on the dollar over a year later isn’t full compensation. They went through hell. Getting most of your money back later isn’t compensation if you lost your health, your family, your farm or your business. A lot of them couldn’t wait because they needed the money, so they sold their bankruptcy claims on the secondary market and took a huge haircut. It’s a disgrace, but that’s what happens when your society becomes corrupted. When corruption seeps into society, it reaches every corner of society, politics, business, entertainment, news, sports, you name it. Markets adapt quicker than any other human institution, so have a guess which aspect of society becomes corrupt first?

Bottom line: If you withdraw your money, your account won’t compound as quickly, and your dreams of getting wealthy or living off your account will just have to wait. However, if you leave it with one broker, you are at risk of losing most of it. The government will NOT protect you, and the markets are more highly leveraged than they were in 2007.

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