Sep 13, 2018
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Genius Nation, welcome to another edition of the Podcast. Today, I really want to talk about something that has been ... a lot of people talk about it, a lot of people as questions about it and it's hard to answer this question because it's different for everybody. And that question is, "How long should it take for me to be successful as an options trader?" Again, it's different for everybody, depends on how much time you put in, depends how much effort you put in, how serious you take it and how much money you have. The less money, obviously it will take longer to build that up into a sizeable amount and if you make mistakes in the beginning, it could affect your confidence if you have the wrong trading plan or if you have the wrong strategy that doesn't fit to your style or your temperament, your risk temperament, then that could affect you as well.
But really, all of that is fine and good but really the thing is that does it really matter how long it takes? As long as eventually, you get there or eventually, you're making progress as you go along. Because as we say, the destination is not the important thing, the journey is what makes you happy. The journey is the longest part of it, right? For example, let's say you're on this journey, you're learning how to trade, all of a sudden, boom, you get there, "Hey, I just made a million dollars this year trading." Okay, you pat yourself on the back, "Woo hoo." But then after a while, that feeling, that euphoria kind of goes away.
So, it's the journey, it's the learning, it's all the epiphanies you get while you're learning, it's what you learn about yourself, it's how you discipline yourself, how you learn that discipline that really makes you a better person as you're trying to become a better trader at the same time. Another way to think about this is let's say, go back in time, when you were in high school, or you graduate high school, you went to high school, right? You spent four years, five years, maybe you got your masters so, two years after that. Maybe you did some PhD, maybe you did whatever, some more time after that. If you had a doctor, you got more time, and you go to school for four, five, six years in order to go and get a job. So, you graduate, now the days the kids are making, they graduate, they're making 40, 50,000 a year and that's a decent salary, decent starting salary. But it takes a few more years before they can actually go and pay off all those student loans because college is so expensive nowadays, you know? Who knows what it's costing right now.
It's crazy how expensive college is right now, and it hasn't kept up with wage growth so, you're spending more to go to college, you're spending several years of your life, you're probably taking that out on loans and then, you're coming out, you're making a decent amount, but most of that money is going to payoff those loans so ... I have some friends who've been out of college for ten, 12 years and they're still paying off their debts. They can't live the life they want to, they can't buy a house, they can't do this because they're still paying off all their college loans, which is nuts. So, let's say you go to college for six years, right?
You rack up couple hundred thousand dollars worth of debt, you get out, takes you maybe another four, five years to pay it off maybe. So, we're looking at about ten years from start to finish to get to the point where you're probably making 75,000 a year. I'm just ball parking here, right? So, it took you ten years to get there. Would you be willing to put that time into trading? I mean, if you think, "Man, I've been trading for three months, and I can't get this stuff." Well no, that's not the way it works, you know? Whether you've been trading for a year or two years or five years, you have to put in the time, you've got to put in the effort. And if you do then eventually, you'll see yourself progressing on the option continuum. You'll see yourself moving up from level two to level four to level five to level six and then maybe you'll get stuck.
But if you get stuck, then reach out, get some help and then mow to the next level and that's how you keep progressing and progressing and progressing and eventually, you'll be able to get to the point that you want to be where you're making enough money to pay off your bills and not have to do that crumby job that you get $75,000 a year for or go spend more money in retirement or do whatever else you want to do. But it takes time to get there. So, that's what I want to stress to you is that this is not gonna be an overnight success kind of thing. You hear stories, you hear, "Oh yeah, this one trader, he made a million dollars on one trade." Or lately we had the whole Bitcoin thing where people were buying Bitcoin and they became millionaires. There's that one guy ... what's his name? The guy with the curly hair. [inaudible 00:05:09] or something, I don't know how you say his name but he had ads all over the place talking about how he's a Bitcoin millionaire.
Well no, he spent a few thousand dollars buying some Bitcoins when they were like a dollar. He got lucky, he placed a bet, he bought a really, really long call option and it paid off for him and now he's trying to get you to give him money to give you advice about Bitcoin because he got lucky. It's not like he has a plan or a trading method where he's gonna make you money over time. He just got lucky once and now, he's just milking it, which is fine, that's cool. Everybody does their thing but that's not likely to happen again, right? It's very rare that that happens and it doesn't happen to the person the first time they're doing it. This guy probably made a lot of bets in other things, he probably put a lot of money into other things that didn't work out and this one thing worked out.
So, if you're thinking that, "Hey, I'm gonna make my first trade and I want to make a lot of money or I'm gonna start winning money off the bat," it doesn't really happen that way because there's gonna be a lot of mistakes that you're gonna make in the beginning. You might be trading too large, you might not pay attention, you might not have the discipline to adjust, you might not know how to adjust properly. There's a lot of different reasons why you could be not trading the way you're supposed to do and then hopefully, you do get enough wins under your belt to get you going and to not totally wipe you out and if you're selling options, then that's one win already in your favor because the odds are in your favor when you get going.
And that's why I prefer option selling is because when you're new, you have that room to make those mistakes, you know? You sell far away from the money so, even if the stock does go against you, you still have that room, you still have that time, you still have that ability to adjust your trade or get out a small loss instead of the people that are just starting out and then they buy options and you either double your money or you lose everything. And most of the time, they lose everything. So, that's my take on it. You go to college, you spend all that time, you spend all that money, you spend all that effort to come out with a job that maybe you like, probably you hate and takes years to pay off all that debt.
Ten years later you're wondering, "What have I done with my life?" Ten years of options trading, your life would be radically different. So, to answer the question, "How long should it take me?" There's really no telling because it's different for everybody, like I said. But if you are disciplined, if you can put in ... I want to give you an answer, I want to come up with some number and say, "Okay, if it's taking you more than ten years and you are working at a full time, then there's something wrong." Right? But if you're gonna go at this full time, all day long, nine to five, whatever, as a job, you're not doing anything else or maybe you're working a nightshirt and you're doing this in the daytime, you should be able to be positive trader within a year. I'm going out on a limb and saying this and again, it doesn't apply to everybody but if you do a lot of trades, you do a lot of paper trading, you do your homework, you do your research, you find strategies that work for you, you do a lot of back testing to find out which is working, what is not working, what works for you, what doesn't work for you and then you concentrate on those strategies, and those stocks and those trades that work best for you, you should be able to be positive within a years time.
If not, then definitely you need to get out, you need to get help, you need to say, "Hey, somebody help me." Find a coach, find a mentor, reach out, take a course, do something in the field or in the the trade or in the strategy that you have chosen. So, if you decide, "Hey, I want to do Iron Condor, that's the thing that fits me, that's what I want to work on, that's what I want to do," of course, the market has to be conducive to that during your learning time but if it is and you're learning and it's been a year ... you know, and if you're doing monthly options, which with Condors, you probably should be doing monthly options, that's only 12 real trades, right? That's 12 trades but hopefully, you're doing back testing, hopefully you're doing paper trading where you're doing a lot of them and that's where back testing really comes into play where you can actually go back in time.
So, if you can pickup a software that will actually let you go back in time and trade day by day by day to see how well you've done, in one year's worth of time, you can do 500, 600 trades. Whereas if you're not doing that, if you're only doing real money, you can only do 12 trades so, the guy who's doing 500 is gonna go through a lot more market's ups and downs and get a lot more experience than the guy who's just doing 12 months so, when you're serious, when you're focused on it, you have to have the right tools and a good back testing software can run you a little bit of money, a few hundred bucks a year but it's not something that's gonna break the bank if you are serious about this, if you're full-time on this. If you're saying, "I have $50,000, $100,000 and I'm going to trade this money and I'm going to turn this into enough money to live off of." Okay, it's gonna be really tough, unless your bills are really small, if you're single or whatever, then you can do it. If you have a family, three, four kids like I do, you're gonna need a lot more than that but in the beginning, you can say, "My goal is to make 25% a year." That would be an awesome goal.
If you can get that within the first year and say, "Okay, I'm gonna practice my first year, I'm gonna work, work, work and then in my second year, I'm gonna make 25%," and you get there, that would be amazing. Because from then on, it only gets better, right? You can have more money, you can get other people to give you money, you can improve, whatever not. But even 25% would be awesome. People would be throwing money at you and say, "Wow, you made 25% a year? Here please, please do it for me, please do it for me and we'll split the profits." So, if you can show a positive track record, there's always ways to get more money. But I think that would be a good benchmark, a good place for you to be. So, if you're full-time, it might take a year. Paper trading, back testing, putting on lots and lots of trades, looking at different strategies, doing education, coming up with your own trading plans or finding ones that work for you and then maybe tweaking them a little bit if you want to.
But I would say a year would be a good amount. If you are doing this part time, you got a full-time job, maybe you can spend maybe an hour a day trading and if you can't spend any time at night ... I mean, you're gonna have to put in extra hours. One hour a day during the market open is not enough to really, really get there. Yeah, you can make maybe $1,000 or $2,000 a month and if that's all you want then that's fine for you. But I'm talking about the people who actually want to do this for a living. If you want to do that then you'll have to put in time after the market closes doing your research there, doing your back testing there, that's another feature of the back testing software, it's there when you want to use it so if you work during the day, you can't do any live trades okay, that's fine. When you go home at night for maybe an hour, two hours, three hours, do as many back tests as you can and you can go through them really quickly and get that experience while you're building up, right?
And while you're saving your money or while you're learning and that way you'll get years of experience in a couple hours a night so, that would be an awesome thing to do. And if you're doing part time, I would say give yourself maybe three years. Because it's part time, of course. And you're working because you need to save up money, you can't just go into it full time, like I said, with $50,000 or $100,000. But if you're doing part time, you're saving up your money, at the same time you're building up your experience, you're building up your strategies, you're doing all that so, I would say give it a good three years.
And at the end of that, you should be at the point where, "Hey, I can make enough money that I can pay my bills." You're not gonna be living in a super mansion but that's not the point, the point is to get to that financial freedom. That point where, "How much money am I making from trading? That's the money that I can use to make my bills so, I'm not getting super rich yet but I don't have to work for a job. I can work anywhere in the world. I can work when I want and how I want, no boss, nobody telling me what to do, wake up in my pajamas. Trade in my pajamas," all those cool things that go along with being your own boss and being able to have that kind of freedom.
So again, if you're going at it full-time, I would say about a year. Dedicated, right? Dedicated. Full-time everyday. One year. If you're doing it part time, I would say maybe three years. Some people can do it faster, some people, it will take more time. But if you're serious, you're disciplined, you're at it, I think that would be decent amounts. Obviously, depending on who you are, if you want to put more time or less time and if you understand the concepts better, depending on the market you're in as well. If it's a very stable market, very slow market then you'll be able to accumulate faster. But I think that the paper trading and the back testing definitely are things that you need to do to help you out. And that's the name of the game, right?
To get on this journey, to enjoy the journey, it has it's up and downs, it's like a rollercoaster, you're gonna lose, you're gonna win. Emotionally, it's very draining and so, that's why if you can do it with back testing and paper trading where you don't have any real money at stake, you can be a lot more calmer and a lot more disciplined on your investments and your adjustments and your plan. So, that's the case. Remember, don't get discouraged if it doesn't happen overnight. If it doesn't happen within a few months, if it doesn't happen in a year. If you're doing it part time and you've been at it for a year, two years, don't get discouraged. Look at where you were when you started. Look at what you knew and now, look at what you know now. Look at all the stuff that you've done, look at all the trades that you made. Listen to some of the other podcasts about going over your trades, reviewing your trades, looking for patterns, seeing what works for you, seeing what doesn't work for you.
Find your niche in trading. Find what works best for you, what you enjoy doing the best, what you enjoy doing the most and then focus on that, concentrate on that, really go in, all in on that one strategy. You don't need 20 different strategies, you don't even need five strategies. If you can focus on one and get really, really good at it, in the beginning, that's all you need. Really. To get you over that hump, to get you to the point where I'm confident in myself, I'm confident as a trader, I know I can make money out of thin air. All I need to do is just focus on my plan, stay disciplined and I can make money consistently month, after month, after month. If you have that, if you get to that point, your life changes completely. 100%. Everything changes for you.
That's where we need to go, that's where we need to get to and the simplest way to do that is to put in the time, focus on one strategy, one technique that works for you and then put in the time, put in the effort, pay your dues. If you're doing it full-time, probably a year. If you're doing it part time, probably about three years but then compared to other aspects, you know, compared to other ways of making a living, this is a lot easier. Right? Going to college for four, six years, paying your bill, paying your student loans for another four to six years after that and then working in a crumby job. Or maybe you start ... maybe you buy a franchise, you have to pay a couple hundred thousand dollars in loans and fees and all that to start a franchise and then, most of those go out of business. Most small businesses go out of business in the first five years anyway, right? So you're basically buying yourself a job and you might not like it, you might like it, it might work, it might not work.
There's a big risk there. Here, we're talking about smaller numbers, small risks and a lot less time to get to profitability. So, you guys already know this. There's lots of benefits to trading but that's the timeline that I would say. If it's taking you longer than that, again, reach out, get a mentor. If you wanted to go faster than that, I've already told you what you need to do. Get more practice, more paper trades, more back testing. Nobody can really do it for you. If you want to learn it, you're gonna have to do it and go through that practice, go through the motions. You're gonna have to do it trade after trade after trade and that's really the only way to do it. Nobody can take what ... if I wanted to, I can't take all my trading knowledge and just take it out of my brain and stick it into your brain, doesn't work that way. You'll have to develop it on your own.
But that's part of the fun, that's part of the journey. Stay on it, stay focused, don't get discouraged. If you do, reach out to us, maybe I can send you some encouraging words or two but it is worth it. The end of the journey ... the journey's worth it, the journey's fun. The end of the journey when you get to the goal, that is awesome and so, just keep at it. If you need anything, we're always here for you, let us know. Help at optiongenius.com. Take care, bye.
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