Knowing Which Style to Play and When to Play It Part II

As per my previous post on this topic title I mentioned that I had and am still continuing to face some rather monumental difficulties in my life and in my "career" as a currency trader (aka, foreign exchange operator). I am small time, an account less than 10K (growing though), with some memorable wins and some gut-wrenching losses in my past. My pattern is usually one of two or three steps forward and a step or two back, but at the moment I am progressing. Part of my problem at the moment is the fact that I cannot support myself through this activity alone, but I am looking forward to the day when it will be possible - I was on the cusp of it approximately three years ago, had an account just shy of 10K > grown from 1K a year prior, with an equity curve that I consider impressive considering I was working for someone else full time, with a combined commute of one to two hours a day thrown in to suck extra time away.

Then I got desperate, my work situation was - less than ideal and growing worse by the month, and I decided, and I chose my words carefully - fuck it, I loaded up against GBP/JPY sold 100,000K into the wickedest rally that I ever saw on this pair - a pair which for the most part I loved to buy low and sell high on. I threw myself against a brick wall, and refused to give up - being honest here. I lost, in the end $4500 on the trade when on Boxing day of 2013, the markets gaped above my stop loss - or did I run out of margin - no matter - I was stupid, and I was stupid for a period of a couple of months where I kept thinking I would come back, and I kept selling on the way up to add to my woes. Plain and simple I was an idiot, running into a brick wall repeatedly, thinking, soon it will retrace and then return to the range, and I'll earn my next 10K in a matter of months. I cannot stress the utter stupidity of the initial decision, but also the continued stupidity of what I continued deciding as the days wore on and I lost more ground to this trade, never mind the -ve carry on this sucker.

It takes a special kind of idiot (me at the time) to allow the feeling of desperation to overwhelm my normally good judgement (and cold blooded trading style), to interfere with my analysis, my money management, and my damn case money.

Never mind the fact that less than a year later, I did this again with the AUD/USD (during the shocking interest rate cut), this time I went long, and continued buying on the way down. lost only 1.5 K on that one, and in my defense, it was my home life (roommate, whom I sure meant well, but was extraordinarily harsh to be around), that was the distraction and the negative influence, so much so that on the month that I moved, I wrote this this piece on the importance of a good environment when attempting to work magic, to employ a craft, to build something of lasting value.

I am now here, just under a year later, and while it has definitely not been a cakewalk by any stretch of the imagination, I feel that my instincts for the trade are somewhat returning. I am nowhere near the level that I was back in the first 3 quarters of 2011, where for three or four solid months, I was earning more money trading than I was at my day job, while working my day job, while commuting, while sacrificing precious time in the present for the future, but I am still playing, and still making gains.

What did I do when I realized I had to fix my brain, especially in regard to how I operated? I stepped back, after a few mistakes, and took things slowly, also my broker started allowing microlot 1K positions to be taken, so I started trying to think like an institutional trader, which means I began to take my business more seriously and enter into deals more cautiously, and more slowly, building positions gradually - which I recommend to anyone who has lost the magic touch of instinctively finding tops and bottoms (which is what I used to do) and playing their whole hand right at the reversal point; which is a bit of bull, it is not magic, and tops and bottoms are generally speaking only a matter of time and perspective (quarterly, monthly, weekly, daily, 4-hour, 1-hour, 15-minute, 5-minute) i.e. which chart is being looked at.

While I have played a few hard and fast trades and done it well on occasion, I traded small for the most part and gradually improved my instincts to the point where some of the fear (and chain-smoking) diminished, and started to have a bit of fun. I realized this step back in intensity and focus allowed me time to heal, and time to look at other aspects of my life sorely lacking...

While I do not think I was quite at the breaking point, I really did feel almost no reason to continue trying, in trading and in life - it was that bad. I am not now in a much better position than I was a couple of months ago, my environment is not great but it is for the most part stable, my day job leaves a bit to be desired but the people there are great, and though I am still way more solitary than I am used to (I miss my old friends badly because I shut them out), I did make a few new friends when I stepped back and just feeling some sincere and meaningful human contact can work wonders even when the world seems to be collapsing around you.

Knowing Which Style to Play and When to Play it

It has been a strange couple of years for me, my head has been in a serious fog for a while and the last couple of years have been bleak. Lost a fairly decent job a couple of years ago, and this year I lost two very good friends who passed away. To make own matters worse, I isolated myself from my remaining friends. Though I did make some seriously bad mistakes and still do, both in life and in my trading, I have learned a few things about both and about myself.

Sometimes I make the same mistakes over again, because well, a painful lesson is often my best teacher, learning it twice or three times creates a deeper impression.

I have learned the strength of a diverse trading style, with contracts spread among several currency pair trades, rather than placing everything in one idea. This used to put immense pressure on me as my progress would be either halted when one idea failed, or stalled while that idea languished in limbo, or reversed as the idea turned against me and cost me more than I should have allowed.

The lesson is that no one idea should or can realistically make a person that trades wealthy; it can happen under the right circumstances, but it it not likely and therefore not highly probable.

Someone that studies and takes positions in the market with an aim to be an "expert" or at the very least professional about it should have more ideas to employ than they know what to do with as they progress, then it is a matter of choosing the right ones, in other words, best risk/reward for your efforts - life on the other hand is not so simple.

When I realized sometime over the last year I had issues with the way I operated, I tried to take steps to improve myself, and what I did was I took the margin I had left over (from carrying some -ve positions) and choosing a bit more carefully where I put my money, and by taking several months to use smaller positions and also to scale into said positions, by buying or selling in blocks, at different levels, rather than the whole position at once, and also waiting for price reversals at extreme levels and then having the patience to wait for that tiny position to be worth something substantial (weeks, and months as opposed to hours and days), which means essentially swing trading with small amounts to reduce the amount of stress I carry day to day. It has not worked out perfectly but I am still a human being with some degree of psychological issues - so bad I went to see help.

Over the last week or two, I have tried to take day trades or larger positions (with recently freed margin), and made a few mistakes and a few good decisions. I am not sure if I will be as fast as I used to be, as this takes good health, an even emotional state (something I have not had in a long time), and plenty of rest. Trading when your life is in a survival mode is difficult, and I realized that I have been in that way of thinking for the last year and a half.

Baby steps it seems, for now, in life and in my trading, and if I learn to run again, it will be nice, but I need to make more progress before that can happen, and continue trying to cut out the bad behaviors that mess me up. I am not trying to be perfect; I will settle for better though.

Trading financial markets should be something you approach with a happy and healthy attitude, but then I realize, so should life.

The Importance of a Good Environment and Rest ~ Objective: a Healthy Mindset for a Trader

When I moved at the end of last week I did not lose anything of significance but I did lose opportunities during and after the move, both in terms of business and personal. My last living situation was seemingly nice on the outside, a pretty decent house with lots of light, in an okay neighborhood, but it was far from ideal because I was at odds with it, with no one to blame but myself; my current situation is far from ideal as well, but it gives me the peace I need to make better decisions. The situation was so out of balance I even wrote a blog about it to channel the negative energy into something constructive.

When trading, environment and mindset is key. If the environment is a source of negative influence, how does this affect a trading career and how does it affect everything you do? I can answer in a word; it taints everything you do, but I can elaborate. It taints every decision you make, and trading is making decisions! If you are bathed in a constant stream of negative influence, bad energy, and disharmony, you can become desperate. You may not, but why stack the odds against yourself, when you are trying to accomplish something important. As I trade from home, I do not have the luxury of going to an office and leaving my home environment and all the potential distractions and stressors. When I think about all of the opportunities I missed or screwed up over the last several months, it is disheartening, but sometimes, the best lessons come with a high price.

Why fight negativity if you can leave it behind and concentrate on improving and succeeding. Now that I am partially settled, I can get back into a healthy routine and make better decisions for myself in terms of career and personal life. The lesson, be careful with both your associations and your environment because your time is valuable.

Swinging back to the positive, I dug up a great webinar by Steve Patterson that explains the upside of what I am saying here. If you are struggling as a trader, or you want to improve your game, the importance of rest and health is one of the keys, enjoy:

Becoming a consistent trader

USDCHF and NZDCHF Updates ~ Both Longs in Money Currently

Not too much time to write here, I am long on both of these currency pairs, from more than a week ago on USDCHF - which has been under water till this morning, and my NZDCHF which dipped yesterday uncomfortably below 0.74 but moved back up since the FOMC meeting. I am holding both for higher prices, but I have to accept the possibility that the market does not agree with me. In the next few hours I am looking for USDCHF (on the left) to violate the downward trendline from the September 2013 highs. and for NZDCHF to clear the 0.75 handle. My most immediate concern right now is the October NFP report which comes out on Friday November 8th where USDCHF (wherever it is) may take a monstrous hit because the NFP is not looking good from where I am standing.

AUD/JPY on 4 Hour Time Frame

The 5 minute entry now on for over 24 hours, and it is in the money. The reversal is in the cards, for now...

Now that the deal is on, it is a question of management, which means exiting at the best possible moment with the information I have at the time. The first trend line of resistance has been breached, but not with excessive strength and price is hovering just above it at the moment. The second line of resistance is where I am shooting for, and is realistic in the next 24-48 hours of trading (meaning I may need to hold over the weekend). The ultimate goal, would be shooting for the monthly high of 83, or even better 83.50 of August. At this point, the next few hours may decide if I close this, take my 300ishUSD from $50,000 in positioning, or if I shoot for higher. So far it has been an incredible month, with this month being the first month that I have earned more in my part time job (trading foreign exchange) than I have in my day job; I would love to wrap it up with another decent sized win...

Review and Strategy Going forward into Autum 2012

After what I would consider a slow start to the year, with only a couple of trades (literally only one in February), and then a meager spring (only a few), my summer took off and never looked back. I have managed to reach the point where my trading activities are netting almost the equivalent to my day job salary. I work almost 50 hours a week, by the way. I'm not bragging, well, I have put in nearly 5000 hours into this over the last few years, and, it seems, while I was not a slow learner, I was slow to control myself.

This morning, I took my monthly statement from my broker, along with a notebook and sat down in a coffee shop and wrote a bit. My August was decent to say the least, $1670 in profit from a less than $5,000 trading account. 5k was a bit of a barrier for me as I had been there before and crashed afterwards. Now, I'm sitting nicely at $5,800 and looking to $10,000 in the coming months. So far, September has been decent to me with $670 earned this week. I have no illusions about not needing a day job at the moment, but I think the next book I purchase will be the The 4-Hour Work Week.

In the last couple of weeks, something interesting happened, I learned to pace myself, I learned to not sit at my desk all the time and stare at the charts for trades that I had under way. I learned to trust myself, step away and allow my trades to work out. I have in fact spent less time trading and my profits have improved.

Aside from everything else I am doing this weekend, I am going to put some time into studying chart patterns, and planning a couple of automated trades for the next week. I have only limited experience with this, so I will only be using light orders for this while I get my feet wet. In theory, a few minutes of analysis a day could earn profit without me having to manage the trades while they are in process. Now, time to study a bit.

In Trading, Psychology is Key

About to go out and have a bit of fun, my week has been great and bad, but I continue to exist, and I move forward. I am about to share time with friends and have a bit of fun, but I did want to share a gem of a webinar that I found on fxstreet.com on trading psychology, which is in my opinion, how the mind works, the most important factor in trading and in life.

The Trading Mindset

AUD/USD Update Downtrend Appears Confirmed but...

The Downtrend seems quite evident now on this pair, but it appears as though the low of the trend is in place for the time being. The long position may still have some validity, based on a possible upward move in the channel drawn on an hourly chart here:

A more conservative target of 1.0480 to 1.0490 might be possible, but it probably will not happen during this trading week. I would keep a stop below 1.0380 for the day and possibly even lower for the weekend if I were in a long position. While this might be a mistake, and it does violate a trading rule held by many traders, conditions are dynamic and can often change at a moment's notice. I am of the opinion that adjusting stops can be done within reason if conditions keep your goal within reach and the additional loss is not beyond your tolerance. There is no reward without risk.

First $1000 Week In a Long Time

This week is a bit of a milestone, but I have been here before. This time, I will do what I did not do the last time I reached this goal: I will stop to smell the roses, as they say. When I started trading, I came up with a series of goals, one that stands out in my mind from several years ago, aside from the Aston Martin I wanted, was to build a $500 trading account into a $5000 trading account, in a period of 6 months through successful trades. I was doing this full time, living in my father's basement, and unemployed so I had not much else to do at the time. I dived into the markets, I researched, I lived, breathed and slept trading; yes I even had dreams where I was trading.

The end result was that I did reach that goal in approximately six months, but the problem was that I broke a few rules to get there and I did not know how to behave once I reached that mountain top. Well, I kept going, and I kept taking risks without proper analysis and I got into a series of trades that broke my account pretty much right back down to 500 or 600 dollars but I would need to check my monthly statements to confirm the exact amount. I climbed up to the top of the mountain and ran right over the peak and went down to were I started.

Several years later, while working a full time job that has been stressful to put it mildly, I have once again reached that goal I set for myself, and in one week, a series of trades put my account back up to $5000 with this week's gains going slightly over $1000. This time, I am taking some time to reflect on what I have achieved, on what I have sacrificed, but more importantly what I have learned and what my future goals are from where I am now. Where ever I want to go, whatever I want to do, it is just a matter of time, patience, and discipline.

Mentoring a New Trader

For those who can impart the basics of trading and the psychology of market behaviour, helping someone learn how to trade can be as rewarding personally as it is for the student. For the student, a careful and disciplined application of their new skill set can change their life. For the teacher, the rewards are many. First, there is a reinforcement of the skill they have already honed in the market. Next, the teacher's own trading rules and respect for the market will be relearned and reinforced. Finally, there is a satisfaction to improving someone else's life.

Direct trading advice (as I have learned from my own mentors), should be avoided; a consistently successful and established trader should be able to spot their own opportunities for the duration of their trading careers. In addition, direct trade advice will carry with it, the possibility that the trade will go badly, and potentially sour an otherwise good relationship. Part of learning how to trade is learning to take both responsibility for ones losses and personal satisfaction for one's success. Trade ideas on the other hand can be given freely but with the disclaimer that results are not guaranteed. Often, the best way to teach someone about operating in the market is to show examples of market behavior, and extrapolate possible outcomes.

Much can be learned about trading by direct observation and the very action of taking a continuing series of trades; there is no substitute for direct experience. Researching from a variety of resources including books, forums, and encyclopedias can help tremendously, however, often the most interesting lessons can be learned directly with consistently successful and established traders. While this last source of knowledge might seem out of reach for those students who do not know anyone personally or cannot afford a trading coach, the knowledge is obtainable with some effort. Many recorded webinars and videos can provide a trader with a non-interactive source for this information. Topics include everything from technical analysis to market psychology to building trading strategies and everything in between. Furthermore, many brokers and several websites provide access to live and interactive webinars hosted by traders, analysts, and other experts for a whole host of topics relating to the market.


Finally, a newly minted trader, with a fresh perspective, can show their teacher new information and ideas obtained through their own research and experiences. As with other skills in life, you never stop learning.

An additional note of caution, be careful about choosing who you share knowledge with, trading is a full contact sport and carries with it risks both financial and psychological...

My Forex Trading Success Keys

Along the way to a moderate amount of consistent success (by my own modest standards) in forex trading, I have found a few keys to successful self-management as a would be forex trader. These tools can be used for any type of trader, and in any market.

Research

This should be second nature to a trader in my opinion, as with any mentally intensive field. Even before I started demo trading, I was reading as much as I could, watching as many videos as I could, and organizing my thoughts and observations about trading. Learning is what keeps our minds young, and expands our horizons, so it should be something a trader enjoys. Throughout the course of this blog, I will provide some of my best sources of data, and some of my methods to organizing that data.

Trading Plan

Having a plan is an ideal place to start if you are just new to trading, and even if you have traded for a while, it can be a worthwhile endeavor. Where have you been, and where are you going? A good journey often starts with a plan or outline. Sometimes it is thrown together last minute, sometimes that plan is loosely sketched in broad strokes, and sometimes it is planned with extensive attention to detail; regardless, having at least some idea of why you trade and what you plan to achieve is a good idea.

Rules and Strategies

Assembling and improving your tactics is one of the most important aspects to trading; if a trading plan is your outline, then your rules and strategies can be considered your blueprint for constructing a trading business. The blueprint is an abstract concept and is open to change as circumstances change. For example, when I was starting to trade, I primarily used visual analysis, with my main indicator being the bollinger bands. To me, buying low and selling high or selling high and buying low was intuitive and seemed natural. I was even successful for a while, constantly earning, no matter what. However, as the market changed tone, I was slow to notice, and I allowed habit to dictate the course of my trades, which was damaging to my bottom line. I had to expand my strategies, so I researched and I experimented. While I still make use of bollinger bands, that one strategy is only a single tool amongst the many in my tool box, applied when the circumstances indicate their usefulness. Some important considerations for a traders strategies are answers to basic trading questions:

When to enter the market

For me, I tend to trade mornings, during the European/London trading day, and early American times, and occasionally, during the American afternoon. The reason for this is because price action tends to be the most active during these times, which means that if my trades are good, my potential for profit increases. I will occasionally trade outside these times, but rarely.

What conditions are needed to begin trading

I need to at least have the potential to earn money, which means that I need to see opportunities that present a high probability for my strategies to succeed. Also, I need to be in a reasonable state of mind, with a decent night's sleep behind me, usually an hour or so after I have been awake; at this time I am at or near the peak of my alertness and energy levels for the day. I need to either be in a good mood, or on my way to being in a good mood otherwise I will stay out of the action. Everything else in my life is preferably on hold, an out of mind.

When do you avoid trading

Typically, I will avoid trading when the market is erratic. Some people avoid big news days, but since some of my strategies revolve around news, I have learned to adjust to the price action that happens during large news events. I tend to avoid Friday afternoons (16:00GMT and onwards), Sundays, holidays, and periods of low liquidity. The only way that I can describe trading on a holiday is that the price action is extremely erratic and that price can move in a choppy fashion that makes me uncomfortable.

When to open a trade

Obviously this one is subjective, because entries are defined by strategies. The rule here is that the probability of the trade working should be in my favor. I almost always have mental stops placed even before I open a position, and assign them as soon as I hit the buy or sell.

When to close a trade

Again, this is subjective, but with every trade I try to exit when my position is in profit, with the idea that even a partial profit is better than earning nothing or taking a loss. In fact, my profit target is rarely hit, but I have managed to continually improve my equity on the basis that I am always moving my stop loss inside profit at the nearest opportunity when price goes in my favor. In most cases, I have the philosophy of letting my winners run, which means that I give a profitable position a chance to run higher; I use my stop-loss to lock in profit, and then move it up as the market moves up, usually allowing for a decent amount of retracement. Occasionally, I leave a large amount of money on the table if the price swings against me, but sometimes, this has allowed me to take a 1:3-5 risk/reward on my trade when the market has moved heavily in my direction. In terms of losses, the issue is even more subjective. In the first few months, I would take some losses needlessly because I did not understand enough about support and resistance, so I would often set my stop loss incorrectly. There is nothing more frustrating than watching your stop get taken out, and then watching the market swing back in your direction and hit your target. Sometimes, you have to look at larger time frames and determine major areas of support and resistance. If you are too slow to get out of a negative position, it is sometimes beneficial look at a larger time frame, where you can spot a new area of support, place your stop below and apply some patience. This is not for everyone, because it is hard to see a -100 or -150 pip position on your account; but if you have the fortitude of will, the margin, and some solid evidence that the price will move back in your favor, or at the very least, to a break even situation, then you can avoid a loss. The key to this tactic, is to not apply your full commitment to a position at first, where you keep plenty of margin in reserve to absorb a negative balance, and look for other opportunities in the meantime.

The lesson is that the market does change behavior, and when it does, so must the tools. As with strategies, rules must change to suit the market. In my first few months of trading, I would assign stop losses and profit targets based on an arbitrary dollar amount, but as I learned something about resistance and support, this became obsolete. Yet, having and following a set of rules is the only thing that a trader can control, and can save a trader from ruin and guide them to success on regular basis.

Trading Journal

Having a diary is great tool for any trader; I've read or heard this tip in at least a dozen places and I don't think I'll stop using mine for as long as I trade. In fact, this blog is part of that journal. How you use the journal or what you write is your business. Some people like to write down all their trade ideas before they execute them. For me, trading is all a matter of successful analysis, planing and timing so I usually do not have the time to write all of my ideas down; by the time I've written it down, in some cases, I've missed my entry, but I do it when I can afford the time, i.e. when the market is moving slowly. I use my journal to write out my ideas when I'm not in the market, most often when I am away from my office, and enjoying a coffee. Being away from the action give me the chance to look at my activities with a more relaxed perspective; I can review my issues, my successes, my opportunities for improvement. I can make plans, go over my goals, review my rules and strategies, and I can be honest with myself if I have adhered to what I have written.

Goal Setting
 
Setting both long term and short term goals is a very good thing to do on a regular basis in order to measure your progress. In my opinion life is about the journey rather than the destination, which means that the bulk of life is spent getting somewhere and the arrival is only a sliver of the whole experience. However, if you have a destination, you have a direction and a purpose, and the impetus to start the important part, the journey. If you have regular goals, you can measure your success by your own standards in time. If you are exceeding your goals you can start increasing your goals. Having progressive goals is one way to give you a motivation for improving your game. If you are missing your goals, or not getting close to them, then you can start to examine why missed those goals; perhaps your goals were unrealistic, or perhaps you had some issues outside your trading activities that forced you to lose some time and productivity, or perhaps you need to identify what you are doing that is holding you back from your potential. Another means of setting goals is to do it visually, both in the mind, and with a goal board. If you want to use your trading proceeds to fund a vacation, put up a picture of where you want to go, or if you want a new car, put that up on the wall.

Positive Thinking

In my experience, having a good attitude goes hand in hand with goal setting; if you enjoy trading, then it makes the process that much easier. I have found that while I may not always be winning, having a good attitude is key to staying in the game and prospering. Even taking losses can be viewed in a positive light, if you understand that losses can be powerful lessons for your future trading success. If you believe in the Laws of Attraction, as I do, then you can apply them to your trading as well, with often surprising results.

Self-Review

Something that most successful people will do on some level or another is to monitor their activities to measure their progress in life. I can't verify this fact because I haven't spoken to all or most successful human beings, but I do notice that many successful people write about their exploits as either trade books, or biographies which are form of self-review. This is where you can be honest with yourself regarding your activities as a trader. Did you follow your rules? Did you break them? If you broke them, did you do it for a very good reason? Perhaps the rule needs to be changed. You can review your activities daily, weekly, monthly, yearly, but regardless, it is a good idea to go over your performance because it is a great opportunity to spot areas where you can improve your trading.

Equity Curve

At first when I started using a graph and spreadsheet containing my profits and losses, I experienced difficulty stopped using it for a period of a few months. I was being dishonest with myself over the fact that for a time I was taking on more losses than gains, and it was painful to commit to a document, and also because, I needed to focus on improving my performance rather than documenting my lack thereof. Nonetheless, even though the losses are painful when they occur and ugly dips in an otherwise increasing curve, I update my equity curve at the end of every trading day to remind myself of what I am doing correctly and what I am doing incorrectly. This provides me with a reality check when I need to improve, and it also shows me graphically the sum of my work over the course of my career. In so doing, it gives me a visual representation (other than my available margin reading on my trading platform) of what I need to protect when I'm in the market; it is an additional pause button for my mind before I think about taking excessive and less-probable risks. Before I open a position think about the other side of the deal, where I may be wrong and I may need to document a drawdown at the end of the day, as a result. This is also helpful in that I have a few built in formulas calculating certain percentage amounts of my available margin, daily. Many successful traders have a rule where you expose a certain percentage of your account on each single trade, some of which apply this to all deals at any single point in time. This percentage varies depending on who you talk to or listen to, it can be as low as 1% or as high as 10%, I've even heard of cases where some traders expose their entire account when they trade, but I imagine they are crazy or that they really know what they are doing and extremely focused and disciplined. Regardless, my spreadsheet shows what the value, in dollars, of 1%, 3%, and 5% of my total margin. This is the amount of exposure to the market I am willing to take in most cases. I have violated the 5% rule on a very small percentage of my total trades, but I have had good reason to do so in these cases; sometimes I have paid the price of a very ugly drawdown, but in most cases, the calculate risk paid off rather well. One argument for going over this percentage might be when you are in a progressively improving trade (but not a progressively diminishing one), you increase your position, or so argues Jessie Livermore. In any case, I have accepted responsibility for each trade before entries, and after exits, regardless of whether or not they were at a profit or a loss.

Although I have found some success with these tools, I am always on the lookout for improving my game, learning new tactics, and overcoming weaknesses and improving my strengths; as with life, trading is not about achieving perfection, but constant attempts at improvement.

Trading and Being Your Own Boss

Unless you work for a firm, trading for a living means that you are your own boss. For some, especially entrepreneurs, this concept is freedom and is part of the reason they are in the market. For others, the idea of being self-employed is frightening because you work without supervision and without the benefit of a structure composed of other individuals; you work alone, and you survive by your own wits. There are benefits and costs, in either case, and I'll front-load the good:

1) You decide your own hours and days

• Enjoy working Monday to Friday like everyone else, with regular hours if you wish. This is great if all of your friends and family operate on this schedule, but not all people have this luxury in this day and age. Many businesses and places of employment operate at either odd hours, on shifts, or 24/7. I've done all these schedules, and while my trading activities have me occasionally trading outside my ideal of Mon-Friday 6am-3pm ish, I trade outside these times when I want rather than when my company tells me that it is required.
  
• Hit and passed your goal and feel like taking the rest of the day or week or month off, you can do so.
• Find that second wind coming on and you are not tired at the end of the session, or you have some deals that are still gaining, you can keep going for as long as you are still effective (but be wary of overtrading of course)
• Find that you are more productive and more profitable at certain times of the day, well you can work those times.

2) You work as hard or as soft as you want

• Part of working for yourself is having the right to work at your own pace, as opposed to working at your boss' pace. For some this might mean more slacking off, but for others it means working harder and more effectively. Personally I've noticed my own work ethic improved dramatically when I started to take my trading seriously and treat it as a full-time job rather than a part-time hobby.
• You are able to balance life and work easier, with some care and planning. At some workplaces, your social networking is seriously curtailed, i.e. no facebook, or personal emails, or phone calls. If you trade for yourself, you can do all the above on your own time, provided you keep track of your work while you're doing it.
• Get it done when it needs to be done, rather than waiting for approval from up above. When I worked in technical support, there was often the problem of upper management questioning what middle management was doing, and on down the line. Often those in the middle and on the bottom are on the ground so to speak, and if they care about what they do, they will usually know what needs to be done to fix a problem for either the company or a client, but would end up with a solution on hold until approval came from above. Precious time was wasted and productive hours were lost when there was a serious lag in communication. As a trader, you have an idea as to what needs to be done within seconds or minutes of a critical decision moment, and the only approval you need come from your strategies, your rules, your equity, and sometimes your gut.

3) You enjoy the full fruits of your labour

• Because you are working for yourself, your profits and losses are yours rather than shared with your company. In many places of employment, often the most productive people carry the rest of the department or organization. In my understanding, this is true downside to communism (which operates on the principal that the all humans are pretty much the same and that the human spirit can be forged to follow a universal set of ideals) and improperly managed corporate structures. Taking realistic human nature into the equation, when everyone in society, an occupation, or a position is paid the same regardless of effort or results, the end result is usually the lowest common denominator of productivity; in other words, why should I work harder and more effectively for the same pay as the slob who only makes the effort of appearing to work hard when he/she is being monitored by a superior?

4) Job security

• No need to worry about downsizing, off-shoring, or closures.
• You are not likely to replace or transfer yourself due to workplace politics or business needs.
• In fact not having to deal with workplace politics really is a complete benefit in and of itself.
  

While the positive aspects seem logical, there are cons to being an independent trader:

1) You need to provide your own work ethic and motivation

• Don't quite feel like trading, but you have yet to reach this week's or last week's goal, you may need to suck it up and start looking for opportunities and deals.
• This doesn't mean trade when there are no opportunities, but you do need to put in a certain amount of time and effort to achieve anything of value (well other than winning the lottery or having a rich uncle that favours you in their will), and this includes being a successful trader.
• This is a profession like no other, but it is still a profession.

2) You need self-analyze your productivity

• Something that many employees either dread or look forward to is the monthly/yearly review, and as a trader you should be tracking your progress.
  
• You will be doing this for yourself, taking extra time out of your day when you are not trading.
  
• This might actually is a benefit for people that are able to objectively criticize themselves and either work around their weaknesses, or overcome them. For others, I recommend learning to do these things very quickly.
  

3) You are responsible for your bottom line

• As an employee, if the company is not profitable one month, you still get your bi-monthly pay, and you will most likely not need to worry about your pay and benefits over the long term. With trading, you are earning money based on the consistent success of your performance.
• If your bottom line dips, or goes in the red, you need to figure things out pretty fast.
• You take care of your own overhead, i.e. paying your rent, power, keep your credit clean and open, pay your Internet connection, and for some traders pay for news/chart feeds, which means your overhead needs to be taken care of in a timely manner or you will not be able to work and earn money.
  
• You are also responsible for maintaining sufficient capital to continue operating your business and your life, even when you are off your game. For most traders, this means planning ahead or having a future-time-orientation, and keeping sufficient savings on hand as case money. Having as much liquid capital as you can amass is key here.
  

4) In many cases, trading is a solitary activity

• Many traders trade by themselves (I do) and sometimes I do miss the back-and-forth with coworkers, having lunch with the gang, the camaraderie of sharing work, being part of a team, and of course the never-ending string of jokes and pranks that I used to enjoy at every half-decent place I've worked.
  
• On the other hand, you can always see your friends and enjoy that time much more when your are not supposed to be working.

All of this comes into focus when you realize that as a self-employed trader, half of your business is to analyze the market and take calculated risks to generate profit on a regular basis, the other half is to analyze yourself before, during and after your trading activities. I find that I will usually devote an hour to a couple of hours on the weekend to serious self-analysis regarding my trade activities, but I usually do as much as I can away from my office so that I can have a fresh and hopefully obejective perspective. Excellent self-management of your trading can make the difference between consistent success and erratic results, so it is worth your time and effort.