My best friend, let's call him "M", had more luck, as a couple of people I started of with in University: he started working for a discretionary investment fund. Later he found out he worked for a multi-million Ponzi-scheme (he almost went to jail but proved to be as innocent as you and me) and we both started thinking: a lot of people in the business don't have the talent to actually match the leverage people provide them with. We started reading, buying software, reading again, taking data subscriptions, doing technical analysis, picking stocks, during the internet boom period I even managed to work for the Ikea investment arm doing due diligence on start-up technology and commercial viability. During that period we even invented the term "flying trashcan" and got quite some success with it in international investment circles (an unlikely place like Brussels is a better start than most people would think). "Why do we call it a flying trash can? It take a lot of energy to launch, it doesn't stay in the air very long and when it crashes it stinks.".
And oh yes, we predicted the 2000 crash. I told the Ikea people. I told some Soros people. They didn't care. They were going to make money anyway. And they did. We just thought we did. We perfectly called tops and bottoms, picked some stocks, made some money, lost some money and we should have realized by then we were going nowhere. Well, actually I was getting nowhere with finance, but my friend was getting some nice results, and I admired him for it. He was happy with some of my savvy stock-picks (Nvidia in 2004 for example, proved a winner, I didn't invest in it myself) and our common analysis. Meanwhile we had invested in some good technical analysis software (Advanced Get EOD) and we were thinking of ourselves as smart as we were using Elliott Waves....
"M" invested most of his money in hedge funds and managed part of it himself. He made very good results on what he managed himself, even during the 2007-2008 crash. I encouraged him to start his own fund. We worked together on the start of a Luxembourg based (did I tell you that Brussels is the European Capital and is located at roughly 150 miles from ... Luxembourg, neither of them have capital gains tax) fund, an SSF (société de sécurisation financière).
Meanwhile I was putting more and more time in investing stocks, even taking up day tading and using more sophisticated tools like eSignal Advanced Get Realtime. Needless to say: I got nowhere, but I got there fast and with hindsight.
"M" meanwhile, loaded up his fund with 7 million dollars and started trading roughly a year ago. You guessed it: he is getting nowhere as well, as he is finding out the hard way that trading 7 million, not your own money, is much more difficult than trading 50k.
Then a real good thing happened, I found a book: What I Learned Losing a Million Dollars
by Jim Paul and Brendan Moynihan. A real eye opener. It was not about how you make money, but how you lose it. I was very much impressed by the 5 stages of loss and how they compared to my situation. Oh my God, was I in denial. I was in denial about the fact that finance and the stock markets where largely a dream I was hanging on to, but that I never really tried to make it, I never invested 100% of my time and brain to succeed. This was my unreal exit, like some neurotic child thinking he can be beamed up by the Enterprise when he is getting bullied, clinging on to his communicator and waiting for the right moment to hail Scotty."Teleportation doesn't exist" was the only conclusion I could come to, made sure to add "yet" to the phrase and then I started seeing a lot of stupidity: most people were doing what I was doing: dreaming, they were not trading, they were trying to escape from their drab reality, and it was a lot more expensive than going to the movies. They were chatting on websites not to give their opinion, give advice, but just to get confirmation of their flawed investments and add to their denial. Or then, just as bad, they were using the forums to express anger and blame everyone else for their failure: government, Obama, the Rotschilds (mainly them), Soros, the markets, the bankers, the senators, everyone except themselves. Otherwise they could not repeat their behavior and start losing again.
Frightening, but the markets are actually big wealth shifters, from the dumb to the savvy, from the foolish to the wise.
I had been part of the foolish. "Make it to the wise or step out of it". After this it took me several days to realize: I had to blog about it. Talking helps me thinking. But talking to whom? People helping me to remain in denial was excluded, so the solution was, well, not so obvious, as "stock talking" is dangerous in this respect. Then I saw Julie & Julia on TV. It would have to be a blog, with an "audience", and the fact that it would take some time for them to talk back would help.
Then there would be the subject. Whilst reading I concluded that I had made one more big mistake: I had been doing short term discretionary trades. Wrong. This can be done for long term trades, but not for swing or day-trading. There had to be a system or mechanical element in it.
So here it is: a blog where a rather average person is going to try to build a system to make money, not 100% system or mechanical trading, but partially. And he'll be completely open about it. If he can't do it, he'll stop and call it a day. How long am I going to try? Until end of 2010. Not any longer. You will get access to the resources I built up in 10 years of stock-watching. I'll share the results. Objective: find a way to turn the 10 000 USD in the subject line to 1 000 000 by being real, structured and imitable.
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