I’ve always been interested in investing.  It has incredible power to either create ridiculous sums of wealth in very short time or mercilessly destroy lives well as whole countries in a matter of minutes.  This never ceased to amaze (or fear) me until now.  And this is where I took a hard lesson in my third failed muse.

My Success as a Day Trader

Over the years I’ve read a few books on trading stocks.  I’ve also invested money ever since I was younger.  After getting my first job as a senior in high school I vowed to save $100 a month.  I put this money into different mortgage funds.  Probably one of the most novice investment one could make and frowned upon by experienced investors.  However, that was probably the smartest investment decision I’ve ever made.

It wasn’t until I got older when I started trading stocks.  I have to admit though my day trading skills were sharpened in a somewhat dishonest way I’m not particularly proud of.  Unfortunately, as a full time engineer I couldn’t day trade.  Or could I?

Work was VERY VERY slow.  Yet I never seized to provide value to the company.  I was creating new processes, improving efficiency of the department I worked in, and setting new product quality standards.  People were ecstatic to get my help on their projects and I was meeting as well as far exceeding every expectation and deadline set in front of me.  Yet, things were very slow, and despite my best efforts I could not always keep busy.

That’s when it started.  I would log into my account in the morning while checking my email and eating a quick muffin from the cafeteria.  Then I’d look at the various financial markets and spot large cap I stocks followed which were lagging in the market.  Then quickly buy them (it’s a little more complex but that’s the just of it).

Then I’d set a trailing stop loss and walk away from my desk.  If the stock hadn’t tripped the stop loss cashing out on it’s own by the end of the day I would manually cash it out and take my earnings away.

This was consistently working.  I’d made about a dozen trades and only came short on one.  Keeping the news to myself was hard though.  A handful of the individuals in the department started asking for and sharing trading advice with me.  I became self conscious and felt bad about trading at work despite performance as an employee and stopped as a result.

Interestingly though one guy across from me was trading as I was.  However, unlike myself he had setup a trading team with his father in law.  My colleague would research stocks and sometimes place trades.  Together he and his father in law were killing it bringing home the bacon and then some.  It wasn’t long until he was on his own free from the corporate environment.

Founding My First Joint Venture Company

It was some years later when I was laid off and worried about my mortgage.  I’d never forgotten about that colleague and my day trading experiences though.  My previous investing efforts had built up a nice security blanket for when I was laid off.  Those day trades and a few others had raised tens of thousands of dollars in my trading accounts which had been untouched since.  I wanted a successful business very badly and saw this as an opportunity to launch one quickly.

I assembled a team of advisers who were much better traders than myself and had the capital to begin making good money day trading.  I filed the paperwork for the Joint Venture and came up with the name Alabatros Equity.  We set our goals higher than the ever.  The idea was not only to pay off our houses but to continue raising money for a vintage fighter jet (I’ve dreamed of flying since being a little kid and so had my business partners).  The first jet would be an L-39 Albatros / Russian Jet Fighter Trainer.

Our research showed we needed around $250,000 to buy the jet alone.  Then around $1,000,000 each year to continue servicing it to fly.  That seemed like an excellent goal because even if we failed to meet it we’d easily have paid our houses off (each of us had a mortgage) and would be home free with no ties to a job.

Building the Company

We wrote a business plan, filed our papers with the state and I got to work.  The idea was to raise the money in the market to fund accounts from which they could also trade in.

They could either bring money forward themselves or use money I’d raised which would determine each partners equity split in the company.  Dividends would be paid out as the accounts grew based on trading performance.  I was the first to start trading as we didn’t have enough money to get started.  I used methods to get higher and higher returns on my investments as I felt I’d found a risk free way to trade…

The money was rolling in hand over fist.  I was making the most money I had in my life using the similar set it and forget it trading methods I had pioneered previously over breakfast at work.  They required virtually no time to manage and capped my bottom end risk / losses (or did they?)…

There’s No Such Thing as a Free Lunch

It was looking like I had it all figured out.  I had found the answer to consistent risk free money.  I was filing the paperwork and setting up the accounts to bring partners online as well as working a part time engineering consulting gig for a large corporation.  We were also getting questions from people wanting to get in on the company launch despite we were doing our best to keep it quite.

I really getting excited and started thinking even bigger.  The plan was to continue on to not only setup the main trading funds / accounts but also get our security licenses so we could take on outside money partners.  This looked like a really promising venture and I felt invincible.  But then the unthinkable happened.

That stop loss wasn’t really protecting me like I thought it was.  A trade busted through the bottom of the stop loss proving it really wasn’t protecting the bottom end and sold me out at a much lower price.  So low in fact that I lost all the money I had raised as well as the money I had previously made in the market.  Making ALL my trading for the past several years a complete wash.

Risk Paralysis

This scared me to death.  I sat back and realized that despite how well you manage things, running a business can be VERY risky and trading is probably one of the more if not most risky businesses to be in.  I immediately put a halt to all my trading as I realized that if I took another hit like that I’d be living on the street.

At this point I was scared out of my whits but one thing I did realize was, no matter what you do things are going to go wrong.  You have to continue trying in light of this.  It’s actually a comforting thing to realize these things happen to all of us in our lives in different capacities.  I’m starting to see the most successful individuals though have simply experienced more situations like this and walked way with more invaluable lessons.

It took me a while to realize this and the hit had shook me up so hard that my next muse was a search for a zero risk venture.  I’ll talk about this in the next article and why there’s no such thing.  And to let you know this next muse hit me much, much, harder than the hard knocks investment muse I launched.

One Last Thing

This lesson gave me a new found appreciation for holding a career and the business owners who created your job.  You see, if you have a job the business owner is really doing a couple major services.

One he’s providing you a pay check as well as any benefits he offers you.  In exchange you’re providing him with some value / work product that he realizes he can make a return on earning money off of you.  I think many people stop here and just complain that they are worth so much more than they make.

However, what most people fail to realize including myself up until now is…  The person who writes your paychecks, the business owner, is taking on all the risk of the business.  He could after all loose every cent he has (and I’ve seen this happen on several occasions) while you stand to only loose your job at worst.

So thank him for taking on the risk.  He’s the one staying up all night wondering how he can meet your paycheck and if he will have to sacrifice everything he has to do so when things get hard.

PS… and don’t trade at work without express permission.  It’s a dishonest / jerk thing to do and I’m not proud of it one bit.