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Making the Switch to Full-Time Trading

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Over the years, I have had many conversations with traders who aspired to leave their day jobs to trade full-time. This is a dream that, at one point in time or another, every retail trader is going to consider. I once spoke with a trader who told me, “there is no leverage in working a job,” a statement that I have never forgotten. 

The grind of waking up every day to meet your supervisor’s deadlines doesn’t give the same excitement as when you have had a remarkable week trading, possibly making more money in that week than you might in a whole month at your regular job.

But how do you know when you are ready? This is a question any trader considering going full-time must ask. Before I present some considerations to this question, I will at least offer the possibility of not going full-time.

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Multiple Sources Of Income Is Good

I have had times when my only income was from trading and other times when I had outside income from various business ventures or contract jobs to complement my trading. One thing I will assert is that I am more comfortable having multiple streams of income rather than depending solely on any single revenue stream, including trading. 

Another assertion I made is that I always trade better, as in, more profitably, when I have multiple streams of income. It’s true, likely due to psychological factors because I’m not trading money that I might need to survive on. Therefore, you might consider these potentials before you quit your day job. The truth is, you don’t know what it will feel like to trade knowing your livelihood is at stake until you quit your job, then it may be too late to change your mind.

Is It Really Worth It?

If, however, you are considering dropping your day job, here are some things to consider:

  1. Don’t expect that life will be easy just because you are not answering to a boss. The best traders have an internal discipline that creates far greater accountability than any boss. To be successful, you will still have to keep a routine schedule. 
  2. How much capital do you need? This is the question that I have been asked the most—the answer is, you probably need more than you realize. First, if you are paying your bills from your profit, you need to be prepared for the months that you are not profitable. What if, for whatever reason, you go a whole quarter without any substantial profit? If you are still making withdraws from your trading account, then your balance is decreasing; therefore you are taking on additional risk to earn the same amount of money. The answer is to have enough of a surplus saved up, even outside your trading account, to where you could live for a few months without a profit. 
  3. How much mental capital do you have? I once had someone ask me how to know when they were ready to trade fulltime. My response was when they could have losing days and weeks and conduct themself the same as if they had the best of weeks. In other words, if you are having a bad trading day and lose your temper with your significant other or your children, chances are you are not ready to trade full time. This indicates that you are still too emotionally attached to your trading and potentially reacting to fear. This does not mean those good traders don’t have exhausting days and sometimes need a release, but as a rule, if you cannot manage yourself on bad days, then you are taking on too much personal risk. 
  4. This final consideration is vital. How much experience does one need? My suggestion is that every trader going full-time needs to have experienced every cycle that their market has to offer. Bull and bear markets, recessions, and economic growth. You also need to have experienced every personal trading cycle which includes hot and cold streaks. Furthermore, whatever system you are implementing should have promising results for various market cycles. For example, a trader should have a system in place for a marker when it is normal, slow, or very volatile. This could be the same system if it is proven to respond appropriately to market conditions, or it might be separate systems that capture different market personalities. 

This is by no means intended to cover every consideration that one might make before determining their fitness to leave their day job for full-time trading. However, these are pertinent questions that, if weighed carefully, will give you an indication of your trading fitness. 

Happy trading to all of you, and I look forward to any considerations you may add in the comments section. 

Trade Well!


Posted by Fair Value Trader on June 26, 2020
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