Trading for a living is a professional endeavor like any other, says Steve Burns of New Trader U.
It requires a large amount of capital to go full-time like any other business and the returns are irregular much like being a commissioned salesperson. It is less about trading from a laptop on the beach with a Lamborghini in the garage and more about taking on the risk, managing the uncertainty along with the stress, and being rewarded for good trades. Also, aspiring traders have to understand that you don’t just make money and receive a regular paycheck of profits, there are also losing trades, losing weeks, and losing months for any real trader.
- You have to purchase private medical insurance as you have no employer plan. In the US this is usually double what you paid through your employer.
- You will likely need a Certified Public Accountant (CPA) to do your income taxes due to the complexity since you will not have a W2 from an employer.
- You will be your boss so you have to make yourself do the needed work of research, screen time, and trading.
- The lower your living expenses are the less you need to make to trade for a living.
- You should never attempt to trade for a living until you have a record of success trading part-time over multiple types of market environments.
- The amount of capital you need for trading is based on your return expectations and living expenses. If you need $50,000 to live off of and your annual return expectations are 10% you will need $500,000 to trade with.
- Don’t think trading for a living will be less stressful than your job, it can be more stressful than most jobs due to the uncertainty and mental stress of trading to pay bills.
- Trading for a living is a lot less stressful if you have minimal monthly bills, no debt, and a year’s worth of living expenses saved before you begin.
- If your spouse works it can be much less stressful as you have another source of income and access to healthcare and 401K benefits.
- When you trade for a living you not only have drawdowns in the capital during losing streaks but also have monthly drawdowns in the capital due to having to pay your monthly living expenses.
- Multiple streams of income make trading for a living much less stressful. The average millionaire has seven sources of income.
- The freedom of trading for a living is worth the journey.
For the majority of people trading to compound capital gains part-time is the best strategy. Trading for a living requires a lot of capital and minimal expenses along with a long-term track record of successful trading to have a chance. Trading for a living is very similar to being an entrepreneur as you risk a lot of capital for the chance at freedom, being your boss, and unlimited profit potential. Keep your risk/reward ratio favorable if you go full-time, and avoid the risk of ruin by making sure the math works before you leap.
Learn more about Steve Burns at NewTraderU.com.