- January 21, 2019
- Posted by: evertradefx
- Category: Trading Tips
The desire for freedom and financial independence is why many of us start trading.
How wonderful it would be to tell your overbearing boss to sod off, sack the annoying client who calls you at 8 pm on a Sunday?
Just you, a laptop, and the charts.
Now that you’ve peered over the fence at my luscious green grass, let me educate you on what it’s really like (while I relax on my sun lounge, sipping an ice tea).
There are thousands of us around the world right now. Trading for a living and making a real difference to our financial wellbeing and the lives of our family through the rewards and flexibility trading provides.
It is possible. You can trade full time and quit your day job. But it ain’t always easy….
Here’s how you do it.
It might sound obvious, but I know traders who took the plunge in the expectation that dedicating full-time effort would result in profitability. Don’t do this.
Build a profitable track record of 12+ months (preferably longer).
Start trading as though your life depended on it today, and if you can make money over a 12 month period without a major error/loss, you might be ready.
Keep in mind that you’ll likely be tempting to take unnecessary risks and overexpose your account because you have your job to fall back on. But remember, as traders we’re always one poor decision away from disaster. Stick to your strategy, cut your losers and live to fight another day.
Don’t hold losing trades for more than 3 days.
“The elements of good trading are (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.” – Ed Seykota
Holding losers for an extended period of time causes unnecessary fatigue. If you’re trading all day, every day, seeing the negative balance perpetually on your account will affect your decision making.
I don’t care who you are, seeing a perpetual negative floating balance on your terminal will affect you, even if you don’t know it.
As traders, we need to be decisive and diligent with our decisions and I find holding long-term negative positions makes that difficult.
Get a support network
Trading can be lonely. And loneliness often leads to poor decision making, primarily due to boredom and overtrading. Find peers and mentors who you can discuss and learn from, I promise you your trading account will thank you.
“The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.” – Jesse Livermore
Save 12+ months of living expenses and reduce your “burn rate”.
How long can you live off your savings before you’re under financial pressure?
Your burn rate is the minimum amount of money you can spend to survive. Shelter, food & internet. That’s all you need. Definitely no holidays, you can do that later.
Don’t assume you’ll make money straight away. If you’re under pressure to perform quickly it’ll likely lead to emotional trading. You’ll become desperate to stay out of that grey cubicle you left only a few short months ago and be tempted to increase your risk or force trades.
How long does it take to learn to become a full-time trader?
Well, how long is an NFP candle…?
If you’re a trading prodigy and work your arse off, then maybe you can get there in 18 months. But in my experience, it takes 3-5 years.
Good luck and Godspeed!