Trading For A Living - Part 2

In part 1 of this article I started to look at the financial implications of giving up the day job to instead start trading full time for a living. There are more than just monetary considerations as we will see later, but for now, there are some more costs to ponder.

More Costs!

Let's move on to equipment. Presumably you already have a PC and internet connection by virtue of the fact you are reading this on the internet. But are these both up to the job of trading full time? Again the specifications for both hardware and ISP will depend largely on your trading style, but if you're relying on a 100Mhz Pentium II and a dial up service, you're setting yourself up for failure. So budget for quality equipment, budget to keep it up to spec, and budget for some repairs too ? expect the unexpected.

Many traders make the mistake of saying "This will do me whilst I start out, and I'll get something better when I make some real money". This is quite simply false economy, you are unlikely to ever make real money with a substandard setup (and this applies equally to substandard software and data feeds). This is a cut-throat business and 95% fail, you must give yourself every advantage you can. You wouldn't enter the Indy 500 in a go-kart with the intention of buying a better car when you've won a few races, and the same thing applies here.

Earnings

When you've added this all together, you have a pretty good picture of how much money you need to generate from your trading in order to live. Does your past performance suggest you will be able to meet this target? It's tempting to say "When I go full time I'll make much more", but how do you know this is the case? Perhaps you can take a couple of weeks holiday and try it out ? if you don't make enough in that two weeks then you're not ready. A few weeks really isn't enough time to know if you're going to succeed though. An ideal next step then is to cut your day job hours to part time and trade maybe two or three days a week. This way you know you have some money coming in, you get to trade for real, and if it all goes horribly wrong you are probably better placed to get back into full time employment than someone who quit the working world completely.

The option of part time work is a luxury many of us don't have however. So does it have to be all or nothing ? trade or work? Why not keep the day job and trade outside your working hours as well. If you are trading and end of day strategy, then this is easily achieved by doing your research in the evening and placing the appropriate combinations of Stop and Limit orders with your broker. For day traders, certainly practising is easier if your intended market is not your home market, for example if you want to trade the US and you live in the UK where you can come home and paper trade in the evening.

There are other try before you buy options open to the day traders who want to practise trading their home market outside of normal hours though. eSignal allows you to download tick data for any symbol and play it back in real time or speeded up so you could trade the whole day in an hour. Other vendors have similar offerings, and if you have an IB account you can use AutoTrader to record tick data during the day for playback into a demo version of SierraCharts or QuoteTracker for free.

The bottom line here is that before you take the plunge, you need to have done everything in your power to prepare yourself for what lies ahead. It will still be harder than you ever thought, but it will be nigh on impossible with no preparation whatsoever.

Other Considerations

There are a few non-financial aspects to consider before going full time with your trading. If you have a family, how will the change impact them? Do you have the space to work uninterrupted during the day? It's important that the family don't assume that because you are at home you are automatically available to take the kids to school, or walk the dog. Make sure from the start that everybody knows the ground rules and that you can separate your working time from your free time effectively.

Consider also the social impact of leaving your full time employer. Again, if you have a partner or family are you going to drive each other nuts being in the same house all day? Relationships can be tested to the limit! Or if you live alone, are you going to drive yourself nuts being on your own all day? Trading full time can give you enormous amounts of free time, but if you have nothing to fill that time with you can quickly lose the plot ? I've seen it happen and it's not pretty.

Is It Worth It?

Nobody can tell you if trading for a living is for you, it's something you have to find out for yourself. I've seen traders go through highs and lows to challenge those of any stock chart, but for most it has proved to be a good move. The long list of benefits are all there for the taking, as with any change of career or indeed any major life change, as long as you go into it with your eyes open, and above all prepare, then there is no reason why it cannot work for you.

About The Author

Geoff Turnbull is a full time day trader, and a contributor to http://www.stock-trading-world.com

The Dreaded Direct Question

(Please have a glass of water within reach before reading... Read More

Advice for International Investors on How to Safeguard Their Profits

What are the risks?Today, investors are increasingly turning to global... Read More

Missleading Fund Names Wreak Havoc On Investor Returns!

Mutual fund managers use fake fund names to part you... Read More

Why You Need To Buy and Sell Gold Coins (Part 3)

Putting Rare Coin Market Cycles to Work for You...Until recently... Read More

Trading Systems

A trading system consists of a set of rules for... Read More

Larry, Moe and Curley, Investment Brokers

Larry, Moe and Curley were sitting in their favorite restaurant... Read More

Your Portfolio and ?Old Ironsides?

The USS Constitution first ventured into the waters in 1798.... Read More

Investors: Avoid These 5 Common Tax Mistakes

For many investors, and even some tax professionals, sorting through... Read More

5 Things To Know About The Stock Market

50% Of U.S. Households Invest In The Stock Market Individuals... Read More

Just Say NO to Your Stock Broker

We have all heard that slogan that started back when... Read More

Choosing A Financial Advisor

With so many financial advisors trying to woo you with... Read More

Trading Tips No 7: Developing a Casino Mentality for the Day Trader

I submit that the successful day trader would profit well... Read More

An Introduction to Offshore Investing

Once upon a time, offshore investment strategies were spoken of... Read More

Creating Momentum with Options - Pro and Cons of At-the-money, In-the-money, and Out-of-the-money

To create momentum in your options trading you need to... Read More

Beta Factors: How They Can Be Used In The Current Situation

Ever since the turn of the century, world stock markets... Read More

Volatile Oil

The Light Crude Continuous Contract fell from $67.70 a barrel... Read More

The American Age of Inflation is Over

"The American Age of Inflation is finished." So says economist... Read More

Tyranosaurus Rex

Everyone knows T Rex was the most fearsome of all... Read More

Investing Online Has Its Rewards: Find Out How To Take Advantage Of Them

Computerized investing. Online investing. Have you taken the next step... Read More

A Gadfly On A Dinosaurs Butt, Or The Hood-winking Of The American Investor

Have you ever noticed how some words in the English... Read More

Building The Foundation For Wealth

You wouldn't build your home on anything less than a... Read More

Brain Snappers and Other Wall Street Nonsense

The last time you spoke with your broker did he... Read More

Trading Tips No 3: Online Trading and Investing: Buy, Hold, and Hope

So you have learned how to trade the markets by... Read More

Stock Market Money Management Skills

Let's start by saying: You can't be afraid to take... Read More

Can Using Sales Leaseback Method of Investment Property Acquisition Reduce Risk?

Sales Leaseback compared to traditional property investmentCan a Sales Leaseback... Read More