Quitting your full-time job to trade for a living is a fantastic goal to strive for but there’s a couple of things you need to have in place before you should consider chasing after the dream to trade for a living. It’s not just about having the system and the confidence in the system, although, of course, you need that. However, when you’re planning your future as a trader, you need to think about your own lifestyle expenses, budget, and your tolerance for uncertainty.
You have to remember that income from trading is inherently volatile, it doesn’t always come regularly week in or week out, month in or month out, like your job income does. When you’re thinking about trading for a living, you need a fair bit of capital and you need some fairly stable returns.
Before making the leap you should consider the following:
- Capital required to trade for a living
- Trading account buffer to protect against drawdowns
- How to establish Portfolio of trading systems to get profitable
- Build the capital to make the transition
If you think about how much capital you’ve got and your average long run return, consider this: let’s say you’ve got a hundred thousand dollars in capital and you make 20% return per year on average. That means on average, you’re going to have $20,000 profit per year. Now, if you can live on $20,000 profit, then that’s great, you can go ahead and do that but you have to remember that one year you might make $30,000 and then the next year you might make $10,000 or even $0. It fluctuates quite a lot.
Trading account buffer to protect against drawdowns
In order for people to learn stock trading for a living successfully, there needs to be a pay of buffer. For instance, in my own account, I’ve always got more capital than I need to generate the return I need to live on. If I have a drawdown or if I have a bad year, I’ve still got capital I can live on. When the profits come back, or I have a better month or year, then the account grows again.
You want to have that buffer in your capital to protect you in case you have a bad year. That helps to prevent you from being too stressed about the returns you’re making or having to work too hard to make the money. As soon as you’re working really hard to make the money, it becomes difficult and stressful then the mistakes creep in and it becomes basically really difficult to be a consistent trader.
How to establish Portfolio of trading systems to get profitable
The first part of the battle after you learn stock trading is for you is to get a system that is completely objective. Part two is to learn how to backtest it so you can be comfortable Finally, it has to fit your personality, objectives, and lifestyle. When you’ve got all of those in place, you can start trading consistently and building your account.
Build the capital to make the transition
The next step is to build the capital to the point where you don’t need the job. How much is that number? Well, that’s going to depend a lot on you, your lifestyle expenses, and what your ongoing obligations are. If you have a really high load of expenses that you have to incur every single month, then obviously you need a lot more capital so figure out what that number is for you.
If you’ve got minimal expenses, you don’t pay much rent, or you don’t have a mortgage, and it’s just you living on your own, then life can be pretty cheap if you want it to be. You can quit your job and then live on a smaller budget if your trading results are not as good that month or year. As you have really good years and build your account further, then you can increase your lifestyle.
It’s a very personal issue about how long does it take to quit your job to be trading, but what I would say is that once you’re trading profitably with the system and you’re following that system day in or out consistently, the feeling of freedom really changes even if you still got the day job. I found out very early on when I started trading systematically, I built my trading account from $7,500 up to $30,000. Now, $30,000 is nowhere near enough to live on particularly where I was living in Sydney, it was hellishly expensive.
Many years ago when I had just built my trading account to $30,000, I knew (obviously) it wasn’t enough to retire on or to quit my job, however, I knew at that point that I was going to be free because I knew my trading was working. That feeling of freedom came over me and gave me the confidence and the comfort to keep going and not to worry so much about the stress in my day job because I had this other thing going for me in my favour.
You get that benefit of feeling free and independent long before you quit the job because you know your trading is working; that’s the first threshold that you want to get to. Your own system, that’s working, building and growing your account, and confidence that you will get there eventually.
That just really is a game changer. I don’t know what your financial situation is, but when you get to that point, all of a sudden, I didn’t feel as trapped in my job. I knew if I had to walk away, I had something else I could fall back on or the money from my job wasn’t the only thing that was keeping me going. Depending on how much capital you’ve got, it could take a couple of months to get comfortable and then quit your job or it could take several years if you’ve got to build the capital.
The question of how long does it take to get a system that you’re confident in, is easier to answer.
If you came and joined the Trader Success System, took one of my systems, learned to backtest, built confidence, and started trading it, you could do that within one to two months, no question. Particularly if you’re focused on it, you ask all the questions as you go along the way. If you want some extra coaching, we can do coaching calls each week as an additional thing but the key is to start and build confidence in that system. That’s what’s really going to get you there and that might take between one to three months, depending how much time you throw into it. Now everyone is busy and I know you’ve got a full-time job, but the thing is, if you carve out some time now to learn stock trading, it’s a couple of months of intense focus on that, sacrifice something else. Maybe a little less sleep or a little timeout from the family, just to learn stock trading and get your system in place.
Once you’ve got that system in place, then it only takes 20-30 minutes a day. You’ve got to have that learning period first that does take some energy and effort. But once you’ve got the system backtested and you’re confident, following the system is dead easy. Particularly if you’re using daily charts like I do and like most of my clients do.
I can help you get to the point where you’re confident in a system in just a couple of months.
From there, you’ll be completely independent. You’ll know how to backtest, how to improve your system, and how to add different rules or try different system ideas. That’s going to really set you up to be independent as a trader and to give you that long term career as a trader that you’re looking for.