Many beginners and part time traders dream of walking into their bosses office and saying “screw this job – I quit – I am off to trade for a living”. I should know, I have that moment on a regular basis. There is a statistic I read once, which is that 70% of workers dislike their job (the percentage who lie about liking their job wasn’t reported, but some days I wonder if it is 30%). So it is understandable that the dream of trading for a living is strong among many traders. Many beginners and part time traders dream of walking into their bosses office and saying “screw this job – I quit – I am off to trade for a living”. I should know, I have that moment on a regular basis. There is a statistic I read once, which is that 70% of workers dislike their job (the percentage who lie about liking their job wasn’t reported, but some days I wonder if it is 30%). So it is understandable that the dream of trading for a living is strong among many traders.
Do you have what it takes to trade for a living?
Before you race out there and quit your job, you need to ensure that you have the necessary building blocks in place, including:
A big enough bank roll, so that with cautious money management, you can still earn enough to grow your bank roll and withdraw some to pay for your lifestyle, bills, medical insurance, school fees, loan repayments, buy your new sports car, keep your trophy wife or husband, etc; and
Having a trading plan and a decent track record which demonstrates a genuine edge over the market in a range of different conditions
Many traders make the mistake and quit their jobs too soon and they have neither a big enough bank roll or their trading plan isn’t up to scratch. Traders will small bank rolls inevitably end up taking big risks to support themselves and have a high chance of blowing up their account. Inexperienced traders with unquantified trading edges usually end up breaking even or watching their account slowly dwindle away as they stare at the prospect of having to get a full time job again.
Until you have both of the above, it really isn’t worth quiting a perfectly good day job.
On the flip side, quitting your job might just be the right thing to do. Many traders struggle for years, with dismal results. When you have no job, it really focusses the mind and your survival instinct kicks in.
Some hobbyist traders who have lost their jobs, such as through a major medical problem that stops them from working, have found their need for survival has made them far more determined to be consistently profitable as compared to when they had a fulltime job and trading was a hobby. Louise Bedford, an Australian Option trader, is a great example of this. She was a successful executive, but after she had a crippling hand problem, she could not return to work, so she had to use her trading hobby to help her survive.
I met another options trader who did this voluntarily. He cut “his umbilical cord” as he called it, traded in his new Mercedes for an old bomb of a car and moved to a smaller house in the outer suburbs so that he could fund his trading account and focus on trading. Fortunately, his story had a happy ending because he was a reasonably competent options trader with a few years under his belt and just needed to get out of the rat race and focus on his trading to take himself to the next level. If he was a rank beginner, this story could have had a very unhappy ending.
Is trading for a living all it is cracked up to be?
Before you quit your day job, first consider the upsides of your job:
In a full time job you will receive a pay packet like clock work, whereas in trading your income is highly unpredictable and it is not uncommon to have zero or negative earnings for months on end. There is nothing worse than having your utility bills overdue and having to withdraw more money than you should from your trading account just to make ends meet. Some traders have to resort to selling trading books, training courses, newsletters, mentoring, etc in order to ensure a regular income. Others do odd jobs on the side as consultants based on their old profession;
Many work environments are often set up to have less distractions to allow you to focus on working (not all work environments are like this though – some are quite toxic). Your home environment might not be conducive to trading for a living (e.g. constant distractions from other family members).
You have friends at work. Trading can be a very solitary business. Sure you can have virtual friends in forums and chat rooms, but it does not beat slacking off in the tea room with your work mates;
With most jobs, it is possible to slack off for a day or two (or even a few months in some jobs), without adverse effects. Lets face it some people are the master of the fully paid holiday undertaken in the comfy confines of their cubicle. Slacking off in trading will mean you will not earn money or worse it may cost you your bank roll;
In some jobs you can actually do something and feel like you have achieved something, be it finishing a project, closing a deal, building a house, helping a patient, etc. Let’s face it, while money is nice to have, it is not an outcome in and of itself and you will need to find some way of putting meaning into your life as a trader. For more on this topic, refer to my post on “Why are you trading?“.
Going on holidays as a trader can be very difficult at times. Taking your laptop on a holiday and saying to your partner “Sorry honey I can’t play with the kids – I am day trading” is NOT a good look;
Traders have a very difficult time applying for loans, credit cards and all manner of things that require full time jobs. For some reason Banks just like full time workers. It doesn’t matter that you earn a 100 times more than your local McDonald’s Shift Manager, they don’t care – they want a wage slave; and
Trading for a living is hard and can be exhausting. You don’t want to be trading when you’re pushing 70/75. Trading in retirement to support yourself is no fun at all, you need to think long and hard about your retirement plan and looking for a more passive form of income.
There is another way of “trading for a living” and that is to “go pro”. If you are a consistently profitable trader, but you don’t have the bankroll to support yourself, you could consider becoming a professional prop trader. The benefit of going down this path is you expect to earn much much more money than you can ever earn as a private trader. However, getting your foot in the door in this area is extremely difficult as it is a very competitive field. If you do decide to go down this path, it is highly unlikely that some one will just give you a job. You will probably have to pay your dues as an entry level stock broker smiling and dialing or in the back or mid-office long before you get your foot in the door on the trading desk.