Sacrifices of a full-time trader

Many individuals who hold down a full-time job and trade the markets in their spare time, harbour the desire to trade on full-time basis. It is a very enticing proposition. Over and above your trading record and the reliability of your trading approach, I think it is important to consider the significant sacrifices involved in making the transition:

  • Security of full-time employment: Perhaps even more important than the absolute level of income is the fact that an income stream from an employer is usually stable. This regular paycheck stream can be matched up against routine expenses like food, rent, etc and in most cases, will leave you with a little spare change for your long-term savings account. A full-time trader either needs to have an asset that generates enough cash to make these routine payments – bear in mind that a £100,000 asset will be lucky to generate to 5% pa (£5000) after tax – or they are in a forced position of having to try to generate the cash from the their trading accounts (welcome to my world). 
  • Income growth: Most people’s pay-packets will grow by an amount that beats inflation, and will often be supplemented with end of year bonuses.
  • Realistic expectations and your bank roll: The very best hedge funds (eg: Quantum, SAC, Citadel) consistently make or have made around 20-30% pa. They have the very best minds working for them, will often throw money at technology, and usually have decades of experience. If you set your aims in this context (ie at a more modest level), it becomes obvious that a substantial bank roll to required to make a decent living from your trading activities. A reasonable minimum level for a rational investor would probably be around £100,000 (plus the asset required to generate a regular income stream). This is what I think is required to stand a reasonable chance of success. It may also explain help to explain why so many traders fail at the retail level; they just don’t have the resources to take a measured approach.
  • Acknowledgement and interaction with peers: We are social animals and unless you are operating from a trading arcade, trading can be a very isolated activity. This is not natural and can be get quite depressing over time. In the workplace you can bounce ideas of other people and you get feedback on your efforts. In most cases, your presence is appreciated. In trading, however, your sense of self-worth has to come from within.
  • Other perks of the pay-check: These include things like health cover, insurances, and pension contributions from your employer and paid holidays.

I hope these points underscore the idea that making the decision to become a full-time trader is not a decision to be taken lightly.

As a trader, I believe my objectives are noble, but I’ll confess that I glossed over these sacrifices when I made the decision to start trading on a full-time basis. That was my first bad trade.

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6 responses to “Sacrifices of a full-time trader

  1. 3500,

    Man…. I hear you. The path to success in trading is probably the most treacherous and difficult path I have ever encountered. Like you I have lost most of my money and what in the beginning seems to be a great idea fill with hope and financial freedom has diminished to the inevitable reality of a 9 to 5 job again. Although I’m not a FX trader but an equity trader the difficult reality is the same. I am down to my last effort both financially and mentally. I have always believed that great reward requires great sacrifice and to that end I will continue to strive forward. I wish you good luck and just wanted to share with you that you are not alone in this battle.

    -Andrew

  2. Thanks for sharing Andrew. It really is all light and promise at the beginning, especially if you extrapolate an early series of wins to forecast your end of year results (yes, I did this). I think it’s fine to be optimistic, but a trader needs to be realistic and well capitalised if they are really going to make a go of it.

    Wishing you all the best.

    PS – At least we tried and are still trying. Win or lose, that fact alone is worth something.

  3. One suggestion, one that I do, is that I trade using daily charts. I make my decisions and enter at the open of the new bar, set my stops, and then go about my business. My opinion, it’s the best way for people who work a full time job to trade.

  4. Thanks Paul, I think it is good advice. When I was working a job at the same time as trading, I also used dailies as my reference. As I moved to full-time trading I moved to ever shorter horizons but this was more due to ‘want’ rather than actual opportunity. This continued to the point where I was trying to trade the 1- minute charts (just a few weeks ago), and of course it was to no avail. I hope that nonsense has stopped.

  5. If trading was easy, evryone wld be doing it. I traded OIL futures at home on a daily basis. This is the market that I seem to “understand” the best. I believe you really have to find the market that you can grasp the most. I tried FX as well and was only able to make gains using technical indicators. I understand your ‘social’ point about trading at home. But I really need to be alone in order to make ‘proper’ decisions. Save the friends for the weekends!

  6. I hear you Ricardo. There is a market and a time horizon for everyone. I feel I understand forex better than I do stocks or commodities, but it is quite clear I could do with some more understanding. Couldn’t we all.

    As you point out, technical analysis seems to play a significant role in the FX market and it is employed by nearly all currency traders to varying degrees. So why is it that I pretty much ignore technical indicators in the conventional sense? For one, it seems to conflict with the rational side of my brain such that I have been reluctant to pay it any mind whatsoever. At the very least, perhaps I should use technical analysis to assist and augment my trading approach, and then I can evaluate whether there is any value to be had, even for a complete non-believer. Indeed, that would also be rational.

    On the social point, I find I can also focus in a trading floor environment where there is so much noise that it becomes white noise, or background noise. Anything in between the two extremes of total isolation and total chaos is too distracting. I also find isolation useful, in that it keeps me independent, but I miss physically being among other people.

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