One of the most common issues I see in new traders is that they want to go full-time right away. As soon as they study the stock market for a few months and open their first trading account, they think they are ready to quit their 9-5 and trade full-time. Developing expertise in trading is no different than any other job. Surgeons don’t just start doing surgery after a few months of training. They study for years before they ever lift a scalpel.
Trading is the same. You may not need quite as many years of training as surgeons, but you still need many months of studying and refining your strategy to become consistently profitable. However, there is no other profession that gives you more freedom and independence than trading. The pain and obstacles are worth it.
In the meantime, here are 3 crucial things you must have done before you trade full-time:
1. Be Profitable Over An Extended Period of Time
Trading is a game where a few days of bad decision making can wipe out months of successful trading. So many traders make the mistake of quitting their job after having 1-2 profitable months of trading. You have to prove that you can be consistent and disciplined over an extended period of time. You need to demonstrate that you can be consistently profitable for at LEAST 6 months, some might say longer.
When I started trading I’d have 2-3 months where I’d think I was on top of the world and no one was a better trader than me. Then I would give back my grains with a few bad trades. The point is that you can never get too excited over a few good weeks of trading. You need to focus on your longer-term PNL trend in order to assess if you are ready to trade full-time.
2. Have At Least 1 Years Savings/Additional Streams of Income
No one knows when the market will present opportunities when you can make money. You need to be able to sustain yourself for when the market is slow and there is no opportunity. For this reason, you need to have a decent amount of savings in the bank before you go trade full-time.
It is even better to have an additional stream (more streams the better) of income that doesn’t directly interfere with the time you put into trading. Not having enough savings or other streams of income will hurt your trading. You will force trades because you need to make money to pay your rent or bills. You cannot be trading because you need money from the markets. The markets are just a mechanism for displaying information, they do not care about your expenses.
3. Have A Large Enough Account
Trading is game where you need to have money to make money. If you need to make $5k a month to pay off expenses and live the lifestyle you want, you cannot do this with a $2k account, especially as a full-time trader. Trading with a small trading account is not at all realistic for trading full-time if it is your only stream of income. Trading with a small account is not necessarily a bad thing but you cannot expect to sustain yourself with it. For more tips on how to trade a small account, check out this article.
Obviously, there are outliers to every situation and some students have found success much faster than others. Regardless, when you’re part of our community we stick by you every step of the way and give you the tools to shorten the learning curve exponentially.