Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/a26f9f83/public_html/articles/includes/config.php on line 159
Trading For A Living - Part 1 > NetSparsh - Viral Content you Love & Share

Trading For A Living - Part 1

There can't be many traders who haven't at least considered the idea of telling the boss what they think of him, throwing it all in and going off to trade the stock market for a living. It's a big risk financially, and that uncertainty is what stops most from jumping ship. Is it really possible to trade for a living?

The Dream

You know how it is, you're sitting in a traffic jam at some unearthly hour of a particularly wet and miserable morning, on the way to the same office you have sat in for too long to remember, and you're thinking - there must be a better way ? life shouldn't have to be like this.

Your mind starts to wander and you find yourself thinking back to that stock you bought only a week ago, and how it skyrocketed giving you enough profit to takes the kids to Disneyland in the summer, and you begin to consider if you couldn't make a fulltime living at this trading game. The advantages are certainly tempting; no more pointless meetings with the manager, hours to suit, holidays whenever you feel like it, and with your home-office - no more traffic jams.

Heck, come to that you could even make home anywhere you want it to be! By the time the traffic starts moving again. you're busily calculating how much cash you could make if all your trades went like that last one - you're almost ready to write your notice letter there and then!

The Bad News

Time for a reality check. Certainly all of the above benefits are there to be enjoyed, but it's a huge step from full time employee to full time trader. Are you really ready to give up that monthly pay-check just yet? Can you really cope not knowing how much money you're going to make month to month? Are you prepared for the months when you actually lose money instead of make it? There are many things to consider before taking the leap of faith.

Considerations

Before you even think about trading for a living you have to know how much money you need to live on, that is, how much cash do you need to generate every month in order to survive. As a financially minded person you already have good home accounts, or are at the very least vaguely aware of where the money goes. So take the annual figure (monthly is no good, you need to account for annual recurring items like insurance premiums, car servicing, and vacations), add 50% and divide by 12. Why add 50%? Because there will always be unexpected expenses, and as traders we are always prepared to expect the unexpected.

Now you know how much money you need each month, you can look at your savings and work out how much buffer money you have, that is, how long you could survive without earning anything at all. You can't expect to be an instantly profitable trader, and even the best and most experienced have periods of drawdown, so you need to be ready for the worst. If you can't live for at least six months from your savings then you are probably under capitalised and are not ready to give up that pay-check just yet.

An important but often overlooked aspect of under capitalisation is the effect it will have on your trading; if you are trading because you need the money, then you are trading scared and you're almost certainly going to lose. You cannot distance yourself from the money-aspect of the trade if you are relying on the money.

Living expenses are only one part of the financial equation. Next you must consider how much trading capital you need. This is the money actually facilitate trading, in other words your account balance for trading margin, and the money you will be spending on data feeds, software, and internet access. You must account for this separately, you cannot start eating into your daily living expenses money just because you took a bad trade and need some more margin.

The amount of trading capital you require will depend very much on your trading style. To day trade the US Stock Markets for example, you must have at least $25,000 in your account, so budget for $30,000 to allow for positions moving against you (if you fall below the $25k minimum even briefly, your account can be frozen for up to three months). If you are holding positions overnight you may manage with a lower balance but bear in mind your buying power and consequently returns will be reduced.

If all this is starting to sound expensive, well it is. There's no two ways about it, you simply cannot survive long term as a trader if you are under funded.

This article will be concluded in part two.

About The Author

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

In The News:

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

Kiplinger's Personal Finance

25 Blue-Chip Stocks That Mutual Fund Managers Love Most
Kiplinger's Personal Finance
Investors continue to pour money into passive vehicles such as indexed mutual funds and exchange-traded funds. However, good old-fashioned stock picking and asset allocation with a human touch still rules in some areas – including in the well-trodden ...


Seeking Alpha

How To Find The Best Style Mutual Funds: Q2 2018
Seeking Alpha
Performance of a mutual funds holdings is equal to the performance of a mutual fund. Our coverage of mutual funds leverages the diligence we do on each stock by rating mutual funds based on the aggregated ratings of their holdings. This idea was ...


Investor's Business Daily

How To Find Good Growth Stocks: A Mutual Fund Pro's Emotion-Free Approach
Investor's Business Daily
"Avoiding behavioral risk" is more than a Wall Street slogan to Vladimir "Val" de Vassal. It is a tactic he has raised to an art form as he aims to remove subjectivity from his hunt for top-performing growth stocks for two Glenmede mutual funds of ...


Investorplace.com

3 Large-Cap Value Mutual Funds for Good Returns
Investorplace.com
Large-cap funds are better than small or mid-cap funds for risk-averse investors. These funds have exposure to large-cap stocks, with a long-term performance history and more stability than what mid or small-caps offer. Companies with market ...


Investor's Business Daily

Breakout Watch: 97 Top-Rated Funds Own This No. 1-Ranked Stock
Investor's Business Daily
When looking for the best stocks to watch, start by seeing what the best mutual funds are buying. And right now, leading portfolio managers are pumping funds into leading car stock Ferrari (RACE). While Ferrari didn't make IBD's latest list of new buys ...


Investor's Business Daily

Amazon Who? Top Fund Managers Go Shopping For These Retail Stocks
Investor's Business Daily
Kohl's saw 16 of the best mutual funds scoop up an estimated $40.4 million worth of shares from March to May. Kohl's initially cleared a 67.10 double-bottom buy point on May 29. But the Wisconsin-based retail stock really blasted higher on June 4.


Can Mutual Fund Giant Fidelity Become A Force In ETFs Too?
Investor's Business Daily
But in recent years, the Boston-based fund giant has increasingly focused on building a name for itself in the universe of exchange traded funds. In 2003, it launched its first ETF, Fidelity Nasdaq Composite Index Tracking Stock Fund (ONEQ). Since Greg ...

and more »

Zacks.com

3 Strong Buy Nuveen Mutual Funds for Striking Gains
Zacks.com
Nuveen Investments was founded in 1898 by John Nuveen and is headquartered in Chicago, IL. The company seeks to provide financial services to its clients by using the multi-boutique structure. It provides these services through an independent team ...

and more »

Quartz

How a major stock exchange is using Telegram to help sell mutual funds
Quartz
On Monday (June 11), mutual funds (MF) worth nearly a million dollars were bought on BSE StAR MF. A dedicated distribution platform for MFs at India's oldest stock exchange, it has seen its total turnover grow at a compounded rate of 114% in the last ...


Economic Times

Domestic mutual funds are selling these smallcaps and midcaps in hordes. Check out why
Economic Times
Mutual fund houses across the board exited several midcap and smallcap stocks over the past three months. As such, while the largecap equity indices have shown signs of stabilising in recent weeks, midcaps and smallcaps continued to be in turmoil. In ...

Google News

Historical Briefing: Stocks, Finance and Money

The World Bank claims that some two billion of the... Read More

Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try... Read More

DIY Portfolio Management

Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More

The Stock Market - How Just One Question Will Tell You All You Need To Know About Your Stock Broker

Last time we looked at the real performance of the... Read More

Money, Insanity and Wall Street

Money: the most charged word in the planet. It means... Read More

3 Components Needed for Beating the Market

Time to look back2004 is over, now we are in... Read More

365/7/24

What does it take to be a stock trader? It... Read More

Discover the Retirement Breakthrough the Federal Government Created for You - The Roth IRA!

If you don't know what a Roth IRA is then... Read More

Maximizing a Stock Market Investment

Maximizing a stock market investmentThere are several factors an investor... Read More

Ignore Stock Market Talking Heads

You should ignore analysts on TV, the radio, the newspaper... Read More

Online Broker Trade History Not Doing the Job

Let me start by saying that...Most online brokers do not... Read More

Patterns

The Law of Chaos is the theory of random unpredictable... Read More

VIX

No, this is not a symbol for some Latin number.... Read More

Pathways

During our travel down life's path we come to many... Read More

Advisory Service for You?

It depends on your level of understanding of the market... Read More

Never Lose Money

Never lose money in the stock market again. Yeah, I... Read More

Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

Hill of Hope

Just about now everyone is confused as to which way... Read More

Analyst Reports

When you become interested in a stock or mutual fund... Read More

A Common Misconception about Stock Prices

I cringe every time I hear a novice investor tell... Read More

Intervention

Intervention. Now don't let that big word scare you. The... Read More

I Love To Lose Money

Well, not really. What I mean is I don't mind... Read More

It Cant Be Done

Wouldn't it be nice if you were only in the... Read More

Box Of Chocolates

Ever have one of those sample boxes of candy? Each... Read More