Trading for a living - Operating Instructions
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Is living from trading an accessible dream? What capital is needed? What income can you expect? Are all individuals cut-out for the profession of proprietary trader? How do you leave your job to make a living from trading? How do you become an independent trader? These are the many questions that I will answer in this article.
I can no longer count the number of people who come to the forums to show their willingness to live off trading. Most of the time, the idea comes to life after the recent loss of a job, a long period of unemployment or having a displeasing job. What motivates most individual traders to live from trading is often the desire to radically change their lives. But impatience is a nasty flaw, especially in trading. Debutante traders often want to learn how to trade as quickly as possible (some don't even want to learn and believe that you can improvise trading yourself, overnight) to start earning money quickly.
Learning the basics of trading takes a lot of work and time. To know the basics, you have at your disposal several learning guides to train you in trading. But one thing you can't learn is experience. In some professions, the right skills may suffice, but in trading, this is not the case. To become a good trader takes several years. You have to reproduce trading strategy tests, to find a good formula for managing your risk well and to learn to control your emotions (see psychology of a trader). There are always smart Alecs who tell you the opposite, those who make 200% performance in a few days and brag on the forums, but strangely, we don't hear from them anymore a few days/weeks later. Because yes, everyone is capable of being a winner at trading (luck, good intuition, talent), but being a winner in the long run is the real challenge. Living from trading means being able to generate a decent income over a long period of time. That's not making a fortune in a week!!
If you want to make a living from trading one day, you need to understand that your money is your work tool. Your goal must be to protect it as much as possible. If you lose your money, you don't have a job. When you start trading, your goal should not be to make money but to avoid losing money, to last as long as possible. If you last in trading, it's because you're learning. You're on the right track.
Before you can think of making a living from trading, you have to work hard, very hard. You have to train well in trading for several years. The best way to learn is to practice. You can draw a parallel between school and a profession. At school, you learn the technical basics, the theory. But when you put what you've learned into practice, you realize that it's not enough to be good at your job. You need to gain experience in the field, to learn practical tips to help you progress. It's the same with trading, learning the skills just takes work, but becoming a good trader takes time. The best trading training in the world will never replace practice. Remember this if you are hesitant about paying out a fortune for a paid trading course that promises to make you a trader in a few days. If you're naive enough to believe it, you're too eager to succeed. Remember, impatience is a nasty flaw!
To have any hope of, one day, making a living from trading, you need dedication. Learning to trade is long and tedious. You will go through numerous disappointments, raze several trading accounts, curse yourself for stupidly losing your savings, go through long phases of frustration and anger. Besides that, you will have phases of euphoria or feeling untouchable, stronger than the market. You have to understand that you must fight your emotions. Positive emotions are as dangerous as negative emotions. Traders’ objectives are to eliminate them completely from their trading, or rather to control them. The day you get there, you're on the right track to making a living from trading. This means learning how to manage money and learning from your mistakes. Making mistakes is the best way to learn, it's the only way to learn from trading. The point is that these errors do not cost you too much and that is why your first deposits to a trading account should never be too large. No matter how much you invest, having your money on the line is enough to activate your emotions. In trading, your biggest enemy isn't the market, it's yourself!
You also have to take into account the pressure of living from trading. If you have a bad month, you don’t pay yourself a salary, what’s worse is that you have recoup your losses before being able to pay yourself a salary the following month. For most people, this pressure is very difficult to bear. Personally, I never made it. Trading was taking too much precedence over my personal life, over my daily mood. It is not enough to have a winning strategy to live from trading. The psychological aspect is at least as important as the trading itself (strategy and money management). I suggest that you read: The three pillars of trading successfully.
The first thing you need to accept is that the financial markets are not a giant casino. If you're trading to get rich, you're on the wrong track. Your objectives must be in line with your means. If you invest €10,000, you will not earn hundreds of thousands of euros but at most a few tens of thousands of euros if you are a good trader. You must also take into account one element if you want to live from trading, and that is taxation. A large part of your earnings disappears in social contributions and taxes. Trading is a job like any other, the goal is to pay yourself a more or less regular salary every month (which means withdrawing part of your earnings regularly!).
Let’s take an example: You deposit €25,000 into a trading account with an optimistic assumption of a 10% monthly gain. At the end of the year, if you do not use leverage, it gives you only €30,000 in gains.
The moral of this story; earning yourself a small salary is possible but from the moment you want to generate a high income (which remains the goal of all individuals who wish to live from trading), you must have a lot of capital, several hundred thousand euros. I’ll let you do your little calculations based on the salary you hope to earn to find the right amount of capital.
To escape this, there is only one solution, and that is to live in a country with low taxes on trading profits. Luxembourg, Andorra, Spain, Hong Kong... these are the destinations that some traders choose. But in this case, you may have to leave your home country to settle abroad. This is the price you pay to trade on your own account unless you have very high capital or exceptional performance.
If you ever manage to overcome all these obstacles, there is one point left to discuss, and that is the life of a trader. Unlike the image created by films, the life of a trader is no more exciting than any other. It’s even boring. The goal for traders is to mindlessly apply their strategy without ever deviating from it, with strict money management and absolute control over their emotions. We then become a sort of trading robot. Trading for a living, a utopia?
Learn trading before you can live off it
I can no longer count the number of people who come to the forums to show their willingness to live off trading. Most of the time, the idea comes to life after the recent loss of a job, a long period of unemployment or having a displeasing job. What motivates most individual traders to live from trading is often the desire to radically change their lives. But impatience is a nasty flaw, especially in trading. Debutante traders often want to learn how to trade as quickly as possible (some don't even want to learn and believe that you can improvise trading yourself, overnight) to start earning money quickly.
Learning the basics of trading takes a lot of work and time. To know the basics, you have at your disposal several learning guides to train you in trading. But one thing you can't learn is experience. In some professions, the right skills may suffice, but in trading, this is not the case. To become a good trader takes several years. You have to reproduce trading strategy tests, to find a good formula for managing your risk well and to learn to control your emotions (see psychology of a trader). There are always smart Alecs who tell you the opposite, those who make 200% performance in a few days and brag on the forums, but strangely, we don't hear from them anymore a few days/weeks later. Because yes, everyone is capable of being a winner at trading (luck, good intuition, talent), but being a winner in the long run is the real challenge. Living from trading means being able to generate a decent income over a long period of time. That's not making a fortune in a week!!
If you want to make a living from trading one day, you need to understand that your money is your work tool. Your goal must be to protect it as much as possible. If you lose your money, you don't have a job. When you start trading, your goal should not be to make money but to avoid losing money, to last as long as possible. If you last in trading, it's because you're learning. You're on the right track.
Prerequisites for living from trading
Experience
Before you can think of making a living from trading, you have to work hard, very hard. You have to train well in trading for several years. The best way to learn is to practice. You can draw a parallel between school and a profession. At school, you learn the technical basics, the theory. But when you put what you've learned into practice, you realize that it's not enough to be good at your job. You need to gain experience in the field, to learn practical tips to help you progress. It's the same with trading, learning the skills just takes work, but becoming a good trader takes time. The best trading training in the world will never replace practice. Remember this if you are hesitant about paying out a fortune for a paid trading course that promises to make you a trader in a few days. If you're naive enough to believe it, you're too eager to succeed. Remember, impatience is a nasty flaw!
The psyche
To have any hope of, one day, making a living from trading, you need dedication. Learning to trade is long and tedious. You will go through numerous disappointments, raze several trading accounts, curse yourself for stupidly losing your savings, go through long phases of frustration and anger. Besides that, you will have phases of euphoria or feeling untouchable, stronger than the market. You have to understand that you must fight your emotions. Positive emotions are as dangerous as negative emotions. Traders’ objectives are to eliminate them completely from their trading, or rather to control them. The day you get there, you're on the right track to making a living from trading. This means learning how to manage money and learning from your mistakes. Making mistakes is the best way to learn, it's the only way to learn from trading. The point is that these errors do not cost you too much and that is why your first deposits to a trading account should never be too large. No matter how much you invest, having your money on the line is enough to activate your emotions. In trading, your biggest enemy isn't the market, it's yourself!
You also have to take into account the pressure of living from trading. If you have a bad month, you don’t pay yourself a salary, what’s worse is that you have recoup your losses before being able to pay yourself a salary the following month. For most people, this pressure is very difficult to bear. Personally, I never made it. Trading was taking too much precedence over my personal life, over my daily mood. It is not enough to have a winning strategy to live from trading. The psychological aspect is at least as important as the trading itself (strategy and money management). I suggest that you read: The three pillars of trading successfully.
How much capital is needed to live from trading?
The first thing you need to accept is that the financial markets are not a giant casino. If you're trading to get rich, you're on the wrong track. Your objectives must be in line with your means. If you invest €10,000, you will not earn hundreds of thousands of euros but at most a few tens of thousands of euros if you are a good trader. You must also take into account one element if you want to live from trading, and that is taxation. A large part of your earnings disappears in social contributions and taxes. Trading is a job like any other, the goal is to pay yourself a more or less regular salary every month (which means withdrawing part of your earnings regularly!).
Let’s take an example: You deposit €25,000 into a trading account with an optimistic assumption of a 10% monthly gain. At the end of the year, if you do not use leverage, it gives you only €30,000 in gains.
The moral of this story; earning yourself a small salary is possible but from the moment you want to generate a high income (which remains the goal of all individuals who wish to live from trading), you must have a lot of capital, several hundred thousand euros. I’ll let you do your little calculations based on the salary you hope to earn to find the right amount of capital.
To escape this, there is only one solution, and that is to live in a country with low taxes on trading profits. Luxembourg, Andorra, Spain, Hong Kong... these are the destinations that some traders choose. But in this case, you may have to leave your home country to settle abroad. This is the price you pay to trade on your own account unless you have very high capital or exceptional performance.
If you ever manage to overcome all these obstacles, there is one point left to discuss, and that is the life of a trader. Unlike the image created by films, the life of a trader is no more exciting than any other. It’s even boring. The goal for traders is to mindlessly apply their strategy without ever deviating from it, with strict money management and absolute control over their emotions. We then become a sort of trading robot. Trading for a living, a utopia?
