Trading for a living – the truth

It always makes me smile when I see one of these photos.

But it also makes me feel kind of annoyed too.

I expect you’re familiar with the sort of thing I’m talking about. The website and emails of trading ‘gurus’ are littered with them.

In fact, to make my point, I even staged my very own photo while on holiday last week.

So, here I am, sat by the beach, cocktail in hand, checking my trades, living the lifestyle that trading promises.

Well, that’s the story we’d like to believe, isn’t it?

The reality is that I couldn’t even see the screen of the laptop because of the glare of the sun, and then – when I’d shut myself in a dark room to get some work done – the wifi was so slow that it took minutes to bring up a chart, and the connection to the broker dropped out every time I tried to amend an order.

The end result for me and my family was a happy one – with 2 full weeks free from screens and charts. But what else about trading for a living … do it from anywhere … luxury lifestyle … blah … blah … are we being misled about?

So, here are the harsh realities of trading for a living. The facts that all those ‘gurus’ would rather you didn’t know …

• Trading returns are erratic. Even the best traders will have up and down periods. You may have a bad month … you may have a bad year …. Trading will never give you a regular monthly paycheck. If you want to trade for a living, you’ll need to be prepared to weather these storms.

• Unless you’re an experienced trader with a substantial track record … don’t even consider giving up the day job. And remember that your track record may be an indicator to future profitability, but there’s no guarantees that performance will continue.

• Consider what you’ll live off in the lean periods. Day traders are often looking to make annual returns of 50%+, but it’s important to remember that if you’re going for hefty returns like this, then it’s not unreasonable to see a loss of 50% on your account either.

• If it doesn’t work out, how easily can you pick up your career? What career advancement could you be giving up?

• Diversify. Don’t put all your investments into one method – spread risk across different markets and different risk profiles.

• Diversify further. Is there another income stream you can use to spread that risk further? Investment in property, for example, or – dare I say it – a day job?!

• This is not the easy option. Relying on income from your investments for day-to-day living is not a stress-free nirvana! If puts a lot of pressure on your trading decisions, and may leave you longing for the days of a monthly paycheck!

So, why would any one consider trading for a living?

I realise that I’ve painted a bleak picture of the professional home trader … shut in a dark room … losing money … worrying about how to pay the bills …

… and, of course, it’s not all bad!

Far from it.

Trading for a living is something that can bring you greater rewards, more security, and a lifestyle that you want.

But it’s not a get-rich-quick opportunity.

You need enough capital to start with, you must be prepared for the losing runs, and you should have a back-up plan. With the right things in place, trading for a living can bring you a hugely fulfilling lifestyle, in terms of money, freedom and the intellectual challenge of making money from the markets.

And, while you may not be able to do it on a remote beach, it is something you can do anywhere there’s decent wifi, giving you flexibility to spend time with family, or to travel.

I know that I wouldn’t want to go back to the days of a 9–5, a boss breathing down my neck, and a monthly paycheck … It feels good to manage my own time, my own money, and not be making profits for someone else (although my broker does pretty well out of me!)

My advice would be that no one rushes to give up the day job. As I’ve stressed again and again, spending more time on trading doesn’t always equate to making more money (in fact, the reverse is often true!) By spending a few hours a week on trading, you can use it to supplement your income and/or build your long-term wealth, and you don’t need to have a large fund to get started. The result could mean that you give up that day job sooner, or simply get to spend more time doing the things you love.

Save

Save

Save

Related posts:

The surprising truth about set and forget trading The uncomfortable reality of trading vs the myth