Trading for a living: how to get started
For some, quitting their day job and trading stocks for a living is an impossible fantasy.
Of course, making a living as an independent trader is entirely possible (and many do!). That said, there are many things to consider in order to make this endeavour a success – enough to support yourself at the very least.
Employed v self-employed trader
First of all, you need to be aware of how different being a self-employed trader is from being an employed one. In two words: steady income.
An employed trader is paid a fixed salary every month, regardless of their performance. As an independent trader, you do not get to enjoy a similar safety net. The stakes are much higher as your income is 100% dependent on your performance.
Therefore, in order to increase your chances of success, it is best to have several years’ worth of trading experience as well as a good track record in terms of performance. This is not foolproof by any means, but it will help minimise risk and help you move forward with more confidence.
Drawing a financial plan
Venturing into self-employment requires a lot of financial planning. Among other things, you need to identify:
- How much money have you got saved up?
- How much money do you need to survive every month?
- How soon do you think you will be able to make enough to survive and save for rainy days?
These figures will help you decide if now is the right time to launch your new career or if you should stay in employment a little longer so you can save enough to perk up your financial cushion. These figures will also help you plan ahead and notice any red flags early enough for you to act.
As with any type of business, one’s ability to make projections and estimates can be the difference between failure and success. Therefore, do not hesitate to add “worst-case scenario” margins to your numbers as good surprises are better than bad ones! In time, however, your predictions will become increasingly precise and accurate.
Assessing your skills and experience
As we mentioned previously, there are significant differences between being an employed trader and a self-employed one. While some of these differences are financial, these are not the only ones you should consider.
With self-employment come a lot of pressure and uncertainty the effects of which should not be underestimated. Trading, specifically, requires huge amounts of concentration in order to spot market trends and make the best decisions. With this in mind, you need to assess your skills and experience as a trader seriously and honestly. Not only that, but you also need to assess how well you work under pressure, as well as your ability to bounce back if things go awry.
If you want to make this career move a success, it is best to educate yourself as much as possible, develop a trading strategy and stick to it. It would also be wise to save enough money to support yourself while you further your trading skills.
Other considerations before you start your journey
- It is estimated that most day traders lose money over the long-term.
Therefore, are you still willing to take this leap? After all, there are so many perks to self-employment that (some) financial loss can certainly be worth it (it is up to you to identify what that limit would be). Or are you in a place where you do not want to, nor can you afford to lose money?
- Self-employed trading can take its toll on your personal life
Traders typically work long hours which can affect family life, going out with friends, taking time off, and so on. Trading schedules and plans will definitely dictate how you live your life, and you need to be okay with working your personal life around these. Are you in a situation where you can afford to close yourself off to the world a little or do you have people depending on you?
- Burnouts are a very real possibility
Living under the pressure of high expectations can be exhausting. The impact of stress and fatigue should not be taken lightly as they can affect your productivity and your performance. If your performance suffers, so does your income… This means you need to be confident in your ability to work under pressure as you are faced with the (impossible?) task of having to perform well constantly, without fail.
- Keep fantasies at bay
We all know how trading is portrayed in film and TV. Do not be fooled by the glamourous depiction of a trader’s lifestyle nor by the exorbitant amounts of money they make in a snap. These fantasies could very well be your downfall. Stay grounded, stick to your trading strategy and do not fall prey to claims of so-called “easy profits”, “hot tips, etc…
In conclusion, you can certainly make a good living as an independent trader as long as you have a solid plan and that you are fully aware of what your new career has in store for you!
Last Update on 02/07/21