In the past few weeks, I got many queries related to how and when to take up Trading as a full time profession. It is good to see many enthusiastic and young people from other professions are interested in checking their luck in the Stock Market. However, certain precautionary steps are necessary before considering Trading as a full time profession even if you have decent success as a Trader as the Market situations are always dynamic in nature. In addition, I have noticed people attracted to the luxuries available in the Trading and sometimes they plan to jump to full time trading just to avoid the problems in their current profession.
Checklists before you quit your current job
Below are the checklists one should look at before they quit their current profession to take Trading as full time career.
Zero Debts: If you have a monthly commitment (EMI) towards any loan, this will add extra pressure in your Trading career as you have to generate this commitment amount every month. Sometimes, there will be no opportunities in the market, or if you fail to make money in the market an extra pressure will be created in your mind which impacts your trading decisions.
Savings: One should save enough money to run the family at least for one year. Suppose if you need Rs. 1, 00,000 (or 2000 USD approx) per month to look after all the expenses in your family, then you have to save Rs. 12, 00,000 (or 24,000 USD approx) before taking trading as a full time business. This amount is excluded from your Trading capital which you required for your Trading. In this case, your trading results will not impact your mindset and also you will not get any emotional pressure from your family members.
Trading Results: Trading looks very simple when a beginner makes some quick money. However, one should realize that the market conditions are always dynamic and it requires enormous skills to make consistent money in the market. So it is better to measure our trading success before we take the extreme step. It is a good idea to consider yourself as a successful trader when:
(I) You make at least six months of your current salary from trading profits in total
(II) You make profits for three consecutive months in Trading.
Trading Capital: Only above parameters are not sufficient to quit your current job and jump into Trading. One should have sufficient Trading capital to make profits in the market. Suppose assume you have the capability to make 10% returns every month (10% per month is the good returns as per any trading experts), then you need minimum Rs. 10, 00,000 (or 20,000 USD approx) as your trading capital if your monthly expense is around Rs. 1, 00,000 (or 2000 USD approx).
Convincing your family
The most challenging part is to convince your family. Because they will lose the luxury of sharing these statements “My son is working in Infosys” or “My daughter is a Team Leader in Wipro” with their friends and relatives. In addition, you can’t give any guarantee about monthly returns from Trading and hence they may not agree with your plan to take Trading as a full time profession. However, one can follow the below ideas to convince their family members:
Keep a trading journal along with the statements from your broker. Show them the consistent profits which you made it in Trading
Explain your plans for your Trading career. Show your savings and tell them you will be able to run the family for one year, even if you don’t make any money from Trading.
Buy Term Insurance and Health Insurance for your family members. Explain to them if something goes wrong, these insurances will take care of you and your family members.
Explain your passion is Stock Market and you will be happy if you opt for Trading as full time career. In addition, also explain to them that you will be able to spend more time with your family members.
One of the biggest advantage and disadvantage in full time trading is ‘You are the Boss’ to your work and you don’t have to report it to anybody. Usually, we are used to ‘Reporting’ style of work and this freedom may work against you if you don’t have serious trading plans and goals. One can keep the below things in their mind when they become a full time trader:
One should not take breaks in the trading days for any reason. Because opportunities may come at any moment and one should be ready to grab these opportunities on all trading days.
Your laziness can cost you dearly in the market. Trading is your business and you should be ready like a business man before the open of the market. You have to finish your exercise, meditation, bath etc. before you look at the market open. If you are unable to concentrate on the market at home, hire a single seat desk in any office (nowadays you can hire a single seat desk on monthly rent which includes internet connection, maintenance at desk, coffee etc).
All successful traders maintain a ‘Trading Journal’ and hence it is a good idea to log all your trades with Entry, exit, SL price etc. You should review these trades on a periodical basis and evaluate your trading skills.
Usually, in all other professions, we will have an environment. However, in Trading, it is difficult to have such an environment. Hence, one should develop a circle of good traders and should be involved in monthly gathering, etc. If possible, attend the major events on Trading like Trader’s Carnival, a seminar conducted by experts, etc.
Please note all the above points are my personal opinion and these may change for the people with different financial interests and also if they are from a different geographical location.