Updated: Feb 21
Many working professionals are planning to switch to full-time Trading as a career option. I get it; everyone needs stress-free money. One of the most frequently asked questions in the trading community is – 'Can I make a living through full-time trading?'
Many people think of taking full-time Trading to escape from the issues they are facing in their office. Quitting their job, work from anywhere with a laptop, no boss, and no politics looks like a dream job for many people. But the reality is different.
So, can a person make his living through full-time Trading?
The straightforward answer to this question is – YES, it is possible to make a living through full-time Trading. But it is not easy, and it demands more focus, discipline, and emotional control behavior.
I suggest improving your trading skills when you are working in a 9-to-5 job.
Because emotions and expectations from Trading are less when you are working, you can easily pass through the learning curve when you have a fixed monthly income.
Can I be a full-time Crypto Trader?
Cryptocurrency is the new buzz in the trading community. Recently Tesla Inc declared a $1.5 billion investment in Bitcoins, and Goldman Sachs decided to offer Bitcoins to its clients.
Cryptocurrency is a digital currency with no physical presence like a coin or note. Satoshi Nakamoto developed the first cryptocurrency 'Bitcoin' in 2009, and many such currencies were born in the last few years.
Bitcoin (BTC), Ethereum (ETH), Tether (USDT), Cardano (ADA) are some of the popular cryptocurrencies.
There are many debates regarding investing in Cryptocurrency.
The world's most significant investor Warren Buffet compared Cryptocurrency to paper checks.
It raised an important question – "It's a very effective way of transmitting money, and you can do it anonymously and all that. A check is a way of transmitting money too. Are checks worth a whole lot of money? Just because they can transmit money?"
According to him, investing in Cryptocurrency is risky and worthless.
However, the world's richest person Elon Musk takes the opposite view, and he thinks these cryptocurrencies are the future universal currency of the world.
Trading and investing in cryptocurrencies come with a specific risk. They are mentioned below:
Cryptocurrencies don't have an underlying asset as security
Cryptos are not authorized by any sovereign bodies (reserve banks or government)
Cryptocurrency is a digital currency; hence there is a risk of hacking or losing your investment if the digital wallet company goes out of business
Therefore, one can plan to invest some portion of their capital in cryptocurrencies (if required), but thinking of a full-time career in crypto trading is not a good idea as the volatility factor is high with cryptos and also because of the risk, as mentioned earlier factors.
Can I be a full-time Options Trader?
Similar to equity and futures, an option is one of the trading instruments in the stock market.
A call option (CE) is a contract that gives the trader the right to buy the shares of a security at a specified price until it expires.
A put option (PE) is a contract that gives the trader the right to sell the shares of a security at a specified price until it expires.
Many traders deploy different options trading strategies to make money in the stock market.
With Options Buying, it is possible to make quick gains when the trading decisions go right. But the success rate is less, and hence traders might go through many emotions.
With Options Selling, it is possible to make consistent returns most of the time as the time decay (theta) works in favor of option sellers. But one failure can wipe out the entire capital (only in case of naked options selling without SL or hedging). Hence, it requires careful execution of trades.
Only experts can think of options trading as a full-time career if they have a proven options trading systems and track record.
Checklist for full-time Trading
Below are the checklists one should look at before they consider Trading as a full-time career:
1) Zero Debts: If a person has a monthly commitment (EMI) towards any loan, this will add extra pressure to his Trading career as he has to generate this commitment amount every month. Sometimes, there will be no opportunities in the market. If he fails to make money in the market, extra pressure will be created in his mind, impacting his trading decisions.
2) Savings: One should save enough money to run the family for at least one year. Suppose if a person needs Rs. 1, 00,000 (or 2000 USD approx) per month to look after all the expenses in your family, he has to save Rs. 12, 00,000 (or 24,000 USD approx) before taking Trading as a full-time business. This amount is excluded from the trading capital.
3) Trading Results: Trading looks very simple when a beginner makes some quick money. However, one should realize that the market conditions are always dynamic. 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 a successful trader only when: (I) you make at least six months of your current salary from trading profits in total and (II) you earn profits for three consecutive months in Trading.
4) Trading Capital: Only the above parameters are insufficient to quit the current job and jump into Trading. One should have sufficient Trading capital to make profits in the market. Suppose a trader can earn 10% returns every month, then he needs a minimum of 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).
5) Trading Discipline: One of the most significant features in full-time Trading is 'You are the Boss' to your work, and you do not have to report it to anybody. Usually, we are used to the 'Reporting' style of work, and this freedom may work against you if you do not have serious trading plans and goals. Hence, it is better to have some goals before a person commits to full-time Trading.
How to learn Trading effectively?
Successful Trading is not only about technical analysis. There are 4-wheels (4-steps) that are essential to get success with day trading:
All these concepts are similar to the 4 wheels of a car, and without one wheel, you will not be able to achieve trading success.
Hence, give equal importance to all the concepts to get success in Trading.
Step 1 - Technical Analysis
Technical Analysis is a method used to predict a stock/index's future price movement by analysis of the old data in different ways.
Technical traders believe current and past price action is the most reliable tool to predict future price movements. They don't use any fundamental information to make a trading decision.
There is no need to study all the aspects of technical analysis. Study only the essential elements of it to design your own trading system. In simple words, a trading system should consist of all the plans for entry, exit, stop-loss, trail stop-loss, and position sizing.
Step 2 - Money Management
"Even a poor trading system could make money with good money management" – Jack D. Schwager.
In boxing, you will be in the game until you avoid a knockout.
Similarly, in Trading, you will be in the game until avoiding big dents to your portfolio.
Below are the possible outcomes for any trade:
A breakeven (no loss, no profit)
A small loss
A small profit
A big profit
A big loss
If a trader avoids the last option, he automatically survives in the game, and he starts to make money in the long run.
Money Management is a set of rules to allocate the required position size to reduce the risk while aiming for good returns in Trading.
So, ensure not to lose more than 2–3% of your portfolio when a trade goes wrong.
Step 3 - Trading Psychology
Psychology means the mental factors or emotions governing a situation or activity. So, when we say trading psychology, it implies cognitive factors governing Trading.
Four primary emotions revolving around Trading are greed, fear, regret, and hope.
Please note, all these factors emerge because of a lack of knowledge.
Backtesting and maintaining a trading journal help to achieve a better trading mindset.
Step 4 - Execution
Execution is the real Holy Grail in Trading.
Suppose you have an excellent positive expectancy system and clear money management rules. In that case, you can make money in Trading in the long run if you execute the plan in all market conditions.
Do you know why Usain Bolt runs only in 100M and 200M sprints? Being the fastest athlete globally, why will he not choose to run in other categories such as 400M, 800M, 1500M, 5K, 10K, and other marathon events?
If you can understand the lesson from this example, any trader will realize the importance of execution using one trading system.
Quitting the current job is not the solution to your trading issues. Successful Trading is all about better decision-making. If a person develops a better decision-making ability, then he will succeed at both work and Trading.
Besides, market conditions are sometimes volatile, and generating some target every month (like a salary) is impossible.
Hence, I suggest managing both ‘9-to-5 job’ and ‘trading’ together. Nowadays, we have a lot of sophisticated tools to back-test, Automated Algo-trading, track, etc and hence it is unnecessary to spend much time in the live market.
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