Littlefish FX Analysts
Littlefish FX
In this weeks trading truths I want to address the realities of trading for a living full time. The internet is full of false promises, of turning your $100 account into a $1,000,00 with a year. Most wannabe traders are attracted to the business by the allure of the opportunity to make life changing sums of money. Others are attracted by the potential freedom trading can provide, with the opportunity to trade form anywhere on the planet as long as you can access a stable internet connection. While the opportunity to create meaningful wealth and a life of liberty is possible, it isn’t going to happen this month or next, like the Forex guru’s would have you believe.
I have been a full time trader for 10 years. During this time I have garnered a substantial amount of experience, while trading for a living certainly has many positives, it isn’t the dream ticket that many are sold. Like any business or career undertaking, the early stages require a HUGE amount of work, just to get off the ground and once you finally defy gravity the hard work doesn’t stop there.
The reality of trading an account for income, is that even once you acquire the knowledge and skill to consistently reap a return from the market, you aren’t going to be doubling your account month on month. You would be a miracle worker to deliver consistent month on month 20% returns. In fact you would be a statistical anomaly. In reality you would be a trading superstar to deliver 10-15% month on month. A more realistic monthly target from my experience is 2-5%. Now obviously there will be outliers in the distribution of your returns, some larger up months accompanied by draw down months. This simple trading truth is one that so many inexperienced traders simply fail to grasp or understand, instead they remain blinded by 200% returns month on month.
So once we accept the reality of the potential percentage gains, we are faced with a harsher reality, we probably wont be able to support ourselves or our families on our $100 trading account. We aren’t going to achieve it on our $1000 account. We are going to struggle on our $10,000 account. Realistically to simply trade for a living covering our expenses and some spending money, we are likely going to need a minimum $50k account, where your 2-5% month will deliver between $1-2,500.
Even once you have adequate capital, you will face further challenges, once your trading account is your sole source of income you will begin to feel the pressure of performance. This is a psychological phenomenon that is difficult to quantify, but it is certainly one that you must consider. If you find your self in the back end of the month trading for your rent check, that pressure is certainly going to impede your decision making capabilities in ways you cant yet imagine. If you extrapolate further and consider the challenge of a draw down month, whereby you have to dip into your trading capital to cover your bills. The following month starts in the hole, you take another few hits, this will put you on the ropes mentally and fiscally. Do you think you have the mental where with all to trade through this type of scenario, suddenly you may experience some shakiness in the trigger finger!
So before you jack in the day job to go it alone and trade for a living, you need to consider the realities of the implications of the decision. So what is the best route to achieving your goal of trading for a living? Well from experience I can tell you there are two key considerations to achieving this goal. First, education resulting in a rigorously back tested trading strategy/plan. Secondly and critically, adequate capitalization. So for those who are truly committed to making a serious career change, I would counsel some soul searching and some conversations with some seasoned individuals, who actually successfully trade for a living, listen carefully to the story of their journey to where they are now. I can guarantee you that behind every story of trading success is a more protracted tale of struggle and self doubt, that had to be hurdled on the road to trading for a living.
Another excellent option for those looking to make the transition to full time trading, especially for those constrained by the capital aspect of the equation, is joining a prop trading programme. Instead of liquidating a smaller account, you would be better investing a sub 10k account directly into yourself and killing two birds with one stone. Through a prop trading programme you can get excellent trading education, with the potential for trading meaningful capital in structured disciplined environment, hence giving yourself the best possible platform for transitioning to trading full time and making a success of your new career/business!
Read the other parts of the serie:
I have been a full time trader for 10 years. During this time I have garnered a substantial amount of experience, while trading for a living certainly has many positives, it isn’t the dream ticket that many are sold. Like any business or career undertaking, the early stages require a HUGE amount of work, just to get off the ground and once you finally defy gravity the hard work doesn’t stop there.
The reality of trading an account for income, is that even once you acquire the knowledge and skill to consistently reap a return from the market, you aren’t going to be doubling your account month on month. You would be a miracle worker to deliver consistent month on month 20% returns. In fact you would be a statistical anomaly. In reality you would be a trading superstar to deliver 10-15% month on month. A more realistic monthly target from my experience is 2-5%. Now obviously there will be outliers in the distribution of your returns, some larger up months accompanied by draw down months. This simple trading truth is one that so many inexperienced traders simply fail to grasp or understand, instead they remain blinded by 200% returns month on month.
So once we accept the reality of the potential percentage gains, we are faced with a harsher reality, we probably wont be able to support ourselves or our families on our $100 trading account. We aren’t going to achieve it on our $1000 account. We are going to struggle on our $10,000 account. Realistically to simply trade for a living covering our expenses and some spending money, we are likely going to need a minimum $50k account, where your 2-5% month will deliver between $1-2,500.
Even once you have adequate capital, you will face further challenges, once your trading account is your sole source of income you will begin to feel the pressure of performance. This is a psychological phenomenon that is difficult to quantify, but it is certainly one that you must consider. If you find your self in the back end of the month trading for your rent check, that pressure is certainly going to impede your decision making capabilities in ways you cant yet imagine. If you extrapolate further and consider the challenge of a draw down month, whereby you have to dip into your trading capital to cover your bills. The following month starts in the hole, you take another few hits, this will put you on the ropes mentally and fiscally. Do you think you have the mental where with all to trade through this type of scenario, suddenly you may experience some shakiness in the trigger finger!
So before you jack in the day job to go it alone and trade for a living, you need to consider the realities of the implications of the decision. So what is the best route to achieving your goal of trading for a living? Well from experience I can tell you there are two key considerations to achieving this goal. First, education resulting in a rigorously back tested trading strategy/plan. Secondly and critically, adequate capitalization. So for those who are truly committed to making a serious career change, I would counsel some soul searching and some conversations with some seasoned individuals, who actually successfully trade for a living, listen carefully to the story of their journey to where they are now. I can guarantee you that behind every story of trading success is a more protracted tale of struggle and self doubt, that had to be hurdled on the road to trading for a living.
Another excellent option for those looking to make the transition to full time trading, especially for those constrained by the capital aspect of the equation, is joining a prop trading programme. Instead of liquidating a smaller account, you would be better investing a sub 10k account directly into yourself and killing two birds with one stone. Through a prop trading programme you can get excellent trading education, with the potential for trading meaningful capital in structured disciplined environment, hence giving yourself the best possible platform for transitioning to trading full time and making a success of your new career/business!
Read the other parts of the serie:
- Trading Truths, To Learn Or Liquidate By #1: Take Your Time & Correct Mistakes
- Trading Truths, To Learn Or Liquidate By #3: False Goals & Trading Process
- Trading Truths, To Learn Or Liquidate By #4: Awarness
- Trading Truths, To Learn Or Liquidate By #5: Trading Tight & Go With The Flow
- Trading Truths To Learn or Liquidate By #6: Psychological & Financial Capital
- Trading Truths To Learn Or Liquidate By #7: Practice Makes Probable
- Trading Truths To Learn Or Liquidate By #8: Anchoring Principles
All comments, charts and analysis on this website are purely provided to demonstrate our own personal thoughts and views of the market and should in no way be treated as recommendations or advice. Please do not trade based solely on any information provided within this site, always do your own analysis.
Editors’ Picks
EUR/USD weakens below 1.1700 as Middle East tensions drive US Dollar strength
The EUR/USD pair trades with mild losses around 1.1685, the lowest since late January, during the early Asian session on Tuesday. The US Dollar gathers strength against the Euro as escalating tensions in the Middle East boost safe-haven currencies. The preliminary reading of the Harmonized Index of Consumer Prices from the Eurozone will be published later on Tuesday.
GBP/USD hits new yearly lows near 1.3300
GBP/USD adds to the recent bearish tone, approaching to the key 1.3300 support to reach fresh YTD troughs against the backdrop of the robust performance of the US Dollar. Indeed, Cable’s decline comes amid the firm demand for the safe-haven space in the wake of the US and Israel attacks to Iran.
USD/JPY bulls seem hesitant amid intervention fears
USD/JPY is seen consolidating below the mid-157.00s and over a five-week high set on Monday as a dramatic escalation of geopolitical tensions in the Middle East continues to benefit the US Dollar's status as the global reserve currency. Moreover, reduced bets for an immediate rate hike by the BoJ seem to weigh on the Japanese Yen and act as a tailwind for spot prices. That said, intervention fears hold back the JPY bears from placing fresh bets and capping gains for the currency pair.
Editors’ Picks
AUD/USD consolidates around 0.7100 as geopolitical tensions counter hawkish RBA
The AUD/USD remains confined within a multi-week-old range, oscillating in a narrow band around 0.7100 during the Asian session on Tuesday. Bets for another interest rate hike by the RBA in May continue to act as a tailwind for the Aussie. However, a hit to sentiment from US-Israeli air strikes against Iran helps the safe-haven US Dollar preserve its overnight strong gains, reaching the highest level since January 20, and caps gains for the risk-sensitive Australian Dollar.
USD/JPY bulls seem hesitant amid intervention fears
USD/JPY is seen consolidating below the mid-157.00s and over a five-week high set on Monday as a dramatic escalation of geopolitical tensions in the Middle East continues to benefit the US Dollar's status as the global reserve currency. Moreover, reduced bets for an immediate rate hike by the BoJ seem to weigh on the Japanese Yen and act as a tailwind for spot prices. That said, intervention fears hold back the JPY bears from placing fresh bets and capping gains for the currency pair.
Gold clings to gains as US-Iran conflict continues to underpin safe-haven assets
Gold retains positive bias for the fifth consecutive day on Tuesday as rising geopolitical tensions in the Middle East continue to underpin safe-haven assets. However, a bullish US Dollar could keep the bullion below its highest level since late January, set on Monday, warranting caution before positioning for any further appreciation.
Strategy lifts holdings to 3.4% of Bitcoin's total supply amid inflows into crypto products
Strategy continued its accumulation of the top crypto last week, acquiring 3,015 BTC for $204 million amid renewed interest in crypto products after four weeks of outflows.
The Fed is finally talking about AI – Here's why it matters for the US Dollar Premium
AI is moving from earnings calls into the heart of monetary policy discussions, forcing Federal Reserve officials to confront a new question: How to act if AI reshapes inflation, employment and interest rates at the same time?
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