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 faces next resistance near 1.1930
EUR/USD has surrendered its earlier intraday advance on Thursday and is now hovering uncomfortably around the 1.1860 region amid modest gains in the US Dolla. Moving forward, markets are exoected to closely follow Friday’s release of US CPI data.
GBP/USD change course, nears 1.3600
GBP/USD gives away its daily gains and recedes toward the low-1.3600s on Thursday. Indeed, Cable now struggles to regain some upside traction on the back of the sudden bout of buying interest in the Greenback. In the meantime, investors continue to assess a string of underwhelming UK data releases released earlier in the day.
USD/JPY consolidates around 153.00 favoured by lower Fed easing bets
USD/JPY steadies around 153.00 after hitting two-week lows at 152.25. A strong US Nonfarm Payrolls report provided some support for the US Dollar on Wednesday. The Yen remains on track for a 2.6% weekly rally, boosted by Takaichi's victory at Sunday's elections.
Editors’ Picks
AUD/USD: Some profit-taking should not be ruled out
AUD/USD has quickly faded Wednesday’s strong advance despite climbing to new multi-year highs around 0.7150 earlier on Thursday. The pair’s decline comes amid a marginal uptick in the US Dollar, while investors gear up for US CPI data and relevant Chinese releases on Friday.
EUR/USD faces next resistance near 1.1930
EUR/USD has surrendered its earlier intraday advance on Thursday and is now hovering uncomfortably around the 1.1860 region amid modest gains in the US Dolla. Moving forward, markets are exoected to closely follow Friday’s release of US CPI data.
Gold plunges on sudden US Dollar demand
Gold drops markedly on Thursday, challenging the $4,900 mark per troy ounce following a firm bounce in the US Dollar and amid a steep sell-off on Wall Street, with losses led by the tech and housing sectors.
Ripple collaborates with Aviva Investors to tokenize funds as XRP interest declines
Ripple (XRP) exhibits subtle recovery signs, trading slightly above $1.40 at the time of writing on Thursday, as crypto prices broadly edge higher. Despite the metered uptick, risk-off sentiment remains a concern across the crypto market, as retail and institutional interest dwindle.
A tale of two labour markets: Headline strength masks underlying weakness
Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.
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