How much do I need to Trade for a Living?

Is it easy to become a Full Time Trader?

I think that almost everybody knows that to become someone who trades for a living is something not very easy.

I do not know many people who know full time traders. You cannot find full day traders in my hometown easily; at least I know none, not full time anyhow.

I think that trading for a living is one of the most difficult things that anyone can try nowadays.

If you are Cristiano Ronaldo or Lebron James and have many millions of $ in your saving account, is not the same as the average guy who may have 10.000 $. And many guys cannot save at all, not to mention finding a job (50% youth unemployment in my country: Spain).

Trading size important

It is obvious that we cannot trade the same way with 5 thousand € than with 5 million. When you have big money, you do not even have a “need” to become rich, so there is no need to leverage so much. If you have one million € you do not need to trade with much leverage at all. You still can trade without leverage and do well.

You can buy a coffee futures contract, 200 thousand Swiss Francs; buy 300 Google stocks, etcetera. If you know what you are doing and apply sound money management, you can do very well and without too much stress.

What happens when you start with 1 or 5 thousand $? Things are dramatically different here.

It seems pretty obvious that if you want to do “something” with that sort of money, you need to leverage and trade a lot. Those are the sort of customers many forex, CFDs, binary options and, in general, market makers look for *.

trading small accounts

Many traders start trading with small accounts, and if we go to the Third World, we find many people opening very tiny accounts (100$).

Those traders know that with a 1 thousand $ account cannot go very far trading without leverage and in longer timeframes. Therefore, they fall prey of the sharks of day trading. Almost all of them go bust eventually, of course.

The problem is that people believe in all sort of fairy tales that proliferate everywhere, especially in the web, like:

  • The famous marketing advertisements making you believe that you may win 4000$ in one week from home with just a 400$ account. This publicity comes together with fanciful images of paradisiacal places and beautiful faces.
  • Forex and other assets signals that promise unbelievable returns (50% per year for instance). Some dishonest guys promote the idea that they can win 50, 70, 100% per year consistently and attract people very easily.
  • Those who promote trading manuals with marvelous systems where you are promised to become the new Jesse Livermore. To tell the truth there are some good manuals out there, but they will not promise you the sky. Those who promise the sky of day trading are likely to be scams. Beware.
  • The stories of people who assure that they are capable of making 4 or 5 thousand $ per month with a 3 thousand account, and offer services about this and that. They, obviously, make a living off of it, not off day trading.

It is very difficult to become a full-time trader.

I would say that someone who really could consider himself trading for a living should have an account of 500.000 $ or more, preferably millions.

Day trading profession?

There are people who think that you can make a living with 100.000 $ or €, but trading is not a stable activity and depending on the country that may be a big or small account. If you have 200.000 $ in Thailand or India you can enjoy a good life, but if you live in Germany or Canada you will not go very far.

As for the stability of the profession, it is a very dangerous life.

You may have 100.000 € account and make 50% profit for three years. You think that you are God and quit your job. Spend all of the gains and in the fourth year have a horrendous performance with a 70% loss, and you find yourself with just 30.000 € and without a job.

So do not become too enthusiastic when you win for a couple of years. You must win a substantial amount of years and quite a lot o money to consider yourself a full-time trader.

If you have one million $, you can diversify your account and invest some money in hard assets or long-term investments for a worst case scenario in the future.

I would say that a full-time trader should have more than 30 times the annual typical income of a country before considering going full-time.

As a main disadvantage of being a full-time trader are the facts that the tax revenue will eat a significant part of your gains unless you live in a tax heaven.

Another disadvantage is the fact that as a trader you do not have public pension like the rest of the workers in almost any developed country. So you would need to allocate part of your annual gains to build a private pension for your future. The life of a trader is more difficult than that of a worker, (the worker one being not easy nowadays anyhow).

To be a full-time trader you also need to be a good long term investor.

The best: to be a part time trader.

So what most of us should look for is to be a part time trader. That means if we are able to generate extra income every year out of trading we should be very happy.

We could invest that extra income, or spend it. If it is 2000 $ it is ok; if it is 20000 $ better. But we should never leave our profession or normal job and dream of becoming a full-time trader doing some day trading from home.

If we are lucky to build a 1 or 2 million $ account in the future, then maybe we could consider becoming full-time traders.

  • I do not mean that all brokers are scams or anything like that. They offer some conditions and leverage, and people use it. If they use it badly, it is their responsibility, because the fact is that it could be used in a better way, profitable for the people. Unfortunately, these waters are populated with sharks and most of the people who start trading fall victims of the “day trading” mania; the bankrupt accounts are uncountable.