Trade for a Living What is Stopping You

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What’s Really Stopping You From Trading For A Living ?

If you have your hard-earned money on the line in your trading account and you feel like you HAVE to make money from your trading, you’re screwed, to put it bluntly. The single biggest reason you’re not making a living trading is because you feel like you have to making a living and you’ve gone ‘all in’ with your capital and emotion.

What do you think is the root cause of why you are unable to make a living as a trader? You might think it’s because you have not yet discovered some ‘amazing’ trading system or maybe it’s a special combination of secrets that you think will punch your ticket to trading success. I assure you that it is neither of these and it’s probably not because of anything else you might be thinking of right now. The cold, hard truth is that what is really stopping you from making a living trading is simply the self-inflicted pressure to make money.

The following four points discuss the major mistakes that many traders make which result in an amount of self-inflicted pressure that is too much for them to overcome:

1. Bleeding “chips”

In poker, if your chip stack starts taking big hits, it’s called “bleeding chips”. In trading, this is the same thing as not having enough capital to see us through so that we can see our trading strategy play out over a long enough period of time to make us money.

Traders who start with very small trading accounts tend to put unnecessary amounts of pressure on themselves to build their accounts fast. This obviously manifests itself in the forum of over-trading and risking too much per trade. There’s nothing wrong with starting with a small trading account and trying to grow your small account into a bigger one. The problem comes in when traders have unrealistic expectations about how long it will take them to grow their small accounts. Once you start thinking about doubling or tripling your small account in a month and dreaming about quitting your job in two months to trade full-time, you have pretty much sealed your own fate as a losing trader. The good news is that it doesn’t have to be this way, you have options…

If you don’t have a lot of capital to fund your account with, you basically have two ways of thinking about your trading:

1. “I understand I don’t have a lot of capital to trade with and I understand this means I must trade smaller position sizes for now because I know that if I don’t control my risk I will eventually blow out my trading account, which is even worse than having a small trading account.”

2. “I know my account is small, but I think if I can just hit a few big winners here and there and double or triple my account, I will be sitting pretty and then I can start managing my risk properly.”

Now, you probably already know that the first line of thinking is the right one, but most traders tend to think like the second one, especially traders with small trading accounts. The temptation to try and build your account really fast, is very difficult to overcome. But, as I discussed in my Tortoise vs. The Hare article from last week, slow and steady really does win the marathon of trading, and no matter what you think or what you want to believe, this will always hold true.

Thus, if you are under-capitalized, you are going to have to accept your reality for now and trade slowly, with proper risk management. You can build a small account successfully, yes it will take time, but the more you develop the proper trading habits, the easier trading will become for you and the more profitable it will become. The alternative is basically an emotional roller coaster of trading that almost inevitably ends up in blown out trading accounts and possibly even destroyed relationships in your personal life.

2. Scared money

The next thing that induces pressure on a trader, and even more so than being under-capitalized as we discussed above, is trading with ‘scared’ money. By scared money, I mean money you really should not be risking in the market or money that might not even be yours. I know that many beginning traders try to trade with loans from family or even credit cards, and quite frankly this is just beyond insane.

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Trading is the LAST thing you should even consider using a loan for. Trading with ‘scared money’ means that you have a greater than normal emotional attachment to the money you are risking in the market, because you know that losing it will have dire consequences. Too often, I get emails from people who are clearly trading with scared money.

If you really can’t afford to risk real money in the market, then you need to “man-up” and accept this reality and not trade live until your reality changes. You can learn how to trade and demo trade in the meantime, but trading with scared money is almost the same thing as taking that money, pouring gasoline all over it and throwing a match on it, because you are almost guaranteed to lose it in the market.

3. The pressure of needing to succeed

It is not at all uncommon for business owners to fail because they start from a point of needing their business to succeed. Think of the restaurant owner who has invested all of his life savings into a new restaurant venture at the age of 55. He is getting close to retirement and thought investing all his money in a restaurant would be a good way to earn some extra money as he gets older. When the business comes limping out of the gate and he is struggling to breakeven every month, the pressure quickly begins swelling up to intolerable proportions. Why? Because he painted himself into a corner, so to speak…he put ALL his money into one business and put himself into a position where failure would essentially mean bankruptcy.

The above scenario happens a lot in the restaurant industry and other industries, it also happens A LOT in trading.

If you wake up every day and think about your trading as a “do or die” venture, as your only source of income or financial security into the future, you are creating HUGE mental pressures that even the most disciplined and patient trader could not overcome.

Successful traders have gotten to the point they are at BECAUSE they understood this ‘pressure’ concept and they figured out a way to relieve the pressure. This might mean they waited to start trading live until they had enough risk capital to unemotionally do so, or it might mean that they remained realistic about their small trading account long enough to build it up to a nice level over time, through proper risk management, aka discipline. Whatever the route they took, any professional trader got there because they figured out a way to significantly reduce or eliminate any type of pressure of needing their trading to succeed.

You have to trade from a clean and clear trading mindset with virtually no attachment to the money you have at risk. You can only do this by having a solid plan B to fall back on, like a job that covers your bills in addition to allowing you to save some extra money each month. Trading is inherently risky, and it tends to attract people who can’t afford to trade or who have dollar signs in their eyes, yet it only rewards those who can afford to trade and don’t have dollar signs in their eyes. You have to make sure you are in the latter category, not the former. If you are not in the correct pressure-free mindset, then do not start trading with real money until you have devised a way to get yourself into that mindset.

4. Not enough experience or education

Finally, perhaps the most common way that traders put unnecessary amounts of pressure on themselves in the market, is by simply trading live without enough experience or education.

When we try to do things without proper experience or education, there is inherently a certain amount of pressure on us, simply because the thing seems much more difficult than it otherwise would be if we had that education and experience. For example, think of trying to perform surgery on someone without being properly trained as a surgeon, you clearly would feel an immense amount of pressure, whereas a trained and experienced surgeon probably feels very little. This is why people have to go to school so long to be doctors, and go through a lot of training with an experienced mentor before they perform their own surgeries. You would not want an inexperienced doctor operating on you or an inexperienced pilot flying the airplane you’re riding on!

Similarly, traders who try trading with real money, without having first obtained proper training and experience, tend to feel much more pressure and emotion than they would if they had a solid trading education under their belt and 3 to 6 months of demo trading. Many traders try to trade with a live account and “learn as they go”, or so they think. This inevitably leads to them blowing out their trading account. I get emails almost every day from traders telling me that AFTER they start making some money in the market THEN they will get a trading education and learn how to trade properly. Trading is no different than any other profession in that you NEED the education and experience FIRST. It is borderline lunacy to think you are going to step into the market with little to no experience or education and start making consistent money right away. Just as you would not step into the cockpit of an airplane with little to no experience and expect to fly the plane, you cannot trade properly and without massive amounts of pressure and stress if you do not first get training and experience on how to trade properly.

Education is the first solution to the pressure that is stopping you from trading for a living, just as education is the first solution to almost any other problem in life. If you want to get on the right path to eliminating the pressure and stress in your trading by educating yourself and gaining insight from experienced traders, checkout my Trading Courses for more information.

How Much Money Do You Need to Trade for a Living?

How Can You Swing Trade For a Living?

One of the most common questions I get from new blog readers is: can you make a full-time living from swing trading (or day trading?) And how much money do you need?

So in this blog post, I want to answer this popular question once and for all!

Because the truth is…

While I believe you can make a full time living from swing trading, it’s not easy. And there are some very common reasons that most new traders fail to achieve their dreams of trading full time.

That’s why I want to pull back the curtain and provide a bit more insight into what is actually required to swing trade for a living full time.

So to get started, let’s review why most new traders aren’t able to trade for a living.

Why Most People Can’t Swing or Day Trade For a Living:

In my opinion and experience, many new traders attack the markets with passion, excitement and dedication. Yet despite this commitment, most new traders come up short. Why is that?

Well, there are many different reasons. But I think it can all be boiled down to two big factors. So let me show you what those are.

Trading For a Living is Hard!

This might sound obvious if you’ve been trading for any amount of time. But the truth is: trading is hard!

Markets are HIGHLY competitive. And there are millions of people (and algorithms!) trying to outwit you for stock market profits. What makes you think you can beat them?

Most beginning swing or day traders realize the potential money they might be able to make, then read a few books or blog posts, and start firing off trades.

And to make matters worse!

“Since no university or college offers trading degrees or certificates, there’s a feeling that anyone can EASILY do it!”

Because opening a brokerage account and placing a trade is so easy, many people start trading based on hope, rather than a concrete plan that’s proven to be consistent.

Instead of carefully learning over time and finding a reliable trading system, they dive in head first, only to learn the expensive way… that… trading success isn’t easy!

And unfortunately, trading full time is even harder!

That’s because not only do you have the day-to-day pressures of a highly competitive market, but you’re also under pressure to cover your living expenses. You see…

Unlike a regular job where you’re paid by the hour, trading profits don’t necessarily correlate to the amount of time or effort invested.

This can add another dimension of difficulty because although trading profits may be irregular, your monthly bills are NOT!

As a result, you may be tempted to force trades and try to squeeze money out of the market to meet your obligations.

But this can easily lead to costly trading errors. And actually, this challenge is related to the BIGGEST reason most people fail to swing trade for a living.

Not Having Enough Money is Why Most Traders Can’t Make a Living:

When it comes down to it, I think the reason most swing traders and day traders fail is because they simply don’t have enough money.

The sad fact is…

“Most new traders are HIGHLY undercapitalized!”

After all, we’ve already established that markets are hard. And if you try to grind out a living without enough money, you’re almost guaranteed to lose the small grubstake you have.

…Now don’t get me wrong!

I’m not trying to be depressing or say it’s impossible to trade for a living. But I DO want to be real with you.

So think of it this way…

Most buy-and-hold investors are expecting 7-8% returns (before inflation). And the competition to beat that benchmark is tough.

So if you come into the market hoping to start your swing trading career with $10,000, well, you’re in for a VERY rude awakening.

Just think about the math…

Imagine you need $40,000 to live for a year. In the Western world, that’s by no means BIG money but it is a pretty reasonable benchmark for getting by. But if you’re starting with only $10,000, that means you need to make a 400% return EVERY year!

… Do you know how hard that is?

Well, it gets worse.

Because not only do you need to make huge returns, you need to make them consistently every month in order to pay your rent, buy groceries and maintain your internet connection so you can trade.

Are you starting to see why this is so challenging?

Here’s a short video I made for you to really illustrate the simple math. Check it out if you’re curious:

How Much Money Do You Need to Trade Full-Time? [VIDEO]

Even with $100,000, you still need to make a 40% return, which is obviously easier than 400%, but still NOT easy!

And again, you have very little room for error.

So I hope you’re starting to see the point here. And I’m sorry to crush your dreams of striking it big with weekly options or penny stock gambles.

“Because while it might be possible, it’s much more probable that you’ll lose your shirt!”

And there are some caveats: if you live at home with your mom, or somewhere really cheap, you might not need $40K a year to get by.

But assuming you DO eventually want to make it on your own that’s a reasonable benchmark to keep in mind.

Now… I know at this point… you might still be wondering…

Exactly how much money do you need to swing trade for a living?

Well, it’s hard to pull a number out of the air. But if I had to pick one, I’d say you probably need close to half a million dollars in the bank before you try swing trading or day trading for a living.

… and don’t worry if that sounds absolutely impossible… there’s another way to get there which I’ll show you in a minute…

But first I just want to share the math behind this.

Because with $400-500 thousand as capital, you might be able to earn a living off a more modest return goal (like 10%).

Of course…

A ten percent return is NEVER guaranteed. And there are lots of other moving pieces you need to get right in order to make this work. But at least it’s in the realm of possibility when you are properly capitalized with enough cash.

You’ll have a lot more runway and won’t be as worried about living expenses or day-to-day money pressures, which can really impact your trading.

Finally, the other thing to keep in mind is that building wealth is a long term commitment. I know you want to get rich now. BUT…

You should also feel a responsibility to grow and manage your wealth consistently over time. I don’t mean to lecture you, but taking big risks to indulge a glamorous fantasy trading lifestyle probably isn’t in your best long term interests.

Instead of obsessing about swing trading or day trading full time, why not think about how you can leverage all your skills to build wealth as effectively as possible to give you and your family the best life?

After all, that’s what most of us really want at the end of the day.

… So what’s my advice?

First : Don’t quit your day job! Because chances are, you’re going to need that cash flow.

Second : Keep learning about markets and start building systems for saving and investing consistently. Snowball your wealth consistently until it’s less risky to manage your money full time.

Or… there’s another approach….

What To Do If You STILL Want To Trade For A Living:

Look, I get it. Some people just want to be traders. That’s cool. And fortunately, you’re not completely out of luck.

So here’s some tips and a potential path you can follow if you really want to trade full time:

  • Read Broadly: I don’t know how experienced you are, but I recommend reading widely about trading and investing. Learn about day trading with candlestick patterns, efficient market theory and fundamental value investing. Understand all the different ways people are trying to make money in the markets. Reflect on what resonates with you. Go deep on the things you’re attracted to. One good book in particular is Trading for a Living by Alexander Elder.
  • Get a job where you can trade: Remember, the journey of a thousand miles starts with a single step. If possible, try to get a job where you can watch the markets a bit, and maybe even do some trading. Most office jobs are actually pretty good with this, especially considering online brokers have ever-improving trading apps. Our world is so connected you can keep tabs on your stock trades from almost anywhere. And if you can get someone to pay you while you learn, this really reduces your risk.
  • Start trading on a longer-time frame: I’m always a bit astounded by how many people want to be day traders. First, I think sitting in front of a screen all day every day is a bit boring and can quickly become unhealthy. But it’s also really hard. Markets move fast on short time frames and reacting to these moves all day can be an adrenaline rollercoaster rife with mistakes. On the other hand, if you swing or position trade using weekly charts, you’ll see things unfold a little bit slower. This gives you more time to think, reflect and properly execute your trading methodology. You need to walk before you can sprint.
  • Join a prop firm: If you really want to trade for a living but you don’t have enough money saved up, then joining a proprietary trading firm might be you best bet. If you’re not familiar, these firms will give you their money to trade. And as far as I know, it’s the easiest and fastest way to get millions of dollars in buying power so you can make enough money to live on. Just be warned, most prop forms are day trading shops and they vary in terms of the kind of training and education they provide. Plus, you usually have to share 50% of your profits with the firm. Nonetheless this is probably the best way for new traders to get started trying to trade for a living.

Conclusion: Trading For a Living is Hard But Doable If You Have Enough Money

I hope this article has given you a sense of what it takes to trade for a living. While it’s certainly doable, it’s also challenging in a wide variety of ways.

Personally, I encourage you to learn about markets and try trading part time before diving in head first. And if you’re truly committed to the cause, a local prop trading firm might be worth a closer look!

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Should You Quit Your Job to Trade Stocks?

Trading is often viewed as a high barrier-to-entry field, but this is simply not the case in today’s market. Now, anyone with ambition and patience can trade, and do it for a living, even with little to no money.

Sound fantastic? It is, and there are so many options available to people with the desire to put in the time to learn.

The New Era of Trading

Changes in technology and increasing volumes on the exchanges have brought about a number of very low barriers-to-entry trading careers. In some cases, no personal capital is required, and, in other cases, only a small amount of capital will be required to get you started, in order to verify your commitment to trading. With markets so interlinked, it’s always open trading time somewhere around the globe, and many of those markets can be accessed with relative ease. This means that even people who have full-time jobs or children at home can trade—it is just a matter of finding the right market and opportunity.

This is not to say that trading is an easy business; it can be very tough to stay in for the long haul. As we look at some different trading alternatives available today, you will see that you are able to enter the market, but your ultimate success depends on you. We will look at these options in-depth to see if they offer full- or part-time career opportunities or if they can simply be used to generate additional income.

Quit Your Job To Trade Stocks?

Available Trading Options

People often think that full-time traders with advanced degrees and a high pedigree only work for investment banks. Equally as common is the thought that, in order to trade, you need large amounts of capital and expendable time.

It is probably true that to work for an investment bank or onto a major institutional trading floor, you will need to have connections or a prominent educational background that sets you apart. However, in this article, we will focus on how the average person, with either extensive or very little trading experience, can enter into the arena of trading and creating wealth.

Trade Independently

The first option—and likely the easiest because it is so flexible and can be molded around daily life—is trading from home. However, day trading stocks from home is also one of the most capital-intensive arenas. This is because the minimum equity requirement for a trader who is designated as a pattern day trader is $25,000, and this amount must be maintained at all times. If the trader’s account falls below this minimum, they will not be permitted to day trade until the minimum equity level is restored either by depositing cash or securities. 

Therefore, potential traders need to be aware of the other markets that require less capital and have lower barriers-to-entry. The foreign exchange (forex) or currency markets offer such an alternative. Accounts can be opened for as little as $100 and, with leverage, a large amount of capital can be controlled with this small amount of money. This market is open 24 hours a day during the week, and thus provides an alternative to those who cannot trade during regular market hours.

The contract for difference (CFD) market has also expanded. A CFD is an electronic agreement between two parties that doesn’t involve ownership of the underlying asset. This allows gains to be captured for a fraction of the cost of owning the asset. As with the forex market, the CFD market provides high leverage, meaning smaller amounts of capital are needed to enter the market. The stock market can also be traded using a CFD. While the stock is never owned, the contract allows profits/losses to be reaped from speculating on the underlying stocks or indexes by mirroring its movement.

High leverage does mean higher risk, but if a trader does not have a large amount of capital, this market can still be entered with very low barriers. Educating yourself on the risks involved and building a strong trading plan are absolute musts before partaking in any trading activity, but when you’re highly leveraged, it becomes even more paramount.

Proprietary Trading Firms

Proprietary trading firms have become very attractive with their training programs and low-fee structures. If the idea of trading from home does not appeal to you, working on a trading floor might. A day trader working for a proprietary trading firm is typically a contractor, not an employee. They receive no wages or perks—just a share of the profits made from trading whatever the firm is into. The trader is provided with company capital (or leveraged capital) to trade and the risk is partially managed by the firm. While personal discipline is still very much required, trading for a firm takes some of the weight off of a trader’s shoulders.

Working for a firm may also require working in an office during market hours, although some firms allow traders to trade remotely from home. The benefits of working with a trading firm can include free training, being surrounded by other successful traders, constant trading ideas, greatly reduced fees and commissions, access to capital, and performance monitoring.

Many proprietary trading firms will accept people who have shown initiative in their backgrounds and have some education in their prior field. This is because the firm can monitor a trader’s risk, and those not showing promise can be released with very little overall loss to the firm.

Pay in a firm is based on performance and is normally a percentage payout of your net profits after fees. Some licensing may be required, depending on the structure of the company. Even if it’s not, though, passing the Series 7 exam will mean that there are more firms with whom you are available to trade. Each firm operates a little differently, so find one that suits your needs, personality, and circumstances. Some require you to use some of your own capital. If you run a search for a list of proprietary trading firms, you will be able to see what is available to you.

The Bottom Line

Once you’ve decided which trading method fits you the best, the next step is crucial. If trading from home is the main interest, you must decide what markets you will trade in based on your capital and interests. You must then make a comprehensive trading plan, which is also a business plan (trading is now your business), and decide how you will operate as a trader. Next, explore different online brokers and compare what they offer. Seek out a mentor or someone to help you. Then it is time to start trading.

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