Trade For a Living requires how much to start with ?
This question is asked at least three times a week. The answer is typically not what new traders are expecting based on the reaction we get. However, here are some simple facts that are the “need to know” numbers before you can start planning. We are assuming that the trader in this example has been consistently profitable and can maintain the disciple to trade to a plan. . Now this is very approximate and ultimately the answer will depend upon each individuals monthly outgoings which is bound to be different for everyone and what the statistics are on their historical trading performance, ie: what is the average loss if a losing month occurs and how does that impact the overall account on top of the monthly outgoings?
A few simple fac
ts you need to know before you can Trade For a Living.
Where are you trading from? Living expenses are far less in Sierra Leone than they are in London.
How much money do you need each month to live your lifestyle? Bills, Rent/Mortgage, Car, Loans, Food, Clothing, Trading Overheads, Entertainment etc
Do you know your system statistics? Does your worse losing sequence impact on your trading capital too much and what is too much for you?
You could keep adding things that are important to a particular situation when talking about Trading For a Living. Let’s take it one step further and provide more information on what generally happens for someone who leaves work and starts to trade in their own generally called Trade For a Living.
Out of every 10 people that come to GMT Futures 7 are chasing a trading system or want to see performance results from a particular system. This really gives the impression that the person wants a system that is a ‘winning’ and therefore as long as we were able to trade it successfully it should be able to work for them? It is rarely the case and a winning system is usually one that is suited to that trader and works with their trading plan and most importantly their trading psychology and individual trading style. Education is paramount and you can’t take the shortcut and expect the “system” to make your money for you. The trading system is about 15% of a professional traders entire plan. Let’s check an example of the “typical” person who gives the one finger salute to the workplace and starts the trade for a living process.
Trader has saved up an account of $50,000
Trader has monthly DD of $3,500 to live
Trader has trading costs of $200 a month
So before the trader even puts a trade on they are behind 7% for the month as that is what is coming out of the account to live on. Let’s say that the yearly performance for this trader was 40% which is better than average. To get this 40% they had to endure 4 losing months of 5% which is approximately $2,500, you have to ask yourself would you be comfortable to endure a few monthly draw-downs of $3,500 for your living expenses and the $2,500 for your loss that month = $6,000 (12% of your starting capital).
Trade For a Living The Real Numbers
If you say “yes I would as I made 40% profit for the year” (Again this is approximate and not using a money management or position sizing strategy.) I would say let’s take a look at the cold hard numbers when you are deciding if the Trade For a Living model is for you or not.
$50,000 x 40% = $20,000 profits for the year.
You have monthly Draw-downs of $3,500 conservatively which is 7% as we know x 12 months is $42,000 a year.
So you would be at a loss of $22,000 per year if you traded and made a 40% return on $50,000.
You would be back at work in less than 2 years.
You need to make above 84% return per year to be increasing your account and be satisfying your living requirements.
So when you do the numbers you can see that to trade for a living it is hard from the get go. A simple way around this is if you can confidently and consistently generate a 40% return for the year just make that 40% of a larger number of say $200,000 for example and you will be in a much better place. Then your 40% return is now $80,000 a year which is almost double what you need to live on and you are increasing your account at a much bigger $ amount than $50,000 and without the pressure each month.
I know most people can’t just have a $200k account and things are merry again but the reality is unless you are making 80+% per year on a small account you are up against it. GMT Futures have the Pro Trader Program that can allocate capital to you which will help in the transition to Trade For a Living status.
If you are currently able to make a 40%+ return per year with your own self trading, I would be happy to look at your methods and possibly provide you an opportunity to trade as part of our team. That would mean no more day job for you. If you are interested in trading for a profession and you have a performance history of generating +40% per year please email email@example.com and I will call you personally.
Hope this helps and hope it opens your eyes a little more as to how it works when you add your monthly expenses into it when deciding if you are ready to Trade for a Living.
If you would like more information on the Pro Trader Program and get a better understanding on Trade for a Livingusing our Automated Trading Software Systems please contact us today to start your day trading career in Forex, Futures and Stocks. We can allocate capital to you if you complete our Pro Trader Program.
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Regards, Team GMT Futures
Level 19, Waterfront Place, 1 Eagle Street, Brisbane, QLD, Australia, 4000
Trading involves the risk of loss as well as the potential for profit, which is what you should learn when you undergo training for Forex trading. Please be advised that any advice provided by Key Equity Education Pty Ltd including this video on Trade for a living is general financial product advice only, and your personal financial circumstances have not been considered in its preparation. Please consult your licensed financial consultant to decide if trading in Securities, Derivatives, & Foreign Exchange is suitable for your personal financial situation.