My definition of trading for a living is pretty simple. I think of it as using trading to generate the earnings you need to pay for daily life – housing, utilities, food, etc. Think of it like a job with a salary or hourly wage. You put in your time and you take home your pay for doing so.
Stock market trading is just like any other job. You might have good times, bad times, even worse times but stick to your trading strategy at all times. Work out on what is your trading edge and develop that. Not every trade would be successful but don’t lose heart. It’s often the one who is patient that enjoys the most returns from the market.
If you are trading to pay your living expenses, that means you need to
- Make a certain amount of money each month,
- Money which needs to be withdrawn from your account.
- That income needs to be fairly predictable in nature.
Sure, you can have some higher months and some lower ones, but there cannot be too much variability or you risk not being able to pay the bills some months!
The regular trader, on the other hand, is more readily able to have ups and downs in their trading performance. They can wait out drawdowns because the money isn’t needed for life’s general expenses.
Those who trade for a living are usually looking for small, consistent profits. That means trading on a regular basis.
A drawdown can mean withdrawls from the account that reduce the available trading funds, which could put pressure on future income potential. That’s not a risk that can be taken. Sure, there are bound to be small drawdowns along the way, but they cannot be big, the kind requiring significant time to be made back up. Normally, this equates to relatively smaller position sizes for those trading for a living.
Trading for a living doesn’t necessarily mean trading eight hours or more each week. I wouldn’t automatically call trading for a living full-time trading, or vice versa. It is perfectly possible for one to only spend a couple of hours per day, or maybe even less, in the markets and earn enough to live on. Similarly, a regular trader can definitely put in loads of screen time hours. The time requirements are just a question of the required trade frequency one has and the strategy employed.
These are all things to keep in mind if you are giving any thought to giving up your regular job to try to make it trading. My personal advice on that would be to make sure you have a sufficiently large capital base as to make earning your required profits quite easy – meaning it wouldn’t require much risk.