Its real tough decision to become full time trader from a successful job.Most of the basic stuff you must have read all over about how much capital is required, how much spare money should be kept aside and what should be expectation on returns etc etc.So,am not going to write about those as it varies with individuals. I wish to share something from my own experience and observation as I have spent a long time in corporate and then became a full time trader and have seen both worlds.This could help to some of you who wish to pursue trading as full time profession.
What should not force the decision :
a) If you think trading is a passion and want to pursue it then rethink twice – unlike other profession, “trading is passion” thought is kind of mirage but mostly what lure us in is our gambling instinct – there is a thin line between gambler wish and passion when comes into trading.If you have put in lot of efforts (here efforts means – midnight oil burning with reading books and tonnes of articles, watching videos, serious engagement in trading forum/groups etc to learn)and time to do learn,back test or analyse, recording your learning, tracked learning in real time, then again record observations etc then such process carried for long time say about 3-4 years and still you are thirsty to learn more and not devastated then it falls under passion.Its not like you can do all these once you become full time trader.Passion is something you find time and resources with quite tight spot amid your routine life and you do lot of sacrifice to learn about your passion without any excuses.Not any of such effort and process but only making money thirst is kicking in means its nothing but gambler wish.Its the truth.When you have no such history of hard work towards passion in past then better forget about getting into full time trading.So, better remove this “follow your passion” factor from taking a decision of becoming as full time trader.
b) If you are thinking that job is stressful and leading 9-5 mechanical life without much of changes and trading could give some freedom – no it can become far worse than your existing job however stressful it is.We have a team and management to support us in whatever little way at job when things go worse.We are ofcourse responsible for everything but thats only till some extent.Once things go south completely then your team and superiors jump in to solve issues,take burden and blame and at some point you get rescued and you move on to next routine without much of change in your routine.90% of the cases it wouldnt affect you except for a short term duress and esp on monetary side not much of damage..You get your paycheck irrespective of any issue or pressure.Max you lose is some of your incentives and increment.But, trading is more stressful and we need to tackle things on our own and esp during tough times its quite tough to handle as stress proportionally affects outcome and monetarily you get into deep draw down.No one would come for rescue.Not incentives but your total capital is at risk all the time – so remove this factor also i.e, “stress from job”, “try something new”, “be independent” factors.
c) Next comes capital part.If you feel enough capital is there and what you all need is just 1-3 % return from that capital (for example) per month.You might think this is far better than what you earn from job and you could easily get it done after all its just about making just 5-10 Rs a stock in a month or 50-100 points in NF a month- no big deal at all.NO, it wont work that way.What we aim is 1-2% but during the process, we lose more and to get that 1-2%, we again and again lose more.It always starts like you lose 3-5% in a week then takes 4 weeks to get break even then another 2 weeks to get 1-3% profit from break even and again in couple of weeks you lose 10%.This cycle repeats most of the time.So, when you are completely pulled in and stuck in this cycle of up and down of equity curve, you tend to completely forget the original purpose of making 1-2 % a month constantly but you end up doing all the stunts to make things worse.Its real tough job to consistently make 1-2% or whatever fixed % from whatever capital.So, remove this factor also i.e, “large capital and small returns – no big deal” factor.
d) Part time learning and trading (though less profits or at break even ) while working gives confidence that if you get into full time sure can do better than this – Again its wrong perception.Part time trading,we have less pressure to make trading as successful venture.When you have less pressure you tend to commit less errors and you have lot of patience there.But during full time, pressure builds up and we do worse than part time trading.So,rule out this factor also.
S o, what are the factors can force the decision :
a) Foremost thing is some personal traits,skills,positive attitude and persistence.You should be good in managing things i.e, well organised, focused, not easily broken during unfavorable situations, love most and hate less (self) attitude, ability to spend time and focus to learn something till you are super clear without giving up, time management, money management, ability to handle stress,ability to draw plans at all levels not only trading plan but daily routine plan, short term and long term plans personal as well as professional, create a process list to achieve such plans, brutal honest to self while evaluating and finding ways to improve,not paper only person but doer of what is marked on paper, networking skills, less ego to learn, ability to spot yourself when you are out of line, i.e, reaching fire zone and able to control yourself and very very important stuff is ability to control your mind and body and finding ways to get that done.Am not saying these are all must to become a full time trader but most of these are essential to reduce the struggling period and to have smooth ride as a trader.If you feel you dont have some of these then you must ask yourself if you could cope up and able to get them done.
b) You have a proven system or some great understanding of strategies and mixed setups where you could draw some 25-40% minimum per year.This helps.Back tested systems are fine but I prefer forward testing i.e, atleast a year or 2 of trading based on such systems to get the authenticity as many factors deviate the results in a large way between backtest and actual.Do not think that you can learn and create edge once you become full time trader.It never works.System or market understanding is edge in trading and if we have a proven system then we can start.But imo markets are quite dynamic and nothing lasts forever or works with all seasons.I have started my full time trading with some systems which I ditched within in a year of full time trading and what am today compared to when I started is complete two different poles.I would have never imagined that I could comment what could happen in next 10-30mins in market as I was completely clueless about auction then and purely relied on mechanical systems.So,I would say to start over based on some system is fine but to survive we need kind of overall understanding of how things work in markets and this is something we need to update on the job with whatever resources we come across.This is more of personal and attitude oriented and if you believe you are capable of adapting to changing market scenario then its workable.
c) If above point is checked then next favorable factor is of course very good size of capital.It depends on what type of trader you are..expect a 25-40% returns a year and based on your returns expectation in absolute term,fix the capital and make sure you have enough of that.For eg, if you are looking for some 40-60K return a month then need 15-20lacs of capital minimum imo.Just a rough working.Use only 50% for trading and rest 50% remain with you.If you are not able to manage within 50% then I would suggest rethink about trading as caree.This is the profession which wont let you get out once you are in and urge you to stay thinking that you could avoid old bad habits and still can make it in round 2 and 3.Wont happen mostly.Better to lay some basic rules of how much and how long before entering.If you are not able to make it workable with first 2 round then just stop it.
d) Another factor which can aid the decision is free of any major financial liabilities and very imp if you have any additional source of routine income to support.If additional income is not there but you have enough savings then fine.But free of liabilities is very important.Once entered into trading focus should not be taken by other factors especially on money front.Most important factor is there should be no scared money like loan or money diverted from any long term future plans.
e) And, family support is very important.Without this,we get a double blow first from market and then from family.
Few other things to note..
a) We somehow manage risk well in part time trading but full time trading is vulnerable to poor risk management as we have more interaction with markets and available all the time in front of terminal and charts so prone to more trades and errors.So,very sound risk management per trade/day/week/month is essential.As you have more capital now, you tend to risk that money quite aggressively which should be avoided.
b) Draw down phase is unavoidable and one should have caliber and outside trading world balance life to take care of such phase.
c) Slow and steady certainly helps in trading profession.Market and its move always lure us for forced decisions especially when we are full timer.But we need to be more composed to manage this.
d) Full time trading gives more free time but better avoid non productive activities like more of social media or too much of non productive stuff.It should be like how we do in our routine job, use every moment to upgrade yourself in market knowledge as well as personally.
I just shared purely from my personal experience and glad to clarify if you have any questions in any specific topic.In a nutshell, “known devil is better than unknown angel” always.So,try to defer the decision of becoming full time trader as much as possible and try to be a one when you are fully ready.