Trading For A Living - Part 2 by cmlang


									by: Geoff Turnbull

In part 1 of this article I started to look at the financial implications of giving up the day job to
instead start trading full time for a living. There are more than just monetary considerations as
we will see later, but for now, there are some more costs to ponder.

More Costs!

Lets move on to equipment. Presumably you already have a PC and internet connection by virtue
of the fact you are reading this on the internet. But are these both up to the job of trading full
time? Again the specifications for both hardware and ISP will depend largely on your trading
style, but if youre relying on a 100Mhz Pentium II and a dial up service, youre setting yourself
up for failure. So budget for quality equipment, budget to keep it up to spec, and budget for some
repairs too expect the unexpected. Many traders make the mistake of saying This will do me
whilst I start out, and Ill get something better when I make some real money. This is quite simply
false economy, you are unlikely to ever make real money with a substa ndard setup (and this
applies equally to substandard software and data feeds). This is a cut-throat business and 95%
fail, you must give yourself every advantage you can. You wouldnt enter the Indy 500 in a go-
kart with the intention of buying a better car when youve won a few races, and the same thing
applies here.


When youve added this all together, you have a pretty good picture of how much money you
need to generate from your trading in order to live. Does your past performance suggest you will
be able to meet this target? Its tempting to say When I go full time Ill make much more, but how
do you know this is the case? Perhaps you can take a couple of weeks holiday and try it out if
you dont make enough in that two weeks then youre not ready. A few weeks really isnt enough
time to know if youre going to succeed though. An ideal next step then is to cut your day job
hours to part time and trade maybe two or three days a week. This way you know you have some
money coming in, you get to trade for real, and if it all goes horribly wrong you are probably
better placed to get back into full time employment than someone who quit the working world

The option of part time work is a luxury many of us dont have however. So does it have to be a ll
or nothing trade or work? Why not keep the day job and trade outside your working hours as
well. If you are trading and end of day strategy, then this is easily achieved by doing your
research in the evening and placing the appropriate combinations of S top and Limit orders with
your broker. For day traders, certainly practising is easier if your intended market is not your
home market, for example if you want to trade the US and you live in the UK where you can
come home and paper trade in the evening. There are other try before you buy options open to
the day traders who want to practise trading their home market outside of normal hours though.
eSignal allows you to download tick data for any symbol and play it back in real time or speeded
up so you could trade the whole day in an hour. Other vendors have similar offerings, and if you
have an IB account you can use AutoTrader to record tick data during the day for playback into a
demo version of SierraCharts or QuoteTracker for free.
The bottom line here is that before you take the plunge, you need to have done everything in
your power to prepare yourself for what lies ahead. It will still be harder than you ever thought,
but it will be nigh on impossible with no preparation whatsoever.

Other Considerations

There are a few non- financial aspects to consider before going full time with your trading. If you
have a family, how will the change impact them? Do you have the space to work uninterrupted
during the day? Its important that the family dont assume that because you are at home you are
automatically available to take the kids to school, or walk the dog. Make sure from the start that
everybody knows the ground rules and that you can separate your working time from your free
time effectively.

Consider also the social impact of leaving your full time employer. Again, if you have a partner
or family are you going to drive each other nuts being in the same house all day? Relationships
can be tested to the limit! Or if you live alone, are you going to drive yourself nuts being on your
own all day? Trading full time can give you enormous amounts of free time, but if you have
nothing to fill that time with you can quickly lose the plot Ive seen it happen and its not pretty.

Is It Worth It?

Nobody can tell you if trading for a living is for you, its something you have to find out for
yourself. Ive seen traders go through highs and lows to challenge those of any stock chart, but for
most it has proved to be a good move. The long list of benefits are all there for the taking, as
with any change of career or indeed any major life change, as long as you go into it with your
eyes open, and above all prepare, then there is no reason why it cannot work for you.

This article was posted on September 27, 2004

To top