Not offsetting the certainty of transaction costs, taxes, cost of living, healthcare, etc with another certain income stream is just bad gambling. It is one thing if you are talking about professional trading that involves a management fee you are going to get with certainty + a heads I win, tails you lose performance fee. That is a nice structure to build into a business.
Building a business based off simply the compounding of your own capital though is rather nonsensical.
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IF my adventures in trading are successful like I want and hope, then eventually I will rely on it for income.
BUT, I've already established rules for that. I know full well that profit taking will mean taking working capital out of my
trading account, so I will not do any profit taking until certain clearly defined goals are met.
I do intend to do some profit taking to hedge against a bad day. A certain amount of profit taking is essential. I do
not see any point in amassing a massive fortune and never using any of that money for anything other than making the
fortune larger. At some point it needs to fund my daily living, and even, dare I hope, improve my standard of living
The numbers for me as I've chosen them:
When I have made 25,000 dollars, I'll take 5000 out and transfer it to a bank account.
When I make an additional 25,000, I'll bank another 5000.
After five iterations, I'd have 100,000 in the trading account and 25,000 safe in the bank.
And so on, for a while. I'll build my trade fund at 4x the rate of my banked profits.
This allows for rapid growth of the trading fund AND good growth of banked profits which can be used to fund
my financial needs.
I firmly believe in the principle of "let it ride" to allow the trading account to grow, but I also believe that
profit taking is essential for security.
The IDEAL situation comes when my rate of account growth due to profits exceeds my need for money to fund
my lifestyle, and by a respectable margin. (Double or greater.) At this point I can then start funneling additional
profits into high yield investments that are safe and easy and don't require me to day trade to get them.
Of course I've gamed out various scenarios, both realistic and unrealistic, concerning how much you could earn
if you got a consistent yield.
You double your initial investment in 70 trade sessions if you got 1 percent yield in every session.
You multiply your initial investment in 212 sessions at 1 percent yield every session.
Roll your yield back into your trading fund and use it all every time you trade, and your growth rate looks like this:
At a yield of 2 percent, the 2x and 10x points come at sessions 36 and 107.
At a yield of 3 percent, the 2x and 10x points come at sessions 24 and 78.
At a yield of 4 percent, the 2x and 10x points come at sessions 18 and 59.
At a yield of 5 percent, the 2x and 10x points come at sessions 15 and 48.
Of course, it's unrealistic to expect a consistent yield of 5 percent, or 4 percent, or even 3 percent, BUT I think that a very level headed, careful trader can probably consistently make 2 percent or better.
I'm still very new at this but my own trade book has me averaging 5 percent yield to date. Perhaps I've been lucky,
and in fact I'm sure I've had some luck. My last outing in the market yielded a bit over 10.5 percent returns.
At the time I write this, I've only had ONE day where I lost money and the amount lost was about 24 dollars,
which hardly caused me to panic and think this was not for me.
The real appeal to day trading for me is simply this: NOBODY stands between me and the money except for my own
decisions. I don't have to wait for a paycheck, I don't have to produce a product, I don't have to provide a service,
I have no customers to satisfy. It's only me vs. the market and my own decisions are all that stand between me
and the money. This is IDEAL for me.
If you were to assume that I am going to make a consistent good return, there will come a day when I will have to adapt my trading strategies as I do believe in the principle of not making trades that are big enough to materially influence the market. It's OK to be a drop in the bucket, as that's not going to materially effect the trading price by itself, but if you're making such a big order that it amounts to you dropping a bowling ball in a bucket, then the market reaction is likely to move the price exactly in the direction you don't want it to go. So if i should ever get to the point
where I can make trades that are that big, then I need to limit the size of those trades and distribute my trading money
among multiple separate trades with different stocks, which increases the risk of hitting one that goes down when I want it to go up.
But then again, as my account grows larger, I can also happily accept a smaller return, too, which makes things easier. I WANT 2 percent or better with an account value under 10,000 dollars, but with an account value of 100,000 dollars, 1 percent yield would make me quite happy. With a million dollars to play with, I'd be happy to make as little as 0.1 percent which is a thousand dollars. But I think I could do better than 0.1 percent with a million dollars to play with. I'm betting that eventually I will prove it.
If I could pull in an average profit of 2000 dollars per week I'd be thrilled beyond words.
And I only trade one day per week. I have to do that at this point in the game because my trade account is not big
enough for me to be able to split it up for multiple transactions, so I have to wait due to the settled funds rule.
Plus, I have a day job which gives me only Fridays off.
I am looking forward to the day when I can walk away from the day job but I think it'll be a while, IF it ever happens at all.
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I may not post here often, but I have seen that line of reasoning a lot of times before. I would be very careful assuming that spending more time in front of the screen would lead to better results. I have personally seen a few traders who can do well trading part-time, completely blow up when going full-time. Part of the problem is the desire to trade, which means that quite often sub-optimal trades are taken. The desire to trade can be brought about by numerous things, but the primary reason seems to be that these traders need to make money to put food on the table.
Just my 2 cents, but I would be very hesitant to quit my job and trade full-time unless I had several years of good performance and had a sizeable bank-roll to fall back on. If you don't need to make money, then trading becomes easier. If you need to make money, I would say you are almost doomed to fail.
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You don't state the type of trading that you are doing and what constitutes part time trading.
The portfolio in my phantom account in my journal is pretty representative (I believe) of a long term trader...I set out the weekly gain/loss of that portfolio. Sometimes I have a good week and I make one or two thousand...Sometimes I lose it too. but overall I move forward and after 7 months I have gained over 8% on $100,000. Right NOW, that would be about the average gain of a long term investor and I still have 5 months to go....if I continue this performance I might end up with about 14-15% gain...somewhere between $14,000 to $15,000.
You cannot live off of that amount of money...you could if you had between $500,000 and $1,000,000 in your initial account and lived a fairly thrifty life. You don't want to spend every dime of the gain obviously (or maybe not) as you want your holdings to grow, don't you?
If I had $100,000,000 using my model portfolio I would end up with about 10x the gains or about $150,000 and with about 250 business days in a year that would be... about $700/day on average gain
So, a decent long term trader with $1 million in their account could do that on an average year.... but you have not stated what that mythical person's account balance is to start with before considering your options.
I don't trade options...I do do future's contracts...So I have no idea of the profitability of such trades. I know that they are leveraged...bigger gains...bigger losses? I have certainly heard the woes on this site about blowing accounts.
I have shown you what a long term trader in stocks needs to be able to make that $500 - $1000/day average. I wonder how much initial poke you need to make that kind of coin doing options/futures or forex. Something tells me that consistently making $500 - $1000/day involves a pretty healthy risk compared to what I am familiar with. But I am ignorant of such trades so I am just guessing.
Stock day traders, would have a heck of a time making $500 - $1000 per day....they would have to be extremely skilled since most of them to believe 2-5% /day is good money and they certainly are not doing this part time. Just researching and finding the suitable trades would take a good chunk of the day...then making the trades themselves and following them to completion...requires constant vigilance. Do Skilled Day traders do this...yep I think they can but they would be all-in every day with about $30,000 to $50,000 and I haven't met a day trader yet that has a winning day every day...and newbies to this trade lose all of their money in one year 90% of the time according to Stats. Also...I would imagine it would be pretty hard to day trade $500,000 to $1,000,000...the pressures would be enormous and you don't get the leverage (unless you are silly enough to use margin)
So unless you are a skilled long term trader with an account balance of about $1,000,000 fully traded I don't think you could average $500 - $1000 part-time
I am saying this without knowing the amount of money needed to get this kind of gain in forex/options/futures and do it part time....maybe someone could comment on the reality of such part time gains in these areas of trading.
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Do I like my job; is there opportunity for advancement?
If I quit my job how easy is it for me to find another job quickly if I have to?
Do I make $500 per day on my job?
How much capital do I have?
Can I survive if I have a bad month or two?
Do I have any one depending on me and how supportive are they?
How confident am I about my method?
Why am I asking this question to a bunch of anonymous posters on a trading forum?
It is hard to find the Truth when you start your search with a preconceived notion of what the Truth will be.
Averaging 500-1000$ daily part time in trading is something. It is even better being that stable for 6 months. I would say that being that profitable with a day job, think at it twice before changing anything in your lifestyle. It maybe the security of your day job that brings you the confidence and success in trading. I would suggest to make any change (day job or any other change) in a progressive manner. Like starting with one day per week without day job. And also, when you are done making an average of 750$ per day part time (lets say in the AM) on the markets, I would take the rest of the day to take care of me (go to the gym) my wife and children, friends and my things !
I am wondering if this question is for a kind of study or statistical research ? :-)
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I just wanted to comment on your 500K-1MIL day trading comment. I absolutely believe a well versed and experienced trader can trade well in the millions Intra day. Proper diversification and strategy implementation would allow for more capital to be funneled into your trading.
But....could he get to that point in his holdings (an account of $500,000 to $1,000,000)....doing it part time....I don't think so...He would have so many balls juggling in the air at $1million that He could not afford to take his eyes off of any of them.
I don't doubt that there are such traders but I venture in all day traders in North America you would count the number of them that are doing this on the fingers of 2 hands maximum.....it is definitely not the skill of of someone with 6 months experience.
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Just reading this thread reminds me how fine a line there is between trading/investing and gambling. Targets should be left until you have learnt enough to be consistent. Once comes consistency of approach and execution of your plan money will come naturally. For me first comes crawling, then walking, then running. Seems a lot of folks new to the industry want to fly before they can crawl. Jumping off a cliff the illusion of flight comes for a few secs but then comes the splat. Not a criticism of anyone, just a word of friendly caution for those who may be new to this world reading this thread.
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