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Is it really possible to work full time and make money trading your own account?
Mon, 07/01/2013 - 19:42
Happy New Year Traders
I am in a dilemma at the moment and could really do with some external thoughts/guidance as I've thought myself around in circles on this one.
Background:
For those of you who don't know me, I trade my own account intra day and have been doing so for approx 5 years.
Whilst trading, I've occasionally mused about how 'easy' the old days were working full time for someone else - this was the case particularly on tough trading days.
Well, just before the end of the year, I was approached by an old employer to consider a temporary contract working full time for a daily rate that I think edges on silly money (for me anyhow).
It's funny what the universe provides when you let your mind wander!
Dilemma:
If I were to take up the contract, I would have to put my trading on hold as it's unlikely I'd be able to sustain my day trading hours. I am really reluctant to let my trading take a back seat.
On the other hand - the contract offer is a boon and if I were to take it up it would either boost my trading capital or be used to cover living costs quite some way into the future.
The only way I can balance the conflict is if there was a way that I could continue trading whilst working full time. I presume that I would have to adapt my trading style to a longer term focus (away from intra day style)
My questions to you all are:
1. Is it really possible to work full time (in a different industry) and concurrently trade successfully?
2. Do any of you actively run daily/weekly/monthly strategies? If so, what sort of strategies/markets work for you?
3. Could you share any tips on how to move from intra-day trading to longer term successfully?
4. A final cheeky one - - if you were in a similar situation, what would you do? ;)
I really appreciate your thoughts,
Many thanks in advance
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Answers
Hello She Trades,
Thank you for your question.
IMO, point #4 is the most interesting as it really highlights the dilemma faced by those of us who are currently, or seriously considering becoming, professional traders. A truly professional trader is not just somebody who sits in front of a screen all day; a professional trader is somebody who has, at the very least, replaced the income that they used to enjoy as an employee/contractor/business owner/etc. in their previous occupation enabling them to pay all of their bills, take regular holidays, comfortably ride out periods of not trading due to sickness or whatever and save regularly in a building society account.
One of the major differences between trading for a living and having a 'regular' job is that with a job one tends to maintain one's capital, give or take, over the medium to long term. On the other hand, every trader, however successful, will at some point experience a string of losing trades, losing weeks or even losing months. In order to maintain the equity curve (the line on your P&L that heads ever upwards at a 45-degree angle), it is necessary to reverse those losses just to break even before getting your equity line back on track.
As traders, we have several 'tools of the trade'. Probably the most important tool is our trading capital without which we can't even take a seat at the table. The majority of new private traders are under-capitalised, which is one of the main reasons why they don't survive in the business for very long.
So, the first step in deciding whether or not to give it all up in order to achieve 'independence' as a professional trader is to calculate how much money you will need to generate in a year in order to maintain your current lifestyle. Even simpler, let's take the income that you can generate risk-free by accepting the contract. Let's call this sum the Silly Money.
Let's assume that you are a reasonably competent trader who is, on the whole, generating a consistent income and you feel that you are able to perform as well as the average professionally-run hedge fund.
Since January 1st 2009, the average hedge fund has made a cumulative 13.5% (source: Bloomberg). That is an average annual return of around 4.5%. Gulp! Surely some mistake? Unfortunately not.
It is now pretty straightforward to address point #4:
1. Add the annual overheads necessary to run your trading business, office accommodation, datafeeds, software, ongoing education, etc. to the Silly Money, as defined above.
2. Divide the total by 0.045 which will calculate how much trading capital you will require just to take your seat at the table.
If your trading pot is not at least this big, take the contract.
To be absolutely honest with you, if I had my time to live again, I would have taken the contract.
Let's now assume that you have decided to take the plunge and make the move away from intraday trading in favour of position and swing trading in order to generate a subsidiary income.
Whoa, where did all that stress go?
Several Traders & Investors Club members engage in this style of trading, using weekly and daily bar charts instead of the hourly and 5-minute charts over which we intraday traders love to pour. There are many longer-term strategies out there that only require an hour or two on a Sunday evening to run successfully. I suggest taking a look back through our recorded presentations for some inspiration and great ideas.
Has anybody got any more suggestions for She Trades?
Do let us know how it works out.
Hello She Trades,
Answering question 4, if I were in your situation, this is what I would do:
Firstly, I’d look at the potential income from the full-time work contract. If it is anywhere close to or above what I could make in trading, I’d take the contract. This is because the contract is guaranteed. Trading is not – you may or may not make that income.
Secondly, from the outset, I’d continue to trade but higher timeframe charts. I’d look at Hourly charts (if I could check the screen a couple of times a day during work), 4-Hour or Daily charts.
But I’d also use the dilemma as an opportunity to step back from intraday trading to develop higher timeframe methods. I think every trader should be able to trade higher timeframes even if they make their income from intraday. We will all have times in our lives where circumstances dictate that we can’t be at the screen for long periods: it could be because we’re travelling, a personal or family illness, or as in your case, a work opportunity.
I trade full-time and I trade short-term. But I also take trades on Hourly and Daily charts (for some reason I always skip over 4-Hour charts!). I love taking these longer-term trades that last a few days. Sometimes I can’t be at the screen and the longer-term trades are less stressful and I wake up one morning to see my targets being hit without me having to sit there and monitor them. It’s a great feeling.
I use a couple of candlestick setups that work very well on the higher timeframes; I combine them with basic support and resistance. It is Trading-101 in its purest form.
Here’s an example of a recent trade setup on the Daily GBPUSD chart that I wrote about for DailyForex:
http://www.dailyforex.com/forex-articles/2012/12/Success-With-the-Pin-Bar-Setup/16803
Huzefa Hamid
TheForexRoom.com
Thank you Traders
I am really very appreciative of your responses and the time you've taken to set out your thoughts and comments.
I have found them extremely helpful as I've twisted and turned in my decision making process. I am not normally a procrastinator, but this particular opportunity did somewhat stop me in my tracks. After much self reflection I realised that I was having a conflict of values and identity. Some time ago, I'd decided to 'live the dream' by quitting the corporate job to work my own hours from whichever location I chose. More than happy to mould my own destiny and be 100% accountable for whatever the outcome I found trading to fit in well with my objectives. I became a trader.
This current contract opportunity gives me a choice, the crux of which is:
What would it mean to go back to the world of work? Would I be selling out?
As basic as it may sound, I ended up having to draw up a simple Pros and Cons list to figure out what makes more sense. To give you a glimpse, here are some of my thoughts:
Pros (of working the contract)
Cons (of working the contract)
Thankfully Traders, your guidance/comments have helped me 'grow up' somewhat, keep my toys in the pram and see the bigger picture.
The formula Kevin set out for calculating how adequate one's trading pot should be to even take a seat at the table had me gasping. On the basis of that very logic, I ought to take up the contract! Also your distinction on 'trading for a living' vs 'working a conventional job' is absolutely accurate. My experience, whilst overall positive, has had periods of self imposed pressure. I'm certain that income derived from another source will allow me to concentrate on what really matters - the 'flawless execution of a trading plan'.
As for my identity crisis - Hamid makes a strong argument in that every trader ought to be able to trade higher time frames. Working a short term contract will not take away my identity as a trader. It may in fact give me the perfect opportunity to add longer term strategies to my arsenal.
I am a price action, momentum based trader. It will be interesting to see if I can find strategies that suit my ideas on a longer term basis. Additionally, I have always been interested in Ichimoku Trading but have never investigated, tested nor traded strategies based on this style of trading. Getting away from intraday trading could provide an ideal opportunity to look into some ideas I have around this area. If I find anything of interest, I will keep you guys posted.
Also another experienced trader colleague of mine has advised that trading should be seen as a 20 year plan. A short term contract that gets me closer to my plan should make no detrimental impact overall. Having looked at the contract value, it represents either approx 20 mths living forward (i.e. covering my current monthly outgoings) or a nice chunk into my trading capital.
So - given all of these factors, I will likely 'get over myself' or more accurately put 'get out of my own way' and take up the contract.
Once again - thank you so much for your support and guidance. It's really helped.
She Trades