Equity Goals in trading (and other goals)
Trading for me is about making money. Others might have goals of trying to be the best, or carve a respectable name for themselves as a trader, or to impress their friends, but for me, it is about making money (and not losing it). Therefore I compare it to a job, except that it is more risky, and less consistent. The parallels are quite plain - you turn up at work at your computer, you spend time on your analysis, and then you place trades. The hours you spend at trading are very much like spending hours at work. Of course, the main difference with salaried work is that you cannot lose money - hence trading is a bit worse than work because of the unreliability if they paid the same dollar value.
When you are considering trading, you should compare it the value you are getting out of it to what you would get at work. The average American monthly salary was $3769 in 2011 for standard work - minimum wage would around $2000 per month. If you are a full time forex trader, then you should be making $3700 at least, plus a premium of around 30% for the variability and risk you are taking on (lets also include reduction in transport costs and hours as a perk). This means that if you are replacing your work with trading, then you should be making on average $5000 per month if you are going to dump your average job. If you are working a minimum wage job, then you should be earning at least $3000 per month if you are going to dump your minimum wage job for trading.
In fact, a lot of retail traders do not make near this amount per month, and yet still spend their working hours at the computer trading - a lot of them lose money. One typical reason I hear is that "this is just a learning phase" - however there are people in the learning phase for years and who never leave. Most courses and apprenticeships do not require 8 hours a day for years to learn - nor is this necessary for forex trading, yet people put themselves through it. However, you can always learn while you work. This is a point that I will come onto later.
I equate money earned from forex as the same as money earned from a job. It buys the same amount of food, electronics, beer, housing. However, retail traders seem to cheer that they earned $2000 in a month for forex far more than they they would cheer if they earned it from their job. The reality is that if you are not making money in forex, you are worse off, and losing time compared to someone who is earning a minimum wage job. Some people would argue that forex is a time sink in which you are losing money, especially if you have dumped your job to trade, or are refusing to look for work and instead are spending time trading.
This is especially relevant for people who are trading micro accounts or $100, $200, $500 accounts. These people are in fact losing valuable time, and potentially money by refusing to look for work.
The great thing about trading is the accessibility. You can trade at any time, and it will always be there. Unlike work, you can take 2 months off, and it will treat you just the same. As a boss, trading is incredibly forgiving if you want to take an unpaid vacation - it will always let you come back in the same position no matter what. Whats more trading can be built around any work you do. Do your work, and then trade when you have some free time - forex will not fire you for moonlighting, or working too few hours!
Many retail traders have the wrong priorities and quit their $3700 per month job for a terrible paying job (trading). Others are young students who refuse to look for work that would provide $2000-4000 per month in lieu of accepting $100-200 a month (if that) from trading.
When you decide to trade you should set equity goals for yourself. Money management is not just about 1% risk, but managing your income in the most efficient way. Don't quit your $3000/month job for trading if you cannot make $3000 per month doing it. Don't refuse to apply for jobs because you want to spend months battling away with a $200 account. You can always reduce your time commitments at work when you start to make $3000-5000 per month trading. Better still, you can find a job that you love to do and work that part time. If you love looking after animals, fixing cars, doing gardening, hanging out at nightclubs as a bartender, then its better to spend some time working than spending it crouched in front of your computer - you might even appreciate the extra income.
So instead of trading your $100, $1000 account, look for ways that you can increase your equity to a reasonable size before you stop looking for work/stop working. I would say that $50 000 is really the minimum equity you need to start earning a comparable salary to the standard American wage. This varies from country to country - obviously if you are from Indonesia or the Phillipines you can look at lower equities, but do yourself a service and value your time by setting a minimal equity goal and achieve that whether it be from working a job or trading.
