Transitioning to a Fulltime Trader

[louistrader]

I went into full time trading before with £50k and found that it was really not enough. This is my view after the end of a lot of hard day trading:

1) The best fund managers in the world are lucky to be hitting 10% year in, year out. Yep sure there are 40%+ funds and traders saying they are tripling their accounts in a month. But take out the leverage and look at the realistic average return over the long term, not a few good short term trades. 10% per year is pretty damn good for most fund managers.
2) Are you as good as a 10% a year fund manager? Probably not but let's say you are. Now think about the money you need....£500k being £50k a year. Not a great wage but not bad, however that's with £500k behind you. Most people don't have that.

What I found is that there are small groups of day traders who hit it big. They came up heads on the coin flip and win and they happened to do this 20x in a row with leverage. £5k -> £250k? Sure no problem. Now with all the people day trading out there will you come across these stories, of course you will. Same as in the casino there will be somebody who doesn't lose a hand of blackjack for half hour straight. But over the long term the averages always come back into play, the house always wins.

Now if you have a true edge and can exploit it repeatedly then you can do this with a smaller amount of money. But most edges are short term or are not really there at all, just small sample sizes of say a 100 trades make people think they are a winner. Can you do it for 1000 trades, 10,000 trades?

I've now switched to long term trading having realised, unless you are lucky, there is no short term fix. Not what most people want to hear but that's my two pence as depressing as it sounds!

LongTermInvester, thank you for your feedback.

For the most part I agree with everything you said. The only thing that is frustrating but hopeful is that I know there are people out there, from home, that are trading for a living where it gives them more flexibility with time and money. If no one is succeeding at it, why are we all wasting our lives studying it and spending money on it (courses and losses)? I ask myself that regularly.

 

[verial]

LongTermInvester, thank you for your feedback.

For the most part I agree with everything you said. The only thing that is frustrating but hopeful is that I know there are people out there, from home, that are trading for a living where it gives them more flexibility with time and money. If no one is succeeding at it, why are we all wasting our lives studying it and spending money on it (courses and losses)? I ask myself that regularly.

The contradiction of full-time trading is two-fold:

First, you money to start. You can't go from $0 to $1,000,000 trading. You have to start with some other sort of income. Thus, you'll have to start with some sort of job or income source, making "trading as a full-time job" impossible at the beginning.

Second, you need enough money to live on before you can make enough money to live on. That is, if you need $3,000 a month to live on, and your trading strategy generates 30% per month, you'll need $10,000 in your account to start with. But you'll actually need more, because if you have a bad month, it will take you a long time to get back up to that amount that can generate your "standard of living" money. Thus, before you can live off your trades, you need a lot of money. But if you have a lot of money, is your monthly expenditure really only $3,000? Doesn't your standard of living increase along with your net worth?

 

[louistrader]

The contradiction of full-time trading is two-fold:

First, you money to start. You can't go from $0 to $1,000,000 trading. You have to start with some other sort of income. Thus, you'll have to start with some sort of job or income source, making "trading as a full-time job" impossible at the beginning.

Second, you need enough money to live on before you can make enough money to live on. That is, if you need $3,000 a month to live on, and your trading strategy generates 30% per month, you'll need $10,000 in your account to start with. But you'll actually need more, because if you have a bad month, it will take you a long time to get back up to that amount that can generate your "standard of living" money. Thus, before you can live off your trades, you need a lot of money. But if you have a lot of money, is your monthly expenditure really only $3,000? Doesn't your standard of living increase along with your net worth?

I adjust my standard of living to my income versus net worth, but otherwise I completely agree.

The point of this thread is to see if there is someone out there that went from working an "average job" to trading fulltime. My perception of this entire space is that it's a tight-lipped secret society where only those that have relatives or close friends that already do this (how did they learn?) actually make it and/or people that have flexible schedules like real estate agents, doctors with their own practice, family business owners and retired people. Most others seem to make their money selling courses. I haven't really seen many, if any, stories where people go from working a regular job to doing this fulltime.

 

[lloydbee]

Hello,

Some of the things I am curious about:

1. What was "the" thing that made you take the plunge?
2. Did you have someone else with income in the household such as a partner or parents? If not, what was your thinking like going into this?
3. Without getting too specific, can you give others an idea of your account size? Do you need to have several hundred thousand or more to actually do this fulltime?
4. What would you tell yourself in the past with what you know now?
5. Any other advice, stories, etc.

Thank you all for reading and responding.

1) BP burning in the Gulf of Mexico and the belief in myself that I could get enough of an understanding to be able to succeed at trading in Options.
2) No other forms of incoming income.
3) Starting capital was under $10k, No I do not need several hundred thousand to make a liveable living.
4) Stay home, stop travelling, live within the account gains means and accumulate a lot more.

 

[Forexmospherian]

I adjust my standard of living to my income versus net worth, but otherwise I completely agree.

The point of this thread is to see if there is someone out there that went from working an "average job" to trading fulltime. My perception of this entire space is that it's a tight-lipped secret society where only those that have relatives or close friends that already do this (how did they learn?) actually make it and/or people that have flexible schedules like real estate agents, doctors with their own practice, family business owners and retired people. Most others seem to make their money selling courses. I haven't really seen many, if any, stories where people go from working a regular job to doing this fulltime.

I would partly agree

I would never have been able to go to living off my full time income from FX trading if I had not been semi retired and having time and money on my side.

I will say retail trading with account under say $100k should be looked upon entirely different to commercial/ institutional trading involving multi million capital accounts with risk priority meaning stake size might be under 0 2% of capital rather than say 2% ( ie 10% size of retail stake risk)

That means if a hedge fund makes say 30% on $10 million - a retail trader can make 200-300% on a 10k or 50 k account - it is a different ballgame and so many do not seem to understand that

I nowadays use under $70k capital accounts and can easily do over 25% per month on stakes under 1% of capital - great months are 30 -50% and bad months only 15%

I do not have losing weeks or months and this last year have not had a losing day - although over 30 days I have failed to make my 50 pip daily target

To do that requires a a lot of skill - I have now taken over 16k live trades and been full time for over 7 years. You do need anything from 3- 7 years to get a level of consistent profits - and even now I still have on average 1 to 3 trades losses a day - with a very bad Monday 2 weeks ago seeing 6 losses - but still made my target by London close

Trading full time is not easy - but every year if you have a good intraday method you should find it getting easier . Good days can be just 2-4 hrs work - but then other days I need over 6 or 8 hrs to get my targets

I would say start full time with over $25k if you can and if you cannot make over 15% per month consistently - dont give up your day job as you might need it back

By the way I dont include compounding - thats another obstacle that can cause traders more problem - take your profits find you comfortable stake size and only grow it very very gradually

Regards


F

 

[lloydbee]

a retail trader can make 200-300% on a 10k or 50 k account - it is a different ballgame and so many do not seem to understand that


F

agreed PA, it all comes to volatility and could be a lot more than that under the right conditions (40 VIX)

 

[louistrader]

I would partly agree

I would never have been able to go to living off my full time income from FX trading if I had not been semi retired and having time and money on my side.

I will say retail trading with account under say $100k should be looked upon entirely different to commercial/ institutional trading involving multi million capital accounts with risk priority meaning stake size might be under 0 2% of capital rather than say 2% ( ie 10% size of retail stake risk)

That means if a hedge fund makes say 30% on $10 million - a retail trader can make 200-300% on a 10k or 50 k account - it is a different ballgame and so many do not seem to understand that

I nowadays use under $70k capital accounts and can easily do over 25% per month on stakes under 1% of capital - great months are 30 -50% and bad months only 15%

I do not have losing weeks or months and this last year have not had a losing day - although over 30 days I have failed to make my 50 pip daily target

To do that requires a a lot of skill - I have now taken over 16k live trades and been full time for over 7 years. You do need anything from 3- 7 years to get a level of consistent profits - and even now I still have on average 1 to 3 trades losses a day - with a very bad Monday 2 weeks ago seeing 6 losses - but still made my target by London close

Trading full time is not easy - but every year if you have a good intraday method you should find it getting easier . Good days can be just 2-4 hrs work - but then other days I need over 6 or 8 hrs to get my targets

I would say start full time with over $25k if you can and if you cannot make over 15% per month consistently - dont give up your day job as you might need it back

By the way I dont include compounding - thats another obstacle that can cause traders more problem - take your profits find you comfortable stake size and only grow it very very gradually

Regards


F

Forexmospherian,

Thanks for posting.

I definitely get what you're saying about smaller accounts being able to generate significantly larger returns than larger accounts as it's a minus sum, liquidity-fueled game.

Regarding compounding: with day trading I think it's smartest not to compound and just transfer profits over to a bank account and/or purchase stable, dividend paying stocks.

I read somewhere, although I cannot find it, that you taught your method to someone and they are now doing well. Is this something you're still doing?

 

[ABTrading]

Hello,

I have been reading through the forums here and decided to make an account. I want to connect with other traders since as you all know, it is a very unique pursuit and it is very difficult to find others that can relate. I hope to provide good insights and promote good discussion here.

I think a good topic of discussion is your story of how you actually transitioned to becoming a fulltime trader. I imagine most members here have fulltime jobs and want to trade fulltime so it would be interesting to hear from those that actually resigned from their jobs to pursue trading.

Some of the things I am curious about:

1. What was "the" thing that made you take the plunge?
2. Did you have someone else with income in the household such as a partner or parents? If not, what was your thinking like going into this?
3. Without getting too specific, can you give others an idea of your account size? Do you need to have several hundred thousand or more to actually do this fulltime?
4. What would you tell yourself in the past with what you know now?
5. Any other advice, stories, etc.

Thank you all for reading and responding.

There is a lot to consider in becoming a full time trader. The number one issue is Why???? Why do you want to trade? I can tell you the majority of people will say for the money and the flexibie life style. The real question is do you like to trade, do you like taking large risks with your life savings everyday and possibly losing large amounts of your money. Many people love the idea of trading but can't really deal with the reality of trading. If you don't have a passion for actual trading you probably won't make it as a full time trader, but if you love the idea of taking on one of the most difficult challenges there is, then it may be for you.
I have been trading for 25+ years and a full time trader for the last 10+ years and there is nothing I would rather be doing.
In regards to your questions:
1. I took the plunge because I was divorced and raising 2 children and my company told me I had to go on the road for at least 3 days a week, which I couldn't do with the kids at home. (I had been trading for years already and knew I should be able to make it trading, but it was a really stressful time.)
2. I did not have anyone else in the household bringing in an income, it was just me.
3. When I got divorced, it took me a year to save up $5,000 to open a new trading account, luckily it was the '90's and the internet boom so I was able to grow my trading account to a reasonable size. I don't think I would think of trying to trade full time with less than a 6 figure trading account, but that's just my opinion.
4. I can't list everything I would tell myself, if there was a mistake that could be made, I have made it, it's a hard road and I would recommend a mentor to help you along, I didn't have anyone, I taught myself.
5. I tell people that learning to trade is like going in the boxing ring with Mike Tyson for 3 rounds, if you are still alive at the end of it, then you will probably make it trading.
Study everything you can find. You can learn to trade in a week, but being able to manage the psychological side of trading can take years.
Good luck in your quest!!!

Oh, one other thing, you should be able to trade off the daily charts while having a full time job. You should definitely be able to generate a good income and build your account while working your present job before considering trading full time.

 

[Mr.Grey]

Interesting subject this as i imagine there are plenty of people that would love to trade daily and earn a living to escape the rat race 9-5. In may last year I had a situation at work which led me to have time off which is still the case. I have traded for around 5-6 years but have never been in a position to trade every day and keep properly up to date with the markets. Some people say things happen for a reason, I'm not totally convinced by this, but at the moment with the returns I've been making since trading forex daily, it may well be this situation at work has led me to a better life. At the moment i feel its a little to good to be true. Having a lye in, no boss, no shifts, no travel expenses, no cold mornings, every weekend off and no asking for days off in the week.

My view is its like anything, if you want to become good at something you have to stick at it, often you have to live and sleep it to get a proper hold on something. Through fasination and not addiction, i have watched forex pairs for the majority of the day for months on end, seeing how they move in correlation with other pairs, seeing how they react to news etc and only when you have absorbed how the markets move, will you effectively apply any strategy you believe can make you money.

We all know how many indicators there are available to us to apply to charts, but in my experience you just can't beat plain and simple price action. I use one indicator which is the 10 day RSI as it suits my trading method.

The way to judge whether you are ready to trade for a living in my opinion is your win ratio. I have a running log of all trades placed since the start of the year and i have completed 314 trades of which 272 made a profit leaving 42 wrong calls. This is a win ratio of 86.6%. Who knows whether this is high enough to trade for a living, but I am comfortable with it at present and i make a profit every week. This week just ended I placed 21 trades of which 21 were correct calls making a profit of £521.70.

My method is to monitor 4 forex pairs, AUD/USD - USD/JPY - EUR/USD - GBP/USD. i wait until one of my trade signals is present and i will enter at usually between £2 and £10 per point depending on the strength of the signal. I am not in the market for long and I am a true believer in if you see a profit, take it and get out. I then wait for further signals.

There are certain things that i have learned over the years and as basic as they may seem people just don't stick to them.

1. Never chase the market, be patient and let it come to you. As we know forex moves so quickly your never far away from another signal if you miss one.
2. I personally never trade near economic releases, not unless price has formed a price pattern on the chart that STRONGLY supports, in conjunction with the RSI, the direction of price following the announcement.
3. ALL trades without fail should be with the major trend. If you call your double top or bottom, or your bullish/bearish engulfing pattern wrong and price is going against your trade, IT WILL CONTINUE to do so. Get out and minimise your loss.
4. Try to trade signals that appear on longer time frames, 5 minute and 10 minute charts contain a lot of noise and false signals. Take a look at Niall Fullers website for a little info. I stumbled across him whilst browsing forex information and found his content very useful. Its basic what he says but it serves as a good refresher. I don't pay for his membership as Im not a believer in paying for forex information, theres enough around the web without paying for it, but his free stuff is well worth a read.

The strongest point i can make is that you HAVE to put the time in to watch charts and properly understand how price moves. You may find it boring and time consuming of course, but in my opinion you HAVE to do it. If you want to do it full time, then you have to put full time hours in I'm afraid. Well i certainly do but thats because of the trading methods I have. There are traders that due to their trading methods can place a trade and walk away, i occassionaly do this, but only on £1 and £2 per point trades and when the markets are in an obvious trend. If you put the time in, you will see for yourself that certain chart patterns repeat themselves, this in itself assists you with decisions around your trading direction, over time you will become more and more competant in recognising these patterns and this will provide you with more confidence when placing your trades, even increasing your trade size when you are feeling more experienced and are making regular profits.

Im rather lucky in that my circumstance at work basically thrust me into a position whereby I have been able to trade daily for some time and therefore ascertain whether i can do it for a living, not everyone gets that opportunity and knowing the work and study I have had to put in to become consistantly profitable, I imagine would be difficult for you guys working full time and then coming home to do that study. I remember when I used to trade on my days off, but by the time that happens the markets picture has changed with all the various economic releases and i found it difficult to stay on the pulse of the moves.

If you are in a position to take a year out of your job, that would be the ideal situation to properly asess your potential to trade for a living.

Happy to talk

Kev

 

[globalarbtrader]

Hello,

I have been reading through the forums here and decided to make an account. I want to connect with other traders since as you all know, it is a very unique pursuit and it is very difficult to find others that can relate. I hope to provide good insights and promote good discussion here.

I think a good topic of discussion is your story of how you actually transitioned to becoming a fulltime trader. I imagine most members here have fulltime jobs and want to trade fulltime so it would be interesting to hear from those that actually resigned from their jobs to pursue trading.

Some of the things I am curious about:

1. What was "the" thing that made you take the plunge?
2. Did you have someone else with income in the household such as a partner or parents? If not, what was your thinking like going into this?
3. Without getting too specific, can you give others an idea of your account size? Do you need to have several hundred thousand or more to actually do this fulltime?
4. What would you tell yourself in the past with what you know now?
5. Any other advice, stories, etc.

Thank you all for reading and responding.

1- I was a portfolio manager at a systematic fund for seven years. I didn't trade at all then really, just a few stocks, because of compliance restrictions. Loved my job, but then a combination of office politics and stress made me resign in summer 2013. After gardening leave I spent a few months building my own system which I started trading in April 2014.

2- We have almost no household income apart from trading and investments. Only a minority (not saying wether its 49% or 1%) of our asset base is in my trading account, so I have dividend income from long only investments.

3- My initial account size was £300k, made £360k on top of that to date, but I've withdrawn most of the profits to pay taxes, put in long only investments . So now my trading account size is £400K. I run this at 25% expected annualised risk. Conservatively I expect to made a SR of 0.5 so £50K a year pretax over the long run (backtest is 0.9 SR). With other investment income on top of this we are comfortably off.

Clearly this isn't that typical for a number of reasons. Apart from anything else I didn't need to spend any time learning or designing a system, since I already had very clear ideas and lots of experience in doing this. So I was able to go almost straight into trading a full account size.

I view my trading account as a slightly higher return investment account. I regularly withdraw any money made over the high water market, again for taxes, or to put into safer long only investments, or for household expenses.

As its purely systematic I don't really think of it as 'work'.

Pyschologically, and practically, it would be relatively difficult for me to live just off that expected £50K, not because it is not enough money (our household expenses really aren't that large) but because it would make it much harder to let the system just do its thing, and to shrug off losses (I dropped £25K over 12 hours yesterday, thanks to FOMC).

This suggests that for me at least I'd eithier need to have more of my net worth in my trading account (which in theory is optimal, but scares me), or expect a much higher Sharpe Ratio and run with higher leverage (and that is the way to go bankrupt).

4- The only thing I should have done better, in retrospect, was to think more carefully about what my system risk should be, and whether I should "roll up" profits and let my capital at risk grow, as I experimented with these a bit (I made money with my experiments, but could easily have not done so).

 

[Forexmospherian]

1- I was a portfolio manager at a systematic fund for seven years. I didn't trade at all then really, just a few stocks, because of compliance restrictions. Loved my job, but then a combination of office politics and stress made me resign in summer 2013. After gardening leave I spent a few months building my own system which I started trading in April 2014.

2- We have almost no household income apart from trading and investments. Only a minority (not saying wether its 49% or 1%) of our asset base is in my trading account, so I have dividend income from long only investments.

3- My initial account size was £300k, made £360k on top of that to date, but I've withdrawn most of the profits to pay taxes, put in long only investments . So now my trading account size is £400K. I run this at 25% expected annualised risk. Conservatively I expect to made a SR of 0.5 so £50K a year pretax over the long run (backtest is 0.9 SR). With other investment income on top of this we are comfortably off.

Clearly this isn't that typical for a number of reasons. Apart from anything else I didn't need to spend any time learning or designing a system, since I already had very clear ideas and lots of experience in doing this. So I was able to go almost straight into trading a full account size.

I view my trading account as a slightly higher return investment account. I regularly withdraw any money made over the high water market, again for taxes, or to put into safer long only investments, or for household expenses.

As its purely systematic I don't really think of it as 'work'.

Pyschologically, and practically, it would be relatively difficult for me to live just off that expected £50K, not because it is not enough money (our household expenses really aren't that large) but because it would make it much harder to let the system just do its thing, and to shrug off losses (I dropped £25K over 12 hours yesterday, thanks to FOMC).

This suggests that for me at least I'd eithier need to have more of my net worth in my trading account (which in theory is optimal, but scares me), or expect a much higher Sharpe Ratio and run with higher leverage (and that is the way to go bankrupt).

4- The only thing I should have done better, in retrospect, was to think more carefully about what my system risk should be, and whether I should "roll up" profits and let my capital at risk grow, as I experimented with these a bit (I made money with my experiments, but could easily have not done so).

Hi Globalarbtrader

I found this comment very interesting and also follow and agree with many of your thoughts and reasoning etc

Just a couple of questions from it though

With a 400K capital account what is your average % stake risk per trade - is it under 0 3 % ?

With you mentioning you dropped £25k off your account yesterday after FOMC - was that just against profits as well - or pure loss - as that then it is a 6%+ loss - which is a large size loss even on a £400k account ?

I appreciate what happened yesterday was highly unusual etc - so I am trying to follow why you would lose over 2 months of profits in just one 12 hr period

Other than that - I wish you well and good trading and further success

Regards


F

 

[globalarbtrader]

I trade a continous system so I don't really have discrete 'trades' exactly.

However there is a simple formula I've developed which converts from continous risk to % of risk per 'trade' to make things comparable.

This gives me an equivalent figure of 0.3% of my capital risked on each 'trade'. I'm holding positions for an average of a month.

If for example I was holding them for a week it would be 0.08% per trade.

I don't understand the difference between 'just against profits' or 'pure loss', but if you read my explanation it might help.

I target 25% volatility a year on average. So that's about 1.5% a day, or £6000.

Looking at intra day p&l will often make moves look larger, especially when things go a little crazy.

So yesterday for example I lost £7800 on a close to close basis, which is well within expectations. From yesterdays close to now I am down about £2000, which is hardly even noise.

The reason these numbers are smaller than 25K is that I'd made about 8 grand yesterday morning, and its from that high water mark that I measured my loss, and also because I've made about 6 grand from the low point this morning.

If returns are normally distributed, then about 2.5% of the time you'd expect to lose 2 sigma - or for me around £12K - in a day. That's every couple of months. You'd expect to lose about £28K in a week, or if you prefer about 6 months of conservative expectations of profits, in 2.5% of weeks; or slightly more once a year. Thats just the maths of return versus vol.

This applies if you're trading system has zero or positive skew. If you're seeing more regular profits and fewer losses then you're probably trading something with hidden negative skew that will bite you much harder every year, or maybe every few years.

To put things into perspective I've had a very good year - much higher than long run expectations - and my profit for the year was £372K on Tuesday night; £380K Wednesday lunchtime, £365K last nights close, £355K in the early hours of this morning, and is now £363K.

The point is you have to be able to stare at that £25K

Hi Globalarbtrader

I found this comment very interesting and also follow and agree with many of your thoughts and reasoning etc

Just a couple of questions from it though

With a 400K capital account what is your average % stake risk per trade - is it under 0 3 % ?

With you mentioning you dropped £25k off your account yesterday after FOMC - was that just against profits as well - or pure loss - as that then it is a 6%+ loss - which is a large size loss even on a £400k account ?

I appreciate what happened yesterday was highly unusual etc - so I am trying to follow why you would lose over 2 months of profits in just one 12 hr period

Other than that - I wish you well and good trading and further success

Regards


F

 

[Forexmospherian]

I trade a continous system so I don't really have discrete 'trades' exactly.

However there is a simple formula I've developed which converts from continous risk to % of risk per 'trade' to make things comparable.

This gives me an equivalent figure of 0.3% of my capital risked on each 'trade'. I'm holding positions for an average of a month.

If for example I was holding them for a week it would be 0.08% per trade.

I don't understand the difference between 'just against profits' or 'pure loss', but if you read my explanation it might help.

.....................

The point is you have to be able to stare at that £25K

Thank you - I follow now and I had been initially thinking your 25% was ROI and therefore your annual profits were a lot lower.

Having never worked in the commercial world - I have never really understood your terminology etc - but you have explained it well

I have never been able to trade more than a $250K account size and approx 20 -25 lots max and so no longer even bother compounding as I could not adjust to seeing larger losses - but quite rightly as you say on the amount of profits you are looking at per month and year - you just have to stare at losses and know its still all under control

Regards

F

 

[globalarbtrader]

Thank you - I follow now and I had been initially thinking your 25% was ROI and therefore your annual profits were a lot lower.

Having never worked in the commercial world - I have never really understood your terminology etc - but you have explained it well

I have never been able to trade more than a $250K account size and approx 20 -25 lots max and so no longer even bother compounding as I could not adjust to seeing larger losses - but quite rightly as you say on the amount of profits you are looking at per month and year - you just have to stare at losses and know its still all under control

Regards

F

That's very similar to my experience. I started with £300K run at a 50% risk target, which theoretically at least is below the optimum, and then compounded up. At the peak I was running £210K of annualised risk, so an average bad day was £13K and a bad day (close to close, not intraday) was £26K. My peak drawdown was £75K. These numbers were just too large for me, even though I was comfortable with the theory.

So I cut my risk target in half, dropped my maximum capital to a round £400K, and I no longer increase it when I go over the HWM. When I go over HWM I mentally (if not always actually) remove the HWM profits from the account. Effectively I'm running a hedge fund with 100% performance fees.

It's a very interesting subject, the pyschology of risk.

Without giving too much away (since I've already told you the trading account is less than 49.999% of my asset base) the daily p&l risk on the rest of my investments was, and still is, more than the £13K I was seeing on my trading account. But I don't get emails or monitor them anywhere near as closely, so that doesn't bother me.

Another example is it would make mathematical sense to put all my liquid funds into my trading account (or at least split between one for me and one for my wife) and then run at the same £ risk, which means the % risk on the account size would be the same as now, and the daily swings would be the same, except I would be seeing all of them not just the the money in my trading account as now. This makes sense if you think that trading has a higher Sharpe Ratio than long only investment (if it doesn't, why bother at all?).

But even though the daily cash p&l would be the same, I still want to rule out the possibility no matter how small of a blow up wiping out our entire asset base.

 

[globalarbtrader]

To come back to the original premise of the thread, which I guess is becoming a full time trader without first being lucky enough to have earned a lot of money first.

I personally think a realistic ROR to aim for is 25% a year. Any more than that and you are eithier being overconfident, taking on too much risk or both.

I also think that if it is your only source of income, then I would cut that target in half (at least), and keep two to three years household expenditure in reserve to cover the inevitable drawdowns.

That implies if you want a good income, say £50K, then you need £400K plus £150K cash reserves. Of course this is much less than you'd need if you were long only investing, where its probably reasonable to plan for a 4% return, although the volatility of that return will be much lower (as dividends and bond coupons are more regular than trading income).

That would take 30 years starting from £1K, 19 years starting from £10K, or 12 years starting from £50K, at 25% a year. Assuming you can avoid withdrawing any money from your account, and don't pay out for courses or unneccessary data fees etc.

That implies quite a long part time apprenticeship before going full time, which probably isn't a bad thing.