Tuesday, June 30, 2009

Trading full-time

Few days ago I’ve spoken to friend of mine, who wants to go full-time into trading. He never traded a thing, but he wants now to do something with his life and trading seems to be something that he might be interested in. He does have some money, that he could use to trade some market and there is a wife who will support him for some time. He asked me what I think about it and my straightforward answer was that this idea would be financial suicide. 

If one wants to go into trading full-time, I would highly recommend interested person to spend some time trading while still having second job and, for that matter, second source of income, which should be stable, not derived from stock exchange and income that is sufficient enough to support his/hers living expenses, without need for money to be taken from trading account. Such arrangement would allow our new trader something that is extremely important - Trading would become activity without pressure of making money. 

This duality, in my humble opinion, should last for at least two-three years. During that time one should discover what are (for his/hers psychological and emotional traits) proper trading instruments; acceptable time-frames; comfortable trading systems and proper risk management. 

What to do after three years?

After 3-year period is over, one should have enough money in the bank account to support him/her for at least a year. Of course, some form of passive income that will cover life-expenses/bills should do too. 

Simply, if one doesn’t have that available, then that person should keep job until all is in place. One of major and first problems that new traders encounter in their new trading endeavor is fact that they HAVE TO MAKE MONEY - and good chances are they will not do it. 

Best trading comes when you don’t have to make money, 
as then almost everything comes nice and easy.
Trading under pressure is definite way of going down and
losing all the money donated to trading account.

My opinion is that, for full-time trader, there are only two types of trading: One is intraday, where one opens and closes positions during very same day; the other one is swing trading where you have your position for few days, including overnight periods while market is closed. Off course, trading has to be with some leverage - so futures or options are to be considered. For full-time trading in South Africa, I believe the best option is to go with ALSI futures contract, as costs of trading are minimal and there is more then enough volatility and liquidity for intraday or swing-trading. 

Is it possible to make a living from trading? 

Yes it is. Some of my friends who are traders are doing this successfully for many years. They don’t have to sit in traffic all day long and to fight their bosses almost every day. They job is to press buttons. 

When you get to that point, trading is just about pressing buttons and watching sreen(s).

Trade with trend!

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