Among the retail traders I’ve spoken to over the years, more than half say they wish to eventually trade full time from home.
This isn’t surprising, given that traders can make money anywhere in the world with a stable internet connection.
I mean, who can resist the idea of lying at the beach sipping a mojito, all while making a thousand dollars a day?
Alas, while this is technically possible, it isn’t the full story.
You see… after 9 years in this business, I’ve learned a few things about full-time trading that most new traders don’t realize.
Trading for a living has its perks, sure… but it’s probably not as wonderful as you might think.
So here are 4 harsh truths about full-time trading that will give you a more realistic view of what to expect:
Harsh Truth #1
Your average monthly profit will almost certainly be less than 15%.
The truth is that an average 10% monthly return on your trading capital would be an amazing result.
Most likely, over the long term you’d be getting less than 5% on average.
Of course, as with any competitive endeavor there will be outliers who will perform much better. But for the most part, a reasonable profit expectation would be an average of 2-3% per month.
Surprised? Most people would be.
The truth can be a bitter pill to swallow, but it’s better to be disappointed with the truth than to be led on by a lie.
After all, the more realistic your projections, the better position you’re in to make effective decisions.
Which brings me to the next point…
Harsh Truth #2
You’re probably under-capitalized.
With a more realistic profit expectation, you come to realize that to make $2,500 per month you have to be trading with at least a $40,000 account… and that’s being optimistic. More likely, you’ll need around $60,000.
A common mistake new traders make is thinking that they can start with a $300 account and grow that capital into an amount large enough to sustain full-time trading.
To achieve this, one would have to make a 10% profit consecutively every month for 4 years. That’s pretty much a perfect record for 48 straight months.
Practically speaking, it’s not going to happen.
The bottom line is that in this business, it takes money to make money. Unless you’re going to have access to (a minimum of) mid-five figures of trading capital, full-time trading is not something you should be considering.
Part 2 Coming Soon
Full-time trading is a highly challenging endeavor, and unless you’re prepared to deal with the practical reality of what it takes, you’re better off working towards a different objective.
In the next post, we’ll take a look at another 2 harsh truths of trading for a living, and what you should expect if this is your goal.