It’s a tempting situation isn’t it, after perhaps three years of effort you’ve finally begun to find a trading method that works. You’ve stared at charts for years after your day’s work is over. You’ve sneaked a peak at your charts during your lunch break and you’ve often sacrificed a few hours at the weekend, when you could and should be doing something more worthwhile then looking at charts that won’t actually have any live data on them. Moreover you’ve kept abreast of all the times key high impact news events are released and can predict what the impact will be, should the data correspond with the economists’ polled predictions.
The sum total for all that study, for all that sacrifice is that, over the past six months, you’ve been consistently profitable, you’ve returned over 100% in your account, with a win loss ratio of circa 60:40 and a max drawdown of 7%. You’ve shaken off the various trading neuroses and you stick to your plan religiously. Trading nerves are a long distant memory and finally you can see a bright future ahead. You’re even confident, that should market conditions change dramatically, both you and your overall method, will withstand the gyrations. Whisper it quietly but you’re now considering leaving your job to concentrate on full time trading as being your own boss, not being part of the 9-5 work culture, was the reason you got into trading in the first place.
You want that freedom and you think you’ve earned it, so it’s just a matter of time (and timing) for you to hand in your notice to your boss, and how exciting will that be, informing your boss that you’re becoming a self employed FX Trader? You can just picture his face; a mixture of bewilderment, envy and annoyance. So should you put your notice in, should you quit your 9-5 and take a big risk? No is the simple answer, unless certain criteria are met. Let us explain…
It’s worth mentioning that there’s one stand out irony that traders considering taking that plunge into a pool of unknown depth often miss; your success to date has been derived trading part time. Now if trading part time exclusively returned you over 100% measured over a six month period then you must be doing something right, in fact you must be doing most things right to be on target for a 200% annual return. Which begs the question, “why change it?” If you’re achieving stand out returns part time is that not suggesting to you that staying part time is the answer?
What do you think you’ll achieve by trading full time, that’ll you increase your win rate and the account growth?
There’s also another issue regarding trading part time and having the security of a wage coming in each month that traders should not underestimate, the relaxed frame of mind that having a definite income provides and that relaxed frame of mind will instantly be under test once you’re trading full time with your own funds and with no safety net.
Perhaps there’s one over-arching reason that traders should use as their barometer for going full time, can you, without any shred of doubt, match the wage you currently have and can you do that for a reasonable period of time? The moment you quit your job and look at trading as important income, your mindset changes. You must be sure that you can handle the new pressure, because it can turn a good part-time trading strategy into a bad full-time one.
And what is full time trading as a retail client, does it even exist, or will you quickly discover that (now you’re proficient and profitable) trading isn’t that ‘hard’? It doesn’t actually require you to sit in front of your monitors for hours on end waiting for that perfect set up. The time you spent part time, is in fact no different to that required full time. The benefits are you’ll discover your leisure time improves exponentially, you’ll have a lot more time for indulging in your hobbies, but the drawback could be that you miss your previous working environment and your work colleagues, trading full time as a retail trader can be an incredibly lonely occupation.
You may think that that the move from part time with a wage behind you, to full time flying solo, is straight forward, but it isn’t.
Supposing your bullet proof strategy experiences the circa 7% loss you’ve accounted for in month two. Now it’s three weeks into month three and you’re just beginning to panic regarding the money you need to pull out of your account this month to pay the bills. You’ll be pulling out capital, not winnings as your 7% loss has not recovered. You’ve only pulled your account back up to -5%, it would have been more, but given you have bills to pay you didn’t follow your trading plan to the letter, you closed several trades too early in your impatience to claw back the losses. You’re now starting to remember all those voices on forums and of your friends and family who kept suggesting that you would be crazy to walk away from your full time job.
The phrase “why change a winning formula?” does not just relate to the winning method you’ve developed, it also relates to the overall strategy, mind-set and money management techniques you must have developed in your spare time to become profitable. If that’s working part time you shouldn’t change anything, you should just carry on carrying on.
The vision of where we thought we’d be, versus where we actually are after, for example, three years of trading, is quite sobering. It’s a small percent of new traders that actually make it through to become profitable and proficient. If you’re part of that elite group you shouldn’t change anything and if you’re aiming to become part of it you have the comfort of knowing that the best chance you can give yourself is to trade part time. No matter how long it takes you to become proficient, you have the back up and safety of a full time job to support you and perhaps your family.
But if you’re absolutely determined to leave the 9-5 and go full time are there any measurements you can use to gauge if you’re ready?
Surely the first would be making the equivalent sum trading as you do working. If you’re earning the average wage of circa €25,000 then this sum must be matched or bettered in the period up to when you begin full time trading. You’ve then got your trading funds and what’s more you’ve proved you can take considerable funds out of the market.
The second test would be what we term the “show and tell”. If you manage to make your average yearly salary you’ve also gained the necessary capital to trade. If you’re in a relationship you can sit down with your partner and explain how the money was made, you can also outline the plan and how you’re setting limits on both the losses and the time line.
If you lose half the money trading, and it’s takes six months, then this will be your cut off period, as you may require the rest of the capital as a buffer until you find work similar to what you had before.
These two ‘simple’ tests will also take away the emotions from the situation you find yourself in. Give yourself six months and 50% of the capital to ‘lose’. In doing so your behaviour will be that of a professional and that type of professional will surely be able to explain a six month gap on their cv, or be able to go back to their previous boss explaining that they gave it a go, but it just didn’t work out.
