So you want to become a full-time trader
A frequent question from aspiring traders goes something like this: “How do I know the right time to quit my job in order to become a full-time trader?”
In 1981 I started Factor Trading Co., Inc. with less than $80,000 in trading capital. I consider myself lucky that I did not wash out – that providence dealt me a better hand than I probably deserved. But markets are a lot different today than they were in 1981. I can only offer my own opinion as to what a full-time trader needs today to go out on their own.
If you have a good career doing something else, why rush into full-time trading? Earning a supplemental income as a trader is a nice gig.
If you desire to become a full-time trader, following are what I believe to be the minimum conditions.
1. Your trading account should represent profits you have accumulated from the markets, not savings you have taken from some other endeavor.
2. Your account size should be at least three to four times greater than the amount of annual profits you are expecting to make from trading.
3. You should have at least two years of savings in the bank (other than your trading capital) to cover your living expenses. [Note: This condition is waived if your spouse earns enough to cover living expenses or if your family is independently wealthy.] Depending on trading profits to cover living expenses is a very poor place to start.
4. You should have been profitable the last two consecutive years with Calmar and Gain-to-Pain ratios of at least 1.5 to 1.
5. You should have a complete understanding of the trading plan you will begin using.
6. You should assume a 50% chance that your first year will be a losing year.
Also below is our current list of recommended reading.
- Richard Schabacker – Technical Analysis and Stock Market Profits
- Edwards and Magee -Technical Analysis of Stock Trends – Only 6th version or earlier – only first half of the book
- Jack Schwager -Market Wizards series
- Steven Drobny – Inside the House of Money – European version of Market Wizards
- Jack Schwager – Market Sense and Nonsense: How the Markets Really Work (and How They Don’t)
- Nate Silver – The Signal and the Noise: Why So Many Predictions Fail – but Some Don’t
- Nickolas Darvas – How I Made $2,000,000 in the Stock Market
- Peter L Brandt – Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading
- Anything by Michael Lewis
- Malcom Gladwell – Blink: The Power of Thinking Without Thinking
- Mark Douglas – Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude
- Edward Chancellor – Devil Takes the Hindmost: A History of Financial Speculation
- Brett Steenbarger – The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist
- Steve Nison – Japanese Candlestick Charting Techniques
- George Soros – The Alchemy of Finance
- Nassim Taleb – Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
New to Forex and Futures Markets
Peter Brandt is a 40+ year veteran of trading. Through his Factor Service, members receive:
View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work. Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about. For more information watch my 30 minute webinar where we cover the Factor service in depth.
I hope you will consider joining the Factor community.