Are you ready for full-time trading? – Times Now

Are you ready for full-time trading?

By Sourabh Sisodiya

Trading is simple but not easy! It is simple because you can buy or sell stocks just at the click of a button, but what to buy and when to buy is a d̶i̶f̶f̶e̶r̶e̶n̶t̶ difficult ball-game altogether.95% of people who opt for trading as a profession eventually, QUIT!

Keep these 4 questions in mind before you venture into full time trading.

1.Do you have a robust trading strategy?

To be a successful trader, you need a robust trading strategy with a statistical edge — Something that is thoroughly back-tested & works in most if not all market conditions.

Let us take the example of a Casino. Just by using the Roulette Wheel, casinos make billions every year. In Roulette, the probability of red to black is 50:50 right? Wrong! Casinos don’t beat players because they are lucky, but because the odds are tweaked in their favor. By introducing 2 green pockets, they enjoy a winning probability of 20/38 viz a player’s winning probability of 18/38. Casino’s edge over the player is just 5% but by exploiting this edge, ‘the house always wins.’ Similarly, the only way to make money in markets is to have a strategy with a statistical edge

2) Do you have savings for at least 2 years?

Unlike other professions, trading ensures no guarantee of getting a monthly pay-check. It is a game of probability and being able to let your edge play out. You may have losing streaks and sometimes even losing months but having enough savings keeps you afloat & going, even emotionally!

3) Are you emotionally strong and disciplined?

Trading is only a 10% strategy but 90% discipline. Trust your system, follow it and execute trades irrespective of the outcome of the previous trade.

You can read Trading in the Zone by Mark Douglas to understand more about Trading Psychology. The book talks about major reasons for lack of success in trading and how to build better mental habits to become a successful trader.

4) Do you have a good size trading account?

Most traders who blow up, start with a minuscule capital and dream of turning it into millions. You should have reasonable capital and a realistic expectation if you want to make trading as a full-time career.

I have coined the below formula to determine the adequate trading capital needed for full time trading

Capital for Trading =((1.5* current monthly income)*100)/ (Expected % Returns per month)

Let’s assume your current monthly income is 1000000 INR and you expect to make around 3% per month based on your strategy performance.

So, Capital needed for trading would be

= (1.5*100000*100)/3

=5000000 (50 Lakhs INR)

So one needs around 50 L INR capital to make around 1.5 L INR per month if his strategy yields 3% per month

You can see that morethe returns, lesser the capital needed.

So you can use the above formula to decide the optimal capital for you based on your current income and expected strategy performance.

People keep looking for the holy grail without realizing that Trading is more about yourself and less about strategies.

To summarise the article, the mantra for long-term trading is given as follows:

Successful Trading requires Robust Strategy,money management and solid Discipline with proper Risk Management

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.timesnownews.com.)