Trading is a challenging journey that requires a constant struggle and patience from the traders to see any good outcome. After years of failing, a market participant is finally able to show consistency with reasonable returns that might provide a sustainable income.
Most investors who are indulged in the phenomenon of get-rich-quick quit their daily jobs as soon as they experience a slight temporary growth in their portfolio.
As trading is a game of probabilities and market conditions change, each day brings something new to the table. A strategy that shows good returns may underperform, and a trader might lose all the invested capital due to poor risk management and psychology.
Leaving your daily job to opt for better at-home trading seems lucrative, but you must keep specific points in mind before proceeding.
Table of Contents
Understanding of the risk management
Solid knowledge of risk management ensures that you do not lose your trading capital in a matter of hours or minutes. Professionals recommend not to risk more than 1-5% on any single trade. E.g., if a trader has a total capital of $100000, the risk per position will be $1000. This way, a strategy that offers an R: R ratio of 1:2 and has a winning percentage of 50% will keep a trader in profit.
Good knowledge of maths
Understanding basic maths is crucial in this regard. For example, reading the performance analytics reports can allow a trader to insight into how his trading account will perform in the future.
Nowadays, various kinds of journal software help in conducting analysis. In addition, some tools help determine your position size, stop loss and take profit levels, so you do not have to calculate on your own.
Have a proper mindset
Eliminating greed, anger, frustration, euphoria, etc., are only a few of the total emotions a trader should be aware of.
Suppose you come across any of these feelings while trading, the chances of a major mistake leading to a significant drawdown are prominent. Trading is nearly 70 to 80% affected by psychology. Quitting your day job at the same time will put even more stress resulting in a catastrophic situation that only a few can handle.
Good trading strategies with the proven outcome will ensure that your account comes back from drawdowns when it experiences any. It is possible to develop one on your own however prebuilt approach will save you from testing and tweaking.
The entry and exit points must be thought through before placing any trade. Traders who have made it big in the industry practice their trade management in their minds before the next day. To be amongst the best and enjoy the freedom that trading provides, make sure to follow in their footsteps.
Using the money that you loan from your family and friends for trading is a one-way road to financial suicide in most cases.
Risking money that a trader can afford to lose not only provides peace of mind but also increases consistency. Being free of all the loans can help make the final decision for quitting your day job.
Support from your family
Your family can help you get on your feet if you are mentally tired or have a blown-up account. With family’s support, a trader can find a new job, make money and get back in the game with added experience.
Treating trading like a business
You have to understand that trading is not child’s play. College degrees require years of effort in studying. Financial markets are no different, and building a good foundation will need some time. It would help if you approached it similarly like a day job or part-time business.
Know when to stop trading
Sitting on the trading desk all day long can tire a trader to an extent where they can face some losses due to exhaustion.
Institutions and hedge funds advise their traders to take a walk if they are experiencing constant stop loss hits.
If you have mastered the art of resting when needed, add plus points of quitting your day job. Keep note of your daily loss limits, profit targets, and maximum monthly drawdown.
Passion and love
You can not expect to stay in this business for long if you are here to make money only. Of course, cash is one of the desires, but a trader should fall in love with the overall process.
Good interest and passion for trading will keep you indulged in the charts even if you are experiencing a losing streak. Ask yourself this question: Do I want to pursue it in the long term?
By ticking off some key points, a trader can approach quitting his day job. Keep in mind that past performance or any particular tick mark does not indicate that the future will bring similar results.
You have to be financially secure and keep your risk management under strict check and balance. Do not take the points as financial advice. Instead, use them as a guide in your path.