Well, I am a salaried-worker currently. As in, I receive a salary every month. I guess in trading, there has to be a paradigm shift. Trading profits may or may not come in every month on time! I did a quick search of the equity curves that I had come across (and still remember!):
- InfinityYield Forex - equity curve tells us that we may not make profits every week
- BK Forex Advisors - equity curve tells us that we may not make profits every month
- Ray Barros - equity curve tells us that we may not make profits every year
So what does this mean?
To live off trading, we need a good sum of starting capital
Let’s use OptionPundit’s equity curve as case study. Let’s use his May 08 to Apr 09’s results for discussion sake. That will be average of 5.5% gain monthly (which is quite good!).
Let’s say I need US$5000 to maintain my family’s and mine current lifestyle. I would require US$90909 in trading capital.
We also need to cater additional funds for our livelihood
We have seen from the above equity curves that no trading strategy can guarantee profits weekly, monthly nor yearly. So, in reality, we will have to set aside funds to tide over those months when the trading account suffers from losses. Even if we look at OptionPundit’s equity curve, there was a month with 1.7% profit (not to mentioned -13% for Aug 08!) which will not give us the US$5000 to pay for our bills, mortgages, food etc.
So what is the GOOD SUM of capital to start with?
- Jorge from Investing Adventures feels that he will be comfortable to start with $200,000
- USD$131,000 is the good amount
- Chris Perruna also suggests a six figure sum to start with
So our objective now as a part time trader should be accumulating that six figure amount so that we can trade full time. And…forget about starting with US$3000 capital and go full-time after demo trading for 6 months…
in post image by AMagill
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The only way to be truely satisfied is to do what you believe is great work and the only way to do great work is to love what you do… - Steve Jobs
Chris, this question is often asked by my students: “How much capital is needed to begin trade full time?”. I don’t think the issue is the capital, it is the skill of the trader.
My answer to them: When you are able to achieve 300 - 500 pips profit, then you will be ready to trade full time.
300 pips = US$3000 if the trader trade 1 full contract size trade.