How Much Math Is Used In Being A Financial Analyst Transitioning From Part-Time to Full-Time Daytrading – Ensuring Sufficient Income

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Transitioning From Part-Time to Full-Time Daytrading – Ensuring Sufficient Income

One of the most difficult times in my life, which threatened my own psychological well-being as well as the possible safety and security of my family, was in early 2004 when I first made the leap from trading to part time to full time.

He had the necessary knowledge. He had the necessary skills. I was a great technical analyst. And I had some proven success in the markets.

But I was lacking in other areas. It was very undercapitalized. And despite my appearance as a person with a positive and confident attitude, inside I was consumed by doubt and fear. Of course, I couldn’t admit it at the time.

Well, there is nothing that I know of that is more effective in bringing out all your fears than quitting your full-time job to pursue a full-time career in market speculation.

With no other form of income available to support my family, it was up to me to continue generating the market returns I “knew” I was capable of achieving. Of course, almost instantly, my results fell short of my expectations.

Fortunately, I still had the discipline to respect my stops, making sure I didn’t have to face a catastrophic loss. While in some ways a single catastrophic loss could be seen as a blessing, at least it’s over quickly. Instead, I spent the next few frustrating months working my way into a soul-destroying slump.

My mindset was a mess. I doubted my analysis, hesitated to enter until it was too late or I lost the trade altogether. And it seemed like the only trades I entered without hesitation were entries out of frustration at losing the previous trade, rather than good analysis. Usually, these trades do not provide the greatest advantage.

I would take profits quickly; I’m afraid the market will take them away from me.

And I even ventured to depths I never thought I’d go to: asking a broker for some trades. In his defense, his analysis may have been brilliant. I just didn’t have the right mindset to profit from any recommendation, no matter how great the trader or analyst.

Basically, the fear of not being able to provide for my family led to self-doubt and indecision, which made me unable to apply my trading plan in a consistent and disciplined manner, leading me to realize the very fear he sought to avoid.

Fortunately, I was able to recognize the problem before the damage to our finances and my marital status was irreversible. Although I have to admit, I pushed them both to the limit.

So, I took some time to rethink my plans. I went back (with my tail between my legs) to full-time work. And I set about preparing for my next foray into full-time trading.

I am eternally indebted to my wife for her patience and support in helping me see the reality of the situation. (Guys, just because we’re wired to perceive it as annoying, doesn’t mean it’s not the truth. 🙂 Don’t tell him I said so, okay!)

What’s the point of all this anyway?

Well, I did things differently the second time around, and I suspect my thoughts on making the transition successfully might be of benefit to others. I get quite a few emails from traders who are thinking of making the same transition: from part-time business alongside a full-time job to full-time business. They’re generally looking for my thoughts on what capitalization they should have, or what levels of returns are realistic on a full-time basis. Of course, I’m not able to give a useful answer. We all have different standards of living and therefore different income requirements. A decent budget will tell you what your income requirements are. And the results of your part-time business will tell you whether you can achieve this level of income, taking into account your current level of capitalization and your current percentages of return. Finding out whether or not you have the ability to cover all the expenses is really that simple.

However, and it’s a big but, part-time business success doesn’t mean you’re psychologically ready for the full-time transition.

So, with my experiences in mind and my desire for you to avoid some of the same pain, here’s how I prepared for my second (and so far successful) transition to full-time trading:

I first established other forms of part-time or passive income that were sufficient to cover all living expenses.

I hope you will consider this idea for yourself. As always, it’s not advice as I don’t know you or your circumstances, it’s just what I did and what I think all serious traders should consider (blah blah blah exemptions of standard financial responsibility).

Don’t be too quick to dismiss this. Don’t listen to that voice in the back of your head that says this isn’t possible for you, or it will take too long. The fact is, if you take the time to do this first, you’ll take the pressure off significantly.

I can trade now without any profit requirement. I could go into a slump that lasts for the next two years and it wouldn’t matter (other than the frustration). The food will still be placed on our table. Any commercial profits you get are a bonus – we don’t need them to survive. This is a powerful place to be.

I trade with my mind at ease.

So how do you get it?

(1) First, make sure you really want to go full-time. Full-time trading is a tough way to make a living. Of course, it’s easier when you have alternative sources of income to help you through the “down times”, but for most of us life won’t be like the trading course infomercials. I hope you can make a living trading on your laptop while sipping a Pina Colada on the beaches of the Caribbean. However, you are more likely to be isolated in your home trading office for eight hours a day, staring at a screen. And if you follow my recommendation for alternative sources of income in addition to trading, your “free time” will be spent trying to manage some kind of business or part-time job. It’s not easy.

Many people may find that their personal and family circumstances are more suited to part-time day trading, or perhaps for a longer period of time. Can you manage to change the first two hours of the emini session? This may be sufficient for your trading style. Can you trade the first two hours of the UK forex session? Or maybe you could be happy trading an end-of-day strategy using daily charts? These shortened trading sessions, along with some time for study or analysis in the evening, may be all you need to make a very profitable and enjoyable part-time trading business.

(2) Second, confirm that you really have a proven track record that warrants going full-time. If you are implementing alternative forms of income, the business results do not have to fully cover your budget requirements, but since this is likely to be your long-term goal, it may be wise to ensure that you have reached this standard of profitability . In any case, you must have demonstrated consistent performance over a significant period of time.

(3) Now, let’s find alternative sources of income.

Ideally some form of passive income. It would be great if we all had loads of rental properties and could live off the rental returns, but I guess most of us aren’t in that lucky situation. Congratulations if you are. For the rest of us, however, the most obvious source of part-time income is a part-time or occasional job or business within your current field of expertise.

Are there opportunities to work in your current organization on a part-time or casual basis outside market hours, or perhaps from home? If you can work part-time, but only during market hours, find another market that operates after hours. It’s a global economy – there’s an open market somewhere.

Or once again, have you thought of trading only the morning session or the afternoon session. A full-time trader should not spend 8 hours a day in front of the screen. Can you find part-time work around these reduced sessions?

If your current employer doesn’t offer any options, look for other employers in the same industry.

Even better, do you have enough experience to start a consulting business in your current field? You don’t need to be recognized as an expert. You just need some skills that can be marketed in the industry, with enough demand available that it can be operated part-time around your business and provide enough income to survive. Seriously, think about it – there are a lot of options available.

Or look at other areas entirely…

Is your spouse able (and willing) to make a job or career change that will potentially provide more income?

Are you able to teach anything? A musical instrument? dance? Learning to coach or referee in a sport? Why not start tutoring local kids in basic math, science, or anything else you’re passionate about? There is no shortage of small home businesses that can be operated at minimal cost around the requirements of your trading period.

I know this isn’t the idea most of you have of “full time” trading, but it doesn’t always have to be that way. I plan to always have alternative forms of income, but you might want to phase them out over time so you’re really just a full-time trader. Consider it just a transition phase.

I also know it’s hard to work full time in your business, and also run a business or work somewhere else part time. But if you want it bad enough, you’ll find a way. I’ve done it despite a young family. How bad do you want it?

Make your budget. And find enough income to cover it, so that it allows you to trade during market hours.

This process can take some time to get going, but I think it’s worth the effort. You may be able to cope with the psychological challenges of moving directly into full-time trading. Certainly some traders have. But many have also failed. If the downside risk of failure in your full-time business venture is too great to accept, take the time necessary to mitigate that risk. Find alternative sources of income, which can support you while still allowing you to operate full-time.

Wishing you the best of luck,

Lance Beggs

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