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Posted on September 13, 2010 by StockTrading.net
Is it possible to turn stock trading and playing the markets into a full time job? Some people have earned several million dollars from successful day trading, so it seems that it is in fact possible to make stock trading your full time career. Not everyone can succeed as a full time stock trader, but if it’s your ideal career path, here are some tips for making it happen:
Be Prepared to Research
A career stock trader must spend a great deal of their time researching and analyzing the entire stock market. If you intend to make day trade decisions that are profitable enough to give you a reasonable salary, you’ll need to look at the entire stock market and monitor trends. Your goal with day trading is to buy the stocks when they are priced at their lowest for the day and to sell them when they’re at their highest (within the same day). You need to be ready to make rapid decisions and have a strategy for doing so.
A typical day trader might invest $7,000 in the morning and sell them for $7,300 by afternoon. That’s a $300 profit for the day, and obviously could lead to a successful career in stock trading. Of course, you can also lose $300 or more in a day, too!
If you’re stock trading on a regular schedule (instead of day trading), you have more time to make decisions. You can find stocks that are priced low per share, and wait until you see the price per share increasing in value to sell it at a higher price.
Use Stock Trading Software
If you’re serious about stock trading as a career choice, you’ll want to get and used quality stock trading software to help you study the market statistics and make decisions. With software, you can make more informed decisions than just guessing on your own. If making stock trading a career, you need to minimize your risks and give yourself all of the tools you can in order to succeed.
You can’t make a living if you are losing more than you’re profiting in the stock market. So in addition to using software to help you analyze and select stocks to buy and sell; you also need software or spreadsheets to help you measure your success. Are you losing more than you’re winning? Are you making a profit overall?
Can You Risk it?
Maybe you’ve had success stock trading in the past, which has lead you to wonder if you could turn it into your career. The important thing to keep in mind is that there are no guarantees with the stock market. The money you invest could be here today and gone tomorrow – and do you have the discipline to know when to stop investing? Do you have enough money saved to support you and/or your family while attempting to make a steady income through stock trading?
Some Myths
Myth #1 – Top traders make triple-digit annual gains on a regular basis.
Reality – A very small (to the point of being statistically insignificant) handful of traders might make 100%+ gains year in and year out, but most full-time traders will do well to earn 50% returns on their account in any given year. They are able to live on this income, however, as most start out well-capitalized, often with $100,000 or more from the onset.
The bigger the account balance, the less aggressive a trader needs to be to generate income. As the need for risk is reduced, the ability to make consistent income is enhanced.
Myth #2 – Stock trading as a full-time career requires access to tons of data, and access to software that offers all the bells and whistles.
Reality – The purveyors of expensive trading platforms and/or data sources have done an outstanding job of linking ‘more powerful tools’ to ‘trading success’, but the truth is, trading success ultimately depends on the decisions you make outside of the software’s direction. Many highly successful traders have surprisingly limited software, as they feel it’s more of a distraction or a crutch than a tool.
Myth #3 – The more you trade, the more you make.
Reality – Experienced traders will tell you that less is more. It’s better to wait for the few big payoff (and high-odds) opportunities that present themselves in a given year and ride them out fully, and not waste time or capital on trades that are made out of boredom. Larry Williams may have said it best when he said his secret to short-term stock trading success was this – “The longer I can stay in a trade, the more money I make.”
Myth #4 – A proven trading system, or ‘black box’ approach, is the key.
Reality – If there really was a turn-key black box trading system that could be developed by software companies or charting services, they wouldn’t make it available to you. It would be more valuable to them to use exclusively for themselves.
That said, adherence to a proven trading system (your own or another) is more likely to lead to stock trading success, as this type of approach mandates consistency over time. The ‘fly by the seat of your pants’ approach is the gentle way of saying “I’m wandering the market hoping to get lucky”.
Myth #5 – At least 2/3, and ideally ¾, of a trader’s trades will need to be profitable in order for the effort to be viable.
Reality – Even professional traders misfire…. quite a bit, in fact. It wouldn’t be unusual for only 50% to 60% of a pro’s trades to be profitable. The key isn’t winning a lot. The key is winning big with at least a few of your winners, and never losing big with your losers. Defense is more important to net profits than offence.
Still want to be a professional trader? Perhaps you’ve changed your mind. Regardless, you don’t have to make an outright commitment of time and money to first get a feel for what trading is like in the real world. There are several ways to ‘paper trade’ real-world situations, which risks no capital, but gives you an authentic experience. Just don’t quit your day job until you’ve proven to yourself you cam make money as a trader.
