Quit job for full time trading

[milkyblack]

It makes sense to quit your day job and pursue trading full time in the following circumstances IMO:

1. When your lifestyle and basic livelihood will not be affected if you quit your job.
   
   
2. You have enough savings to last you 6 months even if you fail at trading and can't find another job immediately.
   
   
3. You have a spouse who can compensate for your lack of earnings while you use some savings to trade (You must be in good terms, as the divorce rates are increasing and it's not pretty ).
   
   
4. You a regular income from a reliable source with which you can pay for all your expenses so that you don't have to pay monthly bills by booking your positions. The minute you go that route, you're in for some trouble. Pressure builds when there is a lack of optimism. In the beginning, it feels like you can book profits and come out positive every single month but trading never gives linear results in my experience so far!
   
   
5. You have a rich dad who can provide you capital and who can bankroll your account if you go broke a few times without it making much of a difference. People with such a background are by far the most suited for full-time trading IMO. But I have observed that they often lack the motivation to put in the hard work. I don't want to stereotype this kind but I've seen this in many instances over the years. Some really good traders who started with their dad's money just give up too soon. If you won't give up, then perhaps your chances of doing it full-time over a long period of time increases because you don't have to put food on the table every month and can single-mindedly focus on growing your capital.
   
   
6. You have entered into a partnership with someone who is providing you the capital to trade with and who is open to the idea of you taking a monthly/annual fee regardless of the performance. For this to happen, the fee amount must be less than 2% of the total Assets Under Management (AUM). If the fee is higher, it will eventually eat into the capital and in the months that the account is down, the partner who provided the capital will feel the pinch and things can get awry. Hence, ensure that the amount is good enough to compensate for your full-time efforts.
   
   
7. You are a SEBI registered Investment Advisor alongside trading your portfolio. That way you can build a fee-based income from your new clients which can pay for your monthly expenses and you could also focus on your own trades since the nature of both activities are similar and in the same direction.

If I have missed out on something, let me know. I personally feel that one should be in a position to take the risk if he quits his job. If you don't have resources to provide for basic livelihood, then it will definitely affect your ability to trade to the best of your potential. Do consider what I have said in the above points if you think it makes sense.

My $0.02!

Nice pointers Tejas , its going to be 10 years next month as a full time trader. I can assure to the ones who want to start their journey as a trader that the path is going to be quite rough and tough and only constant learning, radical change in behaviour towards the market , lot of patience , perseverance, lots and lots of hard work to be self reliant are some of the traits that the market would demand from the trader before s/he can see the bank account to swell.


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[afin]

This is deja vu, since I posted a similar question to one of our members of the forum!

 

[Tejas Khoday]

Nice pointers Tejas , its going to be 10 years next month as a full time trader. I can assure to the ones who want to start their journey as a trader that the path is going to be quite rough and tough and only constant learning, radical change in behaviour towards the market , lot of patience , perseverance, lots and lots of hard work to be self reliant are some of the traits that the market would demand from the trader before s/he can see the bank account to swell.


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Hi @milkyblack, That's great to know! A 10-year timeframe speaks for itself. Yes, I vouch for what you have to say.

 

[Tejas Khoday]

This is deja vu, since I posted a similar question to one of our members of the forum!

You posted a similar question? I thought you were a veteran.

 

[afin]

You posted a similar question? I thought you were a veteran.

Lol. That was in a PM actually I have a very clear plan in place and its yielding me results.

But I had to double check for extra validation from someone who was a bit more senior than me!

 

[pannet1]

You have entered into a partnership with someone who is providing you the capital to trade with and who is open to the idea of you taking a monthly/annual fee regardless of the performance. For this to happen, the fee amount must be less than 2% of the total Assets Under Management (AUM). If the fee is higher, it will eventually eat into the capital and in the months that the account is down, the partner who provided the capital will feel the pinch and things can get awry. Hence, ensure that the amount is good enough to compensate for your full-time efforts.

2% of Total AUM
Some charge 20% of the nett profit / Quarter. Is it because they are having trades for a very short period of time. Or is it because they trade commodities instead of stock? Can you elaborate a bit on the various charges / practices of Fund Management / 3rd party trade management.

 

[afin]

2% of Total AUM
Some charge 20% of the nett profit / Quarter. Is it because they are having trades for a very short period of time. Or is it because they trade commodities instead of stock? Can you elaborate a bit on the various charges / practices of Fund Management / 3rd party trade management.

True. I always wanted to know about that too.

 

[Aerinnon]

I think you are about to make a wrong decision. Quitting your job for fulltime trading is not a decision that you just wake up to one day without being fully prepared for it. And considering that making consistent profits in forex that can sustain you and pay your bills would not come instantly, you need to prepare very well.. 2 months is not enough

 

[Tejas Khoday]

2% of Total AUM
Some charge 20% of the nett profit / Quarter. Is it because they are having trades for a very short period of time. Or is it because they trade commodities instead of stock? Can you elaborate a bit on the various charges / practices of Fund Management / 3rd party trade management.

Some common practices of Unregistered Portfolio Managers with small AUMs:

1. Charge performance fees in the range of 20-25% of profits. This is their main goal!
2. Withdraw profits on a regular basis (Mostly Monthly/Quarterly) or when a milestone is reached.
3. No high-water mark system whatsoever.
4. They make money through brokerage kickbacks too. Hence no management fee (Sub-brokerage model). It takes care of the operational expenses in the event that they make losses in portfolio management. Some unethical folks churn their clients' portfolios a lot more when they know they can't recover from the losses thereby generating more brokerage for themselves. A very bad but widely prevalent practice even till date.

Some common practices of Registered Portfolio Managers (I know some of them personally):

1. Charge management fees of 2 to 2.5% per annum debited on a monthly/quarterly basis from the total net asset value.
2. Charge a performance fee between 15 to 25% and high water marks are an industry standard practice for registered portfolio management companies. More often than not, they are aggressive and aim to outperform the benchmark using concentrated bets. They mostly don't indulge in derivatives to speculate.
3. They also withdraw profits on a periodic basis but the high-watermark applies so they can't withdraw excessive amounts in advance and swindle money from the customer's account.
4. They may or may not make money from brokerage but since they have to publish their turnover ratio, it makes it difficult for them to churn excessively the way unregistered managers do. Also, since they deal with the HNI category the reporting standards and compliances are much higher. The cost of operations is high and thus, a higher scale is essential to survive in this business.

Some common practices of a business venture which has been created for the purpose of trading:

1. A clear cut agreement during the incorporation clearly defining the scope of the business and the nature of trading, it's profit & loss sharing clauses.
2. The partners can add/withdraw capital and do so in a pooled account because it is a business venture.
3. Profits can be withdrawn whenever it is needed.
4. There is no question of earning income other than generating trading profits.

 

[Tejas Khoday]

I think you are about to make a wrong decision. Quitting your job for fulltime trading is not a decision that you just wake up to one day without being fully prepared for it. And considering that making consistent profits in forex that can sustain you and pay your bills would not come instantly, you need to prepare very well.. 2 months is not enough

Totally agree.