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Full Time Trader - Revisited

Started by Jorge · 3 months ago

Before Christmas I had the bright idea of quickly calculating how much it would take to go from a typical 9 to 5 job to trading full time. I admit, I was grossly conservative in my calculations. So much for doing things on the back of an envelope as your professors tell you [...] ... Continue reading »

7 comments

  • Christopher Smith

    11 months ago

    You're basing your plan on a 10% per month return, which is wildly optimistic. A 10% monthly return correlates to a 185% annualized return. A 20% monthly return, which you also suggest, comes out to over 640% annualized.

    No day trader will make these numbers on a consistent basis. Over the long term the market will yield a return that's in the high single digits. Even if a day trader is able to double or triple this you don't get close to your numbers. And even that is optimistic; even good day traders will lose money some years.

    You'll need a lot more capital and a lot more patience than your calculations indicate.
    reply
  • Charlie

    11 months ago

    I certainly agree 110% with Christopher.
    I believe your return rate is too optimistic.
    I think its important to realize any down months. Thus I feel anyone reading this article or blog should really focus on a 5%-8% percent return - even at that level you're going to have a -20% annual return.
    So be fair warn and cautious on where you're going to be putting your hard earn ALREADY TAXED dollars.

    The stock market reality is much darker that most professional plays them out to be.

    Good luck investing - you'll need it.
    reply
  • Jorge

    11 months ago

    Do I think someone with disciple could pull a 10% monthly return? Probably. But you're both right. Nothing is guaranteed. I did run some numbers using a 5% monthly return which I'd agree is much more attainable. To survive off trading, you'd need about $350k once you figure in capital gains taxes and monthly withdrawals for expenses. An 8% monthly return would require about $300k which isn't that bad. I'd go out on a limb though and say that folks who are serious about trading full time can easily beat the professionals if only because the amounts of capital the individuals are managing is much less. I'd think it's much easier to manage $1m versus $100m+.
    reply
  • Julio

    11 months ago

    by taking a trip to vegas or nicaragua you can incoporated into an S corp or a foreign company. trading as a company will save you in tax. instead of 35% personal tax bracket you can pay 8 or 15% or if you are a foreign corp. maybe 15%. pay an employee a consultation fee and let the company pay the personal income tax.
    reply
  • Jorge

    11 months ago

    I'm sure there are ways to having a tax discount Julio but man I'm nowhere near that position yet. I'm barely in the second tax bracket as a graduate student hah. I'm sure there are ways to get around the 35% bracket though. When it comes to that bridge, I'll figure out a way to cross it.
    reply
  • New Option Trader

    10 months ago

    I just wanted to thank you for posting this analysis. Regardless of whether or not your percentage returns are the right goals, I'm just happy to see this topic discussed. I've been thinking about the same question and was hoping the intitial capital would be significantly less if I was adhering to a disciplined trading plan. But, now see that even with discipline and a good plan, I'll need a decent amount of capital.
    reply
  • Jorge

    10 months ago

    NOT:

    Not a problem, hah! As with everything, no calculations that are somewhat subjective can be perfect. It does give a relatively realistic starting point though. I should work on making some sort of calculations with historical monthly data but I think that's outside my reach. In any event, glad you enjoyed it and good luck!
    reply
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