How to Tell When I'm Ready to Trade for a Living?

Blood, busted neurons and lost capital under their belts separate the big boys from the plankton. As to how the sharks reached that blessed place, they certainly did not look up at the stars for help in shedding their amateur status (although employing astrology is your choice.)

Different people have different answers as to when they are ready to trade professionally for a living. Targets depend on your personality. One trader would consider trading from home when he consistently hits $5000 month for at least 2-3 years, along with confidence that his trading strategy is working.

Another trader wanted to go pro after he gets comfortable with being a social pariah as well as having God-like status, and also cited sufficient capitalisation and remuneration. One of the pragmatic ones suggested due diligence: create a comprehensive and realistic family/home budget (after tax). Here are some of his considerations:

• Assuming an annual budget of less than 7 percent of your capital, required income can be generated from relatively safe blue chips investments like banks, long term deposits, etc. Risks increase if you need to rely on capital gains to generate income.
• Create a written trading plan, then test and fine-tune it. Use the plan for at least 12 months before deciding to go pro. Anticipate bear markets and create strategies (high-risk short selling or fully franked dividends) to generate income.
• Learning how to run a small business also helps. Unless you pay someone to do it for you, expect to spend most of the day sitting in front of your computer researching and filling out buy/sell orders. Ask yourself if this is the major lifestyle change you want.

The odds of being a successful long term trader go against most people. If you are convinced that trading is your path in life, fall and learn from your mistakes. The chosen ones—who enjoy 'boring' and get to play a lot of golf—will get it right, but not many.