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How to Know When to Quit Your Day Job to Trade Full Time

Posted by BluFX

 

How to know when to quit your day job to trade full time-1

It's a big leap to go from trading part-time to full-time. Most traders when they start out rely on a day job for steady income - but how do you know when to quit your day job to trade full time? The answer is that you'll want to ensure you have enough experience trading profitably, are comfortable with live trading, have a large enough savings account, and have tried a whole range of trading strategies. So: here are some signs that you're ready to take the plunge and trade full time.

This blog is part of our new Make It Happen series, a series of blogs aimed at total beginners to forex: for people working a full-time job, with little capital to start off with, and limited time to learn how to trade. Sound familiar? Here’s how to get started on your trading journey.

Read Women in Trading: Mandi Rafsendjani Q&A ⟶


Signs You're Ready to Quit Your Day Job to Trade Full Time

You've profitably traded a live account

The first thing you should probably ask yourself is “Can I make money day trading part time?” Because if you can’t profitably part-time, it's a red flag that you may not be ready to make the commitments necessary to succeed at trading full-time. And it's important as well that you have experience with trading a live account. While demo accounts are great and give you a realistic sense of how the market works, it is not quite the same.

Consider an airplane pilot. He or she may be fantastic at flight simulators, but the fact is that if their plane falls out of the sky in a flight simulator, the consequences are minimal. While the conditions may be simulated perfectly, it is essentially different from the real world in one important aspect - permanence.

When you are flying a real plane, the consequences are real and you perceive that. You will need to be able to handle them psychologically and manage them through consistent action, oftentimes through adversity. It does not take much capital to just get the feel for live trading because with proper risk management the risk per trade will be proportional to your trading account.

So: before you quit your day job to trade full time, you need to make sure that you're trading a live account, and making considerable profits - enough to realistically live on.

Trying to trade around your day job but finding it hard? Maybe you haven't found the right strategy. Here's how to find forex trading strategies to suit your day job>>

Your savings are big enough

When you first adjust to trading full time, it may take a while for your account to turn positive. Successful forex trading is not a matter of continuous winning but putting together a winning average over time. That means that you will need some buffer to get you through the lean times. This also plays a big part in trading psychology: if you know you do have a buffer, you're less likely be worried about not making profit - and therefore less likely to make impulsive, risky trades.  

There is no hard and fast rule about how much money you will need. Essentially, you will want to calculate how much money you need each month for living expenses. Your savings will serve as a buffer for when your trading income does not meet your needs. Early on, this may occur regularly while you are adjusting. Many traders have their own personal criteria for what constitutes adequate savings. It is a good idea to have six months of savings to get you through the initial period. 

So: before you quit your day job to trade full time, you need to make sure not only that you're trading a live account, and making considerable profits - but that you have some savings to tide you over the first few months comfortably.

Here's how to build up a major forex trading income stream>>

Your trading account is big enough

If you’ve been doing some part time day trading, you are probably still relying on your day job to pay the bills. Replacing the income that you currently get from your full-time job means that you will need to earn profits comparable to that every month. You should expect it to take a while for your account to be consistently profitable. So, you will need to rely on your savings to some extent when starting out.

As with savings, there is no universal rule of thumb about how big your trading account should be. Some suggest having a large enough capital account that you can earn twice your regular job's income consistently. By setting the bar that high, you can be reasonably confident that you will at least reach your day job’s income level and maintain your standard of living.

Think you'd find it useful to chat to other traders about their experiences? Here's how to find a forex trading community>>

You're confident using different trading strategies 

Being profitable in a real account, or even a demo account, can be challenging and if you have managed to do so, hats off to you. But if you maintain a profitable account using only one trading strategy, it will be hard to succeed in trading a live account long-term. Market conditions change over time, so it's important to be adaptable enough to profit from multiple strategies. This is not to say you can't have a strategy you prefer, or use most often, but that you've tried a range of them and feel confident. 

If you like to trade during a particular time of day, that means there are certain forex pairs that you will be targeting. The behaviour of these markets is in flux all the time, so what worked last week may not work this week. If you are committed to a lower timeframe, you can’t just go find other currency pairs because they will likely not have enough activity to be profitable.

As a full-time trader, you can’t just sit around and not trade. That does not mean you should trade recklessly. It means that you should develop a diverse toolkit of trading strategies that can help you find opportunities in many different kinds of markets. Perhaps you have done swing trading as a part time job. You may be a swing trader, but markets don’t swing all the time. Learning range trading strategies to add to your swing trading can greatly enhance your ability to find good trades when the trend is over and the market starts moving sideways.

Scalping is another strategy that you can use to find opportunities. A news event can cause a spike in a currency pair that can net you huge profits in a matter of minutes or hours. These events cause a sudden jump in price that completely contradicts the longer term trends that a swing trader would miss. Build a robust collection of trading tools that you can use to profit from as many market conditions as possible.

Fancy trying a different strategy? See different trading strategies that might suit your personality here>>

You’re passionate about forex trading

This one is something you generally either have or you don’t - but it's important. Most people don’t get this far into forex trading to consider without being passionate about forex trading itself or at least passionate about the freedom it offers. Just be sure that you understand forex trading is the engine that makes everything go. Without dedication and a passion for the craft itself, the lifestyle that it affords will not be attainable long-term. You can do this!

Stay tuned for more in the Make It Happen series for practical tips on learning forex as a total beginner and getting your head in the trading game... 

Read Women in Trading: The Trader Chick Q&A ⟶

Tags: Make It Happen

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