Common-sense Approach: Trading for a Living

Well, let’s break this into two parts- 1. Meaning of Trading For a Living and,  2. A common sense guide to achieve this goal. No technical, high-tech, scientific  or scholarly discussion; just something which a beginner/layman shall be able to grasp.

A google search on same pukes up more than 28 million results… so is trading for a living so straightforward to be widely pursued?

Meaning of Trading for a Living

Literally this implies earning enough money from trading in the markets to substitute a regular 9-5 job or business. Hence Trading should be reported as primary source of income at Tax Filing. In other terms making sufficient money to pay off lifestyle expenses on a regular basis.

Making Sufficient Money: In India for typical metro middle-class annually this is Rs 8 Lakh, for upper middle class it may mean more than 15 Lakhs. This income will most likely be taxable@30%.

Achieving the Goal of Trading for a Living

OK, to make that kind of money one needs a risk capital at first place to trade in the markets. Elementary maths suggests for someone growing capital at 50% a year he/she will need a approximate risk capital of 15 Lakhs and 30 Lakhs respectively.

People aged under 26 are not likely to have saved that much money to bet on the table from their regular job/business . Again the middle class guy will need a savings of minimum 20 Lac plus to put 15 lac in trading account, or similarly the upper middle class guy will need a savings of 40 lac plus.

So for the young it seems trading for a living is a pipedream, unless he/she is willing to work at a prop firm.

People aged 30-35 are likely to have that much of savings. But will it be prudent to buy their own house/luxury or risk the money in trading?

People aged over 40 should be able to afford this venture. BUT will they be willing to get out of the habitual financial comfort of 9-5 job or regular business to start something formidably new?

The Common-sense Solution

• Keep away from misinformation and scams all around. The fact that a very large number of commercial services exists for such a rare profession, itself suggest a lot of things are fishy.
• Save money for your risk capital as fast as possible.
• Use part of your savings to grow them fast by careful investing- requires less time than trading short-term and allowing to grind at regular job. This also helps in building experience in the markets. Investing here refers to medium to long term trading- trades initiated with a expected holding time of 3 weeks plus.