Quitting Your Day Job To Trade Full-Time: How To Make The Transition
Woohoo! You're making the big decision to trade full-time. Congrats!
Quitting your full-time job is a huge commitment. However, you shouldn’t underestimate the gravity of the task you are about to take on. There’s still a lot to consider.
Your income is not the only thing that will change, it will also affect how you work and your lifestyle too.
If you already work in finance or other areas related to trading, you will have an advantage, but it is by no means everything you need.
And even if you trade a little bit part-time, it probably won’t be enough.
Everyone’s approach will be different. What works for one person will not necessarily work for another.
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Are you completely sure you’re ready to trade full-time?
Have you properly assessed what you are getting yourself into? There are plenty of questions to ask yourself first before starting:
- How do you know that you are ready?
- What is telling you to make the move?
- Is your performance good enough?
- Do you have enough capital?
- Are you making more than your salary?
Don’t start full-time trading because you made some money on one trade. What was the market like? Was it rather bullish and easy to profit in? It will not be like that all the time.
Ideally, you should have been trading for a while already part-time. This will give you some vital experience.
On top of that, you will know how to trade in different market situations. Different conditions call for different trading strategies.
Sometimes the market, as well as being volatile, will be very slow to move and you will find it hard to find opportunities to trade. That’s why you should be well-equipped to deal with both environments.
More importantly, by part-time trading, you should be able to make the amount of money needed to survive.
To really consider yourself ready though, you should be able to bring in this amount part-time for at least six to 12 months.
Be honest with yourself and don’t make the decision to become a full-time trader impulsively.
A demo account is not enough
If you are planning to use a demo account first, quit your full-time job and then start trading full-time, stop right there.
As we’ve already mentioned, to transition to full-time trader, it is recommended that you are already trading a little bit on the side learning and picking up the basics.
Real trading environments differ quite a lot from demos, particularly in terms of execution of trades and the number of funds you have at your disposal.
We implore you, sign up with a broker and start doing some trading before you start!
You need a space to trade, a trading room
Before quitting your full-time job, arrange yourself space to trade, where you can focus.
Ideally, don’t do it from your bedroom, living room or kitchen. These should be environments where you don’t think about trading and where you can relax and rest.
Get yourself a trading room, an office or any space solely for doing trades. This way you will not feel distracted.
Once you are finished for the day, turn off your PC and leave that space. The reason this is recommended is to avoid trading too much and burn out.
Don’t forget to get yourself a fast internet connection and a good computer!
Set yourself a routine
It may be tempting to work when you want, after all, you are your own boss. But even bosses need to set themselves a routine.
Without a routine, you may end up getting lazy and then upset with yourself when you don’t see results.
Ideally, you should aim to work when there is some market movement. A great time to trade in high volatility is to trade in market overlaps.
The most active times to trade are during the London/Tokyo overlap in the morning and then later in the day when the London exchange overlaps the New York exchange.
That said, depending on where you are located, there may only be set times when you can trade. You may even need to stay up past midnight or wake up before dawn to trade.
By being organised, you can make better trades and aim to be consistent. This is the most important thing to achieve as a trader.
Set achievable goals
If you plan to make 10% of your trading account every week you will likely drive yourself crazy. It simply will not always be possible.
It is much wiser to set goals for 10% for the overall year. This will make you less stressed and take the pressure off your shoulders.
If you do set yourself weekly goals, assess the market first and align them with what is possible.
Your expenses will change
Cut unnecessary expenses until you are profitable as a full-time trader. Do you have any subscriptions or services you don’t really need? Now is the time to cut them off.
The beginning is the toughest time because you may not know how to manage your finances as you are still learning to adapt.
In the run-up to quitting your full-time job, keep track of how much money you spend per month on different things.
This will give you a good idea of how much you will need as well as where to cut unnecessary expenses. If your expenses fluctuate, get them in order!
It is then suggested by many traders that you have at least six months’ worth of monthly expenses saved up. This money is only to live on, not to trade.
Separate your living expenses from your trading account where you will also need a good amount saved up. For many, the ideal number is around $10,000.
Bear in mind that some instruments are cheaper to trade than others. Part of the reason forex is so popular is because of the small amount of income needed to trade it.
Aim to withdraw from your trading account every six months, taking only what you need and leaving enough to continue trading.
If possible, leave more in your account from your successful trades so you will be able to compound what you have earned and grow your account
When you start trading, have a good risk-reward ratio. At the very least 1:2.
Paul Tudor Jones recommends having a risk-reward ratio of at least 1:5. This way you can be wrong four out of five times and still be profitable.
Have a second source of income
Not only will it help pay the bills and provide you with enough to live on, but it will also alleviate the pressure to be successful. If you make some bad trades, you’ll still be okay.
You won’t always be able to withdraw from your broker. It won’t be practical, so remove that idea from your head.
If necessary, you may need to get a part-time job either at the beginning or later on if you do not see the successes you planned for.
Don’t beat yourself up about it, accept it and see it as a way to get back to trading. Many traders started out the same way.
Early in his career, Bill Lipschultz managed to turn $12,000 to $250,000 and then lost it all on one trade.
Despite this, he got back to trading and managed to earn even more and not repeat the same mistake. Losing everything is not the end.
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You will have more free time, use it wisely
You will have a lot more time to do what you want to do.
Of course, there are plenty of tough decisions to make and consider, but this article wouldn’t really be complete if we didn’t mention the upsides to trading; lots more free time.
That said, this needs to take into consideration if you are day trading or swing trading (more on this below!).
Use some of this time to learn more about trading. Don’t think because you’ve made the change that you know it all. This is very dangerous to think!
Do you know if you want to swing trade or day trade?
You should know what camp you belong to. Find out the differences between day traders and swing traders here.
Try swing trading while transitioning
Swing trading is much easier to do while transitioning to full-time trading as it takes less time. You can do it after work, for example.
With swing trading, you will use larger charts, perhaps of time frames, ranging from days to weeks or months.
Your trading strategy must reflect this. Don’t try to implement day trading strategies to swing trading!
You need a lot of time for day trading
Don’t try to day trade while you work, unless you have a lot of free time. Day trading requires you to stay in front of the screen constantly. If you miss a second, you may miss a trade.
Day trading uses much smaller charts from minutes to hours, and to lesser extent days. Again, don’t try to use swing trading strategies for day trading! They won’t work!
To become a day trader will be more difficult and take more time than swing trading.
If you are not sure if you are a day trader or a swing trader, it is still too early for you to transition to a full-time trader.
Take baby steps
There’s no need to rush into trading. Take your time to acclimatise to the new environment
Don’t feel that you must trade any more or make bigger trades because you have started full-time. It may be the case that you will not make the same wage as you did in full-time work.
In trading, slow and steady really does win the race. For many of the best traders, it is less about earning money and more about not losing what they already have.
Bear in mind that for many traders to become professional, they usually need between two to five years under their belt.
Practice your trading strategy a few times before transitioning
Going from full-time employee to full-time trader is a big deal and it will probably change the way you trade.
Before making the change, try your strategy out a few times and see how it works. You don’t want to quit when you find out your strategy doesn’t work.
If it requires you to be in front of the screen all day, get a day or two off work first and test it out.
Learn what indicators to use
Make sure you know a couple of indicators in advance. If you don’t, you’ll have a huge learning curve when you start.
Don’t use too many. Keep it to two or three at the most. You can check out the best indicators to use here.
This is another trap many traders can fall into when they finally make the transition to a full-time trader.
Again, don’t feel that you need to compensate and earn the same amount you did from your full-time job. This is very risky and you are still learning.
You will not be a pro trader from the beginning. The money you have saved up should be enough to live on. The money you are trading at the moment is to learn how to trade.
Know when to take breaks. Force yourself if you must, especially if you feel you are getting emotional or feel pressured.
On top of that, learn to enjoy your victories. Just because you have made a winning trade doesn’t mean that you need to trade more. Be happy with what you have.
A common phrase in trading is that the best traders trade less, not more.
When you trade too much, you may become overconfident and stop assessing your risk properly.
As you progress with trades, reassess your risks as when the markets change, so do they.
There will be tough times
As you start full-time you will need to reassess your trading goals. Don’t give up when things don’t go your way sometimes.
An important thing about trading is that you will not win all the time. You should strive for consistency. Finding the right strategy that works for you will take time.
Accept your losses
You will need to learn to take total responsibility for your losses. You can’t put them on other people or things.
If you don’t accept your losses you will not learn from them and you will likely repeat them. Mistakes are not a bad thing if you see them as opportunities to learn.
Don’t start chasing your losses, accept them and move on. Trying to get revenge on the market will certainly fail.
Your social circle will change
Working alone, you may feel isolated. You may become more distant from friends and family. Make them understand what you are doing.
Teach them what you are trying to achieve. Don’t let them think this is a get rich scheme.
Keep in good contact with them, but at the same time don’t let them believe that because you now work for yourself you do nothing all day!
You may also find yourself getting bored at times and it is important that you do something not to feel this way as it can affect your trades.
Join a trading community
Here you can learn a lot about trading. Forums are a goldmine of useful information, particularly ones such a Reddit.
You will be able to learn from many other traders who have done the same thing as you about the process in general and other tips that helped them settle into full-time trading.
Get a mentor
A mentor is an excellent way to make the transition.
Your mentor should be someone who has plenty of experience in trading, enjoys teaching and is still interested in learning themselves.
They would be particularly useful if they have made this transition before and there are similarities in your situation.
Trading Education can help with this.
Our One On One coaching is an excellent choice for making the change to full-time trading.
Have a fail-safe plan
What are you going to do if it all goes wrong?
Put a plan in place if you can no longer trade or if you fall on hard times. This should be one of the first things you do when transitioning to full-time trader.
If you remember anything from this article, make it these key points.
- Start trading part-time first. Gain enough capital and experience before trading full-time.
- Your expenses will change. Save up a good deal of money for living and trading. If necessary, get a part-time job or have a second source of income.
- Swing trading is much easier while transitioning. Once you are a full-time trader, you can think about day trading.
- Have a backup plan. Plan for the possibility that things will not work out.
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