So you want to become a full-time trader

In 1981 I started Factor Trading Co., Inc. with less than $80,000 in trading capital. I consider myself lucky that I did not wash out – that providence dealt me a better hand than I probably deserved. But markets are a lot different today than they were in 1981. I can only offer my own opinion as to what a full-time trader needs today to go out on their own.

If you have a good career doing something else, why rush into full-time trading? Earning a supplemental income as a trader is a nice gig.

If you desire to become a full-time trader, following are what I believe to be the minimum conditions.

1. Your trading account should represent profits you have accumulated from the markets, not savings you have taken from some other endeavor.

2. Your account size should be at least three to four times greater than the amount of annual profits you are expecting to make from trading.

3. You should have at least two years of savings in the bank (other than your trading capital) to cover your living expenses. [Note: This condition is waived if your spouse earns enough to cover living expenses or if your family is independently wealthy.] Depending on trading profits to cover living expenses is a very poor place to start.

4. You should have been profitable the last two consecutive years with Calmar and Gain-to-Pain ratios of at least 1.5 to 1.

5. You should have a complete understanding of the trading plan you will begin using.

6. You should assume a 50% chance that your first year will be a losing year.

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