Many have come into the Blog chat room and have asked about what they could expect to earn and how much capital you would need to become a full time trader. Obviously this is a question that each trader will need to ask themselves, but I thought I would give you my thoughts on a thumbnail sketch on an overall financial strategy/plan. As you may have heard from many people – 90% of traders quit within a year. Staggering but true statistics !!!

Some fear and think they will loose it all in the first day. Its not like that. What I have seen typically is that people will trade and perhaps make some money and then loose some money – months pass but their trading account just does not grow. You may have bills to pay and you soon realize that you need to step up your trading to start making some real money. This is when the trouble starts and you start doing silly things. Often you enter trades too quickly, too many contracts, double down or unwisely over trade and that’s when you blow your account and start looking for a job.

So how should you set up your financial framework? First of all how much can you expect to earn? If you have a reasonable risk profile and you are trading everyday like a job – you should be able to double your account in one year. If you think you can do more – this is a warning sign that you maybe taking too much risk. As far as personal draw downs, I recommend that you only take a maximum of 50% of earning. This is for an account from $50K to $250K – as your account grows this percentage will shrink. This you could consider to be your gross income. From this number you can calculate the amount of capital required to finance your business and satisfy your income needs. If you do not have enough capital you should consider working until you do (but certainly do not borrow money) or reduce your standard of living accordingly. This means you need to sell all things not needed and …. maybe even consider moving into a mobile home (:-D). You do not want to have the pressure of making money to effect trading decisions – but do place a quota objective on yourself. In any case I would suggest that a minimum of three to six months of paper trading full time is required before starting with real cash. Ask a trading friend to monitor your paper trades/account to keep you honest and kick you when you do bad … this school of hard knocks in the long run will pay off. However, do not be scared and have courage.