If you want to trade full time make sure:
- you have enough capital set aside in a cash deposit to pay all monthly costs such as rent/mortgage, insurance, child support, vacation, medical bills, home repairs, car repairs, etc. (+20%, just to be on the safe side) for a minimum of 2 years. Obviously, 3-5 years is much better. Depending on your lifestyle this "iron reserve" sum should be somewhere between $30,000 - $100,000 for every year you wish to cover. 2 years coverage is good, obviously 3-5 years gives you much more peace of mind once you're going through a drawdown in trading.
- you have investable capital that is large enough to sustain a drawdown of 25-35% without making you panic and lead you to tap your above "iron reserve" for trading (which you should never do). I suggest a minimum trading capital of around $250,000+, analogous to the capital requirement for a nice little start-up brick and mortar company.
If you can earn 15-25% annually - year in year out with little volatility of monthly returns - on your investable capital before taxes while slowly going through your reserve for living expenses you might be able to sustain yourself as a full-time trader. For a full time trader, I'd thus recommend a minimum of e.g. 3x$50,000 coverage for living expenses = $150,000 in a cash deposit plus $250,000 trading account = $400,000 starting capital. Obviously, these numbers are by no means mandatory, just a personal conservative recommendation.
So if you want one piece of advice so you're "ready" in 2 years: reduce your costs today, save money. Don't try to trade fulltime unless you have the required capital base. Trading is like any other business. Make a business plan = trading plan. Include your assets, costs, goals and write down everything that can go wrong (e.g. 50% drawdown, becoming sick and needing 6 months hospital treatment etc). and potential solutions and plans for everything that can go wrong. This will prepare you and have you think about avoiding risk primarily rather than frantically thinking about maximizing returns.
How many restaurant startups start with lots of passion but little experience and $15,000 in capital and end up making their owners millions? 1 in a 1000 would be my guess.
