Anyone actually make living from trading?

[globalarbtrader]

To make a living, you mean replace salary. It requires capital, imho 250k minimal. Trade conservatively to preserve capital to return 25% +-, using option premium, cap gains and dividends.

I've posted on this subject before but here are some more realistic numbers:

Assume you can make a Sharpe Ratio of 0.5. Maybe you'll do better - bravo. Maybe you'll do worse (most retail traders lose money, so 0.5 would be much better than average).

That implies a full Kelly risk of 50%, and half kelly of 25%. I'd use half Kelly maximum. That equates to an expected return of 12.5% a year with 95% of your annual returns falling in a range of -38% to 63%. Your probability of losing money in a given year is around 30%. Your probability of making less than 12.5% in a given year is 50% (assuming symmetric returns).

You clearly can't expect to make money every year so you need to either have (a) several years of living costs saved up to cover the times when you will don't make enough money or (b) passive income from dividends / bond coupons or (c) a combination of both (or (d) another job or income from a spouse but we're talking about 'making a living from trading' so let's assume that's what you're doing).

Let's focus on (a): Mathematically over 5 years you have roughly a 3% chance of not making 12.% in any of those years so I'd personally want to save 5 years of living costs in cash.

Let's say that you want to replace $50K in income (I'm ignoring taxes). You're probably going to want to have 5 years of living costs, minimum, which is $250K. At 12.5% to generate $50K you need $400K. That's a total of $650K.

GAT

 

[newwurldmn]

I've posted on this subject before but here are some more realistic numbers:

Assume you can make a Sharpe Ratio of 0.5. Maybe you'll do better - bravo. Maybe you'll do worse (most retail traders lose money, so 0.5 would be much better than average).

That implies a full Kelly risk of 50%, and half kelly of 25%. I'd use half Kelly maximum. That equates to an expected return of 12.5% a year with 95% of your annual returns falling in a range of -38% to 63%. Your probability of losing money in a given year is around 30%. Your probability of making less than 12.5% in a given year is 50% (assuming symmetric returns).

You clearly can't expect to make money every year so you need to either have (a) several years of living costs saved up to cover the times when you will don't make enough money or (b) passive income from dividends / bond coupons or (c) a combination of both (or (d) another job or income from a spouse but we're talking about 'making a living from trading' so let's assume that's what you're doing).

Let's focus on (a): Mathematically over 5 years you have roughly a 3% chance of not making 12.% in any of those years so I'd personally want to save 5 years of living costs in cash.

Let's say that you want to replace $50K in income (I'm ignoring taxes). You're probably going to want to have 5 years of living costs, minimum, which is $250K. At 12.5% to generate $50K you need $400K. That's a total of $650K.

GAT

You are talking 12.5percent real returns. Overtime you will need to grow your account for inflation and to "keep up with the jones's" who are receiving salary increases and job promotions.

 

[viruscore1]

Depends on too many factors, like how much you earn and how good you are, you can do 25% week on a small 5k account trading futures.

I've got 3k currently, plan to run it upto 10k+ by end March (tax year), 20% per month ie 2k is enough for me to live off, initially atleast.

I've ran from less than 3k to 10k in less time.

I don't base my return on a few months. The average is for 10+ years, annually.

 

[globalarbtrader]

You are talking 12.5percent real returns. Overtime you will need to grow your account for inflation and to "keep up with the jones's" who are receiving salary increases and job promotions.

You're right however since Sharpe Ratio is an excess return over the risk free rate, if you assume risk free rate ~ inflation, you're close enough. But yes, to be safe add another 3% on for inflation.

GAT

 

[murray t turtle]

Thats why most fail and are angry, they are told they need enough money to make it work so they throw in there entire life savings, lose a bit, want it back gamble harder and harder to its all gone, then they havent got enough to ever try again.

%%
Your $50 option post;
maybe much more accurate, but havent checked it out this quarter. I use a profitable 50 day moving average, but that is with cash stocks. i dont mean quarters like we gambled for in a poolhall LOL , but OCT-DEC. LOL

 

[Turveyd]

I don't base my return on a few months. The average is for 10+ years, annually.

That's fine if your going to live for ever and don't mind dying having never spent a penny of it, I'm more of a short term constantly needing cash injections to have fun with and eat and pay bills, you know real world sucky life!

 

[Haze]

I trade for a living. My personal goal is to make a profit every day, I don't care if I made it from dividends or if a stock has a nice little jump like GPRO today.

 

[d08]

To make a living, you mean replace salary. It requires capital, imho 250k minimal. Trade conservatively to preserve capital to return 25% +-, using option premium, cap gains and dividends.

Because option premium strategies are easy as is just collecting (large) dividends. It's not like the high dividend paying stocks are risky or anything.
If it's how you say it is, why isn't each and every small hedge fund doing it? 25% will make you a star.

 

[murray t turtle]

I trade for a living. My personal goal is to make a profit every day, I don't care if I made it from dividends or if a stock has a nice little jump like GPRO today.

%% Great name GoPro; i cant buy or sell with a 52 week chart like that, but like long lasting trends...... Good profit today

 

[Visaria]

Because option premium strategies are easy as is just collecting (large) dividends. It's not like the high dividend paying stocks are risky or anything.
If it's how you say it is, why isn't each and every small hedge fund doing it? 25% will make you a star.

tbh on small amounts like 250k, 25% a year (it's only $62.5k) should be more than feasible.