jztrading,
Ok, I'm a lurker trying to get further along and not expert like so many who have responded to your question, but I am in a very similar position.
When I had a lot, I treated investing money like plastic poker chips. When I had a loss I was confident it would even out in a few trades and it always did. I was ruled by greed and fear wasn't even in the building. I was making over $1K by 11AM every day and would quit and gloat "there's nothing to this stuff!".
However the old adage about being ruined by having a few bad minutes applies to me. One day I kept adding to a single winning position until I had the whole pot in there when an external event absolutely killed that stock. I lost 30% of my portfolio in less than 20 minutes. I know, I know... money management, etc., but remember up to then I couldn't loose.
I didn't bounce back from that one and, after almost 2 years, I still struggle with fear every day. Because of that, I tend to exit with small losses and small gains when had I stayed the course would have had very nice profits.
Those in a different position might advise to stop trading and do something else with what I have left. However, like you, this is my only source of income and doing the math shows I will outlive it. So I'm approaching the situation from a stone cold logical perspective, with my best Mr. Spock imitation.
I'm working on a mechanical strategy that will remove most of the emotion. It is not easy as I learned just how much my trading was instinctive and based on knowledge of a few particular stocks. It's a real struggle but, although I'm not there, I have gained so much knowledge that I'm more confident it can be done and I can do it.
Also, like the advice of others on the board, my wife and I have cut our living expenses about in half and I'm looking for a job. Thankfully the interest rate drop allowed us to refinance and pay off a bunch of stuff while reducing the house payment a couple hundred per month. Once I get a job we will live strictly on what I can earn until I have my system proven and trading profitably.
Ok, hopefully at least part of this mess has a familiar ring to it. The key points for me are:
1. Somehow cut living expenses. I had to stop most of the bleeding in order to make it this far. The solution most likely is not in the next trade. I held out hope way too long and wish I took this action at least a year ago. I recognize looking back there was a definite time when I transitioned from optimism to hope. That's a milestone event you need to recognize and respond to.
2. Get some income coming in. I like to say I started looking for a job over a year ago, but it's only the last 3 months I really got after it. I just lost out on an excellent job that would have covered all our monthly expenses and have an interview with Orchard Supply for a part time job next week. Some income is better than none.
3. You really can have both a job and develop a trading plan. Initially you can look at charts and apply your strategies in the past tense. Just make sure you are honest about it. I had to cover the right side of the chart and write down each trade before exposing the next bar. Don't forget that your entry will lag your decision by 1 bar, so decide & log it then expose the next bar.
4. When you are ready, arrange a day off when the market seems to be trending your direction. Assuming you are trading your IRA, that means only long. Trade no more than 25-100 shares depending on price. Journal each and every trade and include your emotions. Believe it or not, writing this stuff down helps get a grip on it even if you never go back and read it - but I advise that you do.
5. Go back to work the next day even if you were successful. 1 day does not make a trend. You need to absorb your key learnings from your trading day. Fine turn your plan to handle all market conditions. Hint: I almost always regret trading on a down day even if the market looks like it is ready to party. If down from the open and it doesn't reverse by 10:15 and prove itself by 11:00, I'm better off in the long run to sit on my hands. I pretty much know to stay out of those days, but the sideways days are killers. Remember, cash is a position too.
Repeat 4 & 5 until you have proven you can handle it. By then you probably have earned some vacation, so take a week and make trading your job. Turn your wife into a cheerleader before you do because you will need positive reenforcement.
If you are really making the bucks, then give notice asking to come back if it doesn't work out. I believe most bosses wish they could do the same and would understand if it doesn't work out.
Finally, if it is working, learn and apply money management. I'm not talking about just how many shares to buy but mathematically apply risk/reward to set trading parameters.
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I apologize for the length of this post. I started out to write a couple paragraphs, but along the way realized that I need to hear this stuff. Seems my typing fingers know what to do even if I seem not to. I hope this helps and best of luck to you.
