How much capital do you typically need as a trader to live on your own?

[limitdown]

Quote from Ghost of Cutten:

No, just a bit of simple economizing. And I had a commute back then, nowadays you can work from home. Just do basics like:

1. Spend zero on booze, cigarettes, restaurants, snacks/sweets/candy etc.
2. Get very cheap accommodation - house-sitters (people employed to keep rich people's empty houses from squatting/burglary/vandalism) can live somewhere for free or even get paid a bit for it. House-sharing in acceptable areas (working class non-ghetto) is cheap.
3. Don't own a car.
4. Eat cheap but not unhealthy food e.g. fruit, bread, cereals, milk, canned food, pasta, vegetables etc.

Your only necessities are a computer, internet, food, water, electricity, heating, accommodation. Costs today for that:

Computer: 100-200 second hand
Internet: 10 per month
Food: 40 per week
Water: 40 per month
Electricity: 40 per month
Heating: 40 per month
Accommodation: 50 per week (can easily be lower with some creativity)

Total cost = around 6-6.5k. There is room for a few savings there as well.

Remember, this is fixed costs. Not discretionary spending. IF you are making ok profits, then sure you can spend some of it. But it's best to have low overhead so you don't have to make a huge % return just to meet your nut.

are these fixed start up (i.e. one time costs, like computer purchase) or recurring monthly expenses (obviously the perishable commotities, like electricity, water, food are)?

 

[DHOHHI]

Quote from Ghost of Cutten:

Anyone who tries to start as a solo trader and has 60k annual expenses is an idiot. When I started, my fixed/unavoidable annual spend was about 5k.

I agree 100%. When I started in 1996 mine were $15K. And if one isn't willing to make sacrifices (such as living frugally) early on they just hurt themselves. The more pressure you have to make a decent amount of $$$ in the early days the more likely you'll fail.

 

[billyjoerob]

Quote from 007Arb:

There is no right or wrong answer here. In my case, I didn't feel comfortable making trading my living until I had $300,000 to $400,000 in my account and was debt free. As an aside, the smartest move I ever made was making as many trades as possible in my IRA account. There is no better wealth creating tool than the tax free compounding of trading capital over time.

This is very true. I'll probably save $20,000 in taxes this year . . . That compounds very quickly. This is one reason why I think that Roth IRA's will not survive tax free during the coming revenue crunch . . . ultimately Roth's will be taxed as income (at least on withdrawal) above a certain income level.

 

[Blotto]

Quote from Lethn:

Okay, here's a question I'm going to pose for you traders who are actually successful and living on your own? How much did you need before you actually left wherever you were based at and could comfortably live on your own? I'm currently calculating my costs and I think I'm looking at somewhere around £100,000 - £150,000 as a target for moving out.

However there's only one problem, how much can you typically earn daily? Or is that merely something you have to find out for yourself when you build up enough capital to trade more frequently?

I had just over 100k. I was learning and paper trading for the first few years, and burned through 25-30k per year on living expenses.

You should leave yourself three years expenses, plus 25k for a trading account when you are sure you can do it. Leave yourself at least six months living expenses so you don't draw out of the trading account when you start.

How much can you make? Depends how good you are.

 

[Ghost of Cutten]

Quote from shortie:

when was it? what country? costs may be different now

UK in the 90s. There are always cheap places to live, even in rich countries. People on minimum wage or less, still have to be able to afford to survive. I am pretty sure I could live off about 10k now. All you really need to spend are the unavoidable costs.

 

[Ghost of Cutten]

Quote from limitdown:

are these fixed start up (i.e. one time costs, like computer purchase) or recurring monthly expenses (obviously the perishable commotities, like electricity, water, food are)?

All monthly repeat costs, except computer. You can get a 2nd hand one for 100-200. However, personally I'd rather spend more on decent gear for trading. But even a new shiny 750 computer is only 20 per month, depreciated over 3 years.

 

[Lethn]

You can get a perfectly awesome computer for around £400 - £500 if you build it yourself and search for the parts, that's how much mine cost minus the monitor.

Thankfully computer isn't a problem I just need a place to live now and the money to buy it lol

 

[failed_trad3r]

LOL

Some people here think you can make it with 10k at prop. and if you live frugal $5k a year expenses.

NO YOU CANT

If you want to live frugal at 10k a year, and you DONT quit 50k a year job, thats 40k savings in 1 year.

40k a year!

You think you can make 400% profit your first year as trader from 10k?

Living frugal to make it as a trader is the dumbest thing i ever heard...

 

[DHOHHI]

Quote from failed_trad3r:



Living frugal to make it as a trader is the dumbest thing i ever heard...

Working at a job - corporate or otherwise - that you don't enjoy, just for the $$$ is perhaps even more dumb than pursuing something you truly want to do.

When I left in 1996 I was making $85K/year. And I left to trade. No guarantees. No regular paycheck. No security. No health insurance. No paid vacation.

So what was my motivation? Freedom. No limit on potential earnings. No daily commute with all the traffic. The ability to knock off trading at ANY time of the day I desire. So living frugally early on was not only smart but allowed me to trade more conservatively - book smaller profits to pay the bills and develop confidence in my trading.

So if you feel I was dumb to live frugally so be it. It's 10:45 and I've done my trading for the day. Off for a bike ride, back for lunch, off to mentor a kid and then tutor after school. How many working stiffs can make those kinds of CHOICES?

 

[failed_trad3r]

Quote from DHOHHI:

Working at a job - corporate or otherwise - that you don't enjoy, just for the $$$ is perhaps even more dumb than pursuing something you truly want to do.

When I left in 1996 I was making $85K/year. And I left to trade. No guarantees. No regular paycheck. No security. No health insurance. No paid vacation.

So what was my motivation? Freedom. No limit on potential earnings. No daily commute with all the traffic. The ability to knock off trading at ANY time of the day I desire. So living frugally early on was not only smart but allowed me to trade more conservatively - book smaller profits to pay the bills and develop confidence in my trading.

So if you feel I was dumb to live frugally so be it. It's 10:45 and I've done my trading for the day. Off for a bike ride, back for lunch, off to mentor a kid and then tutor after school. How many working stiffs can make those kinds of CHOICES?

What were your living expenses when you lived frugal? Lets take the example of the poster, 10k. So then you can save 75k had you stayed with your job and have 10k expenses. So then you would have to make 75k trading to breakeven!

You say you now trade 2 hours a day and make 75k, then you saved in a 50-hour workweek about 40 hours of work. Thats a good deal. But daytrading usually means trading 8 hours a day. Just because you found a strategy that allows you to take time off doesnt mean others have the luxury. This is the nature of daytrading.

Logic still stands. Living frugal as a way to become a trader is a failure strategy. Let me rephrase that. If you NEED to live frugal, otherwise you won't make it in daytrading, then daytrading is a failure strategy. Then you are undercapitalised for sure.