How much trading profit is enough to live on?

J

jinxu

I've been away for awhile. Back in November I lost about 75% of my capital during the election. Afterwards I decided to quit trading for good due to my mind feel like it was about to snap. It did and I started to develop depression. Then I lost my job in December and my depression got worse.

Then for some reason while at the peak of my depression in mid-January I started thinking about giving trading another try. There was only about $800 dollars in my trading account so I figure why not. I have much more in my saving account but since I am unemployed it's my emergency fund. Win or lose I didn't really have any expectation. Maybe just a few $50 buck profit here and there to keep me afloat. At the very least maybe just enough to pay for a meal.

That was about 3 weeks ago and now my account is at $4600 which is about a 500% profit. I'm absolutely dumbfounded. Either I was lucky or I actually had a functioning trading system. Most of my trades were winners too. I had lost a lot of money struggling as a trader before. The only things that had changed was I started focusing on high probability trades setup. My depression also made me dumb to the point where I no longer try to predict where the market might go. That helped me stop taking gambling trades that realistically only had a 50/50 chance of working.

On Monday I almost had a disaster and it finally click on me what my high probability trades are. I changed the rules and yesterday I made $800. Today I made $600. Those were the big winners, most of daily profits had been between $100-$300. I think I have a strong perspective now on how the market works. I kept thinking how it was possible my trades are working when before they didn't. I realized that the rules I had in the past didn't really work. Now I have new rules which are working.

However I'm still depressed but slowly recovering. Not taking medication. Trading still feel tough. Despite profits I still doubt myself.

Is it possible for me to make this a career? I'm starting to scale back a bit. I still have a lot more to work on to be perfect. Like taking as much profit from a trend as possible.

I'm aiming for at minimum $50 daily average profit as that pays the rent, bills, and lunch. But I want to see myself scaling up.
 
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azntrad said:
It is good to see that you have something going on. What did you lose your job? It is because of your trading?
More...
My depression was getting worse and I couldn't function at my job anymore. Then the work environment started getting hostile. I ended up having to quit for my mental health. The work place did know about my trading activity.
 
jinxu said:
I've been away for awhile. Back in November I lost about 75% of my capital during the election. Afterwards I decided to quit trading for good due to my mind feel like it was about to snap. It did and I started to develop depression. Then I lost my job in December and my depression got worse.

Then for some reason while at the peak of my depression in mid-January I started thinking about giving trading another try. There was only about $800 dollars in my trading account so I figure why not. I have much more in my saving account but since I am unemployed it's my emergency fund. Win or lose I didn't really have any expectation. Maybe just a few $50 buck profit here and there to keep me afloat. At the very least maybe just enough to pay for a meal.

That was about 3 weeks ago and now my account is at $4600 which is about a 500% profit. I'm absolutely dumbfounded. Either I was lucky or I actually had a functioning trading system. Most of my trades were winners too. I had lost a lot of money struggling as a trader before. The only things that had changed was I started focusing on high probability trades setup. My depression also made me dumb to the point where I no longer try to predict where the market might go. That helped me stop taking gambling trades that realistically only had a 50/50 chance of working.

On Monday I almost had a disaster and it finally click on me what my high probability trades are. I changed the rules and yesterday I made $800. Today I made $600. Those were the big winners, most of daily profits had been between $100-$300. I think I have a strong perspective now on how the market works. I kept thinking how it was possible my trades are working when before they didn't. I realized that the rules I had in the past didn't really work. Now I have new rules which are working.

However I'm still depressed but slowly recovering. Not taking medication. Trading still feel tough. Despite profits I still doubt myself.

Is it possible for me to make this a career? I'm starting to scale back a bit. I still have a lot more to work on to be perfect. Like taking as much profit from a trend as possible.

I'm aiming for at minimum $50 daily average profit as that pays the rent, bills, and lunch. But I want to see myself scaling up.
More...


well the best thing to do is backtest and verify what if scenarios to see how functional what ur doing is to make sure its not a short term flare of gains, and always look at whats worse case scenario is so that u dont give up ur gain if u happen to run into losing streaks, backtesting and verifying will help u become more confident in urself so that u dont doubt ur self as much
 
How much is enough to live on? How long is a piece of string?

I'd say you'd have to look at how many hits you could take before blowing up.
 
jinxu said:
I've been away for awhile. Back in November I lost about 75% of my capital during the election. Afterwards I decided to quit trading for good due to my mind feel like it was about to snap. It did and I started to develop depression. Then I lost my job in December and my depression got worse.

Then for some reason while at the peak of my depression in mid-January I started thinking about giving trading another try. There was only about $800 dollars in my trading account so I figure why not. I have much more in my saving account but since I am unemployed it's my emergency fund. Win or lose I didn't really have any expectation. Maybe just a few $50 buck profit here and there to keep me afloat. At the very least maybe just enough to pay for a meal.

That was about 3 weeks ago and now my account is at $4600 which is about a 500% profit. I'm absolutely dumbfounded. Either I was lucky or I actually had a functioning trading system. Most of my trades were winners too. I had lost a lot of money struggling as a trader before. The only things that had changed was I started focusing on high probability trades setup. My depression also made me dumb to the point where I no longer try to predict where the market might go. That helped me stop taking gambling trades that realistically only had a 50/50 chance of working.

On Monday I almost had a disaster and it finally click on me what my high probability trades are. I changed the rules and yesterday I made $800. Today I made $600. Those were the big winners, most of daily profits had been between $100-$300. I think I have a strong perspective now on how the market works. I kept thinking how it was possible my trades are working when before they didn't. I realized that the rules I had in the past didn't really work. Now I have new rules which are working.

However I'm still depressed but slowly recovering. Not taking medication. Trading still feel tough. Despite profits I still doubt myself.

Is it possible for me to make this a career? I'm starting to scale back a bit. I still have a lot more to work on to be perfect. Like taking as much profit from a trend as possible.

I'm aiming for at minimum $50 daily average profit as that pays the rent, bills, and lunch. But I want to see myself scaling up.
More...

I'm hesitating to write this post as you're obviously in a fragile state.

But you've already answered your question:

Either I was lucky or I actually had a functioning trading system.

After 3 weeks it's impossible to tell which of these things is true - you just don't have enough evidence. You need years of trading with the same system to have some degree of confidence about whether this is a good system or not.

I should also point out that, to be honest, it's unlikely someone can develop a winning system that quickly. But this is irrelevant - they key point is that you have no way of knowing.

You're also taking insanely high risk. The fact you lost 75% on a single day. If you can make $800 on $4600 then you can easily lose it. Let's be optimistic and say you can only lose $400. So you're 12 losing days from being wiped out. Even if your trading system is very good this will happen at some point.

Someone who is living off their trading income needs to be taking much less risk than this. If you need to make $50 a day, $1500 a month, then 8 losing days over a month will wipe you out.

Bottom line is that just under $5,000 is grossly inadequate to produce a bare living income of $1500 a month. Think about it: that's a return of 390% a year. That is insanely optimistic. Not a single hedge fund in the world expects to make that kind of money consistently.

Like I said I didn't want to write this, but I strongly suspect if you do wipe out your trading account then you'll go back into depression and this time it will be worse. And I would say that there is a 95% chance you will lose 75% or more of your capital over the next year even if your system is relatively good.

I strongly suggest that you (a) start trading on much smaller risk and (b) look for a job. If you can find a job that you can combine with trading then carry on trading at smaller risk, save money, and if you can prove your system works over a series of years then one day you might be able to become a full time trader. But the save money is very important because you should be looking at a stake of several hundred thousand dollars to generate that $1500 a month; and more if you want a comfortable living.

There are some other things I want to say, but not in this public forum. PM me if you want some more advice; though I appreciate it is not the advice you want to hear.

GAT
 
jinxu said:
I've been away for awhile. Back in November I lost about 75% of my capital during the election. Afterwards I decided to quit trading for good due to my mind feel like it was about to snap. It did and I started to develop depression. Then I lost my job in December and my depression got worse.

Then for some reason while at the peak of my depression in mid-January I started thinking about giving trading another try. There was only about $800 dollars in my trading account so I figure why not. I have much more in my saving account but since I am unemployed it's my emergency fund. Win or lose I didn't really have any expectation. Maybe just a few $50 buck profit here and there to keep me afloat. At the very least maybe just enough to pay for a meal.

That was about 3 weeks ago and now my account is at $4600 which is about a 500% profit. I'm absolutely dumbfounded. Either I was lucky or I actually had a functioning trading system. Most of my trades were winners too. I had lost a lot of money struggling as a trader before. The only things that had changed was I started focusing on high probability trades setup. My depression also made me dumb to the point where I no longer try to predict where the market might go. That helped me stop taking gambling trades that realistically only had a 50/50 chance of working.

On Monday I almost had a disaster and it finally click on me what my high probability trades are. I changed the rules and yesterday I made $800. Today I made $600. Those were the big winners, most of daily profits had been between $100-$300. I think I have a strong perspective now on how the market works. I kept thinking how it was possible my trades are working when before they didn't. I realized that the rules I had in the past didn't really work. Now I have new rules which are working.

However I'm still depressed but slowly recovering. Not taking medication. Trading still feel tough. Despite profits I still doubt myself.

Is it possible for me to make this a career? I'm starting to scale back a bit. I still have a lot more to work on to be perfect. Like taking as much profit from a trend as possible.

I'm aiming for at minimum $50 daily average profit as that pays the rent, bills, and lunch. But I want to see myself scaling up.
More...

By the way you can do worse than go back and read the advice you were given...

https://www.elitetrader.com/et/threads/how-can-i-get-over-fear-of-making-big-profits.204422/

... in 2010.

GAT
 
Professional traders wont risk more than 1% to 2 % on a single trade. For a 50% success rate strategy I suggest 1:3 risk reward ratio. Hope that would give you an idea on how to fine tune your strategy. :)
 
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