I currently do not have enough income from my trading to live off it. I intend to not touch my trading account until I run out of cash for living expenses and then only take out what I need for living expenses until it has grown to a point where taking out 6 months of living expenses would be less than 5%. However, the trading plan has rules to reduce the trading volume and the trade size if my trades are not profitable (on a weekly basis - I day trade). WD Gann developed many rules about protecting trading capital - but I won't post them here except to share to key rules: 1. Never have any trade where if it loses (is stopped out) it is more than 10% of your capital. (This is with infrequent trades and a high win ratio). 2. When you have a hot streak withdraw 50% and keep it in a reserve account not to be touched except for emergencies. 3. Never increase your trade size after a hot streak. If you are almost fully invested then you would be most likely breaking rule 1 and 3 and should perhaps consider rule 2. -------- For your situation my thoughts would be: 1. Be aware the market can have a huge flash crash so either have index put options or balance your trades so that the beta to the market direction is neutral (some sub-indexes bull and some bear). 2. After each profitable trade withdraw enough for the tax bill. Ask yourself "What are the conditions that have made the last three years profitable and how will I know when to go to 100% cash or to change direction?" --------- Some people use asset class rebalancing periodically. (eg each year or each quarter). So it might be 20% cash, LT bonds, medium term bonds, equities, gold. You might be wise to go to 100% cash and wait til Oct and re-evaluate then. Don't lose it and remember 2007 crash marked a 60%-75% capital loss so $600,000 to $150,000. Good luck
Do number 2. Don't change your style if it's working. Delivering to lower your returns is the same as pulling money out but with more obfuscated accounting.