how to meet monthly expense while growing trading capital?

Discussion in 'Professional Trading' started by adamchubb, Oct 19, 2010.

  1. I'm just thinking of way to meet these 2 conflicting objectives:
    1) take money out of the trading account to meet monthly expenses
    2) grow trading capital

    Here is what I'm thinking:
    - at the end of each month, take out half of the trading profit for monthly expenses, and keep the remaining half in the account. e.g. if i made $2000, withdraw $1000 and keep the remaining $1000.

    - the trading profit obviously will fluctuate month to month. if i made more, i can take out more. if i made less, i would still want to maintain a minimum withdrawal amount so that i know i have certain amount of money to spend each month. e.g. a minimum withdrawal amount of $1000. if i made only $1500, i'll still take out $1000 and keep $500 in the account

    - don't take money out in a losing month. wait until the capital is above the "high water mark" before withdrawing money again.

    I think that can help balance between the need for monthly expenses and growing trading capital, also help prevent trading capital from depleting.

    Anyone doing similar things? mind to share?
  2. Baron

    Baron ET Founder

    That part doesn't make any sense. If you don't take money out in a losing month, then where's the money coming from for that month's expenses?
  3. Get a second active income from a part time job or freelancing and stuff to keep paying the bills.

    Withdraw from account only when consistently profitable.

  4. jinxu



    I don't see any problems with your plan. Other things you may want to consider are:

    1) Reduce your monthly expenses as much as possible so that it won't eat up a lot of your profit. Just think of it as operational expenses.

    2) If your account is small, you need to aim for the big moves to push it higher. With a higher account size, you can start increasing your car sizes with the same setups. You can't rely on a consistent fixed profits as there are no guarantees.

    3) Basic Rule of Business: Maximize Profits and Minimize Costs.

    4) Only as a Last Resort should you use loans or credit to fund your living expenses/trading. Sometimes you don't have a choice. If your system is good, then it may not matter. Traders talk about how you should treat it as a business. Well most businesses are started with a loan.

    5) Slow and Steady Wins the Race.

    Good Luck.
  5. promagma


    If you spend half of your profits, a good chunk of what is left will go to paying taxes :(
  6. VinMan


    Sell courses. Seems to be how a lot of firms supplement their businesses.
  7. actually i always wonder whether those guys make more money from trading or selling courses???


    When I started I had money set aside for living expenses to cover the next 9 months. If your account is your sole source of funds and you need to make profits each month to pay living expenses you'll be putting undue pressure on yourself as far as trading from the start. And IMO it greatly increases the likelihood of failure. So you may want to consider saving some $$$$$ to cover living expenses for a while and the start trading which also allows you to increase trading capital if you're profitable and not needing to draw down each month for expenses.
  9. 1) Monthly profits / 20%_ set aside for taxes.
    2) Monthly profits / 60%_ set aside for monthly expenses
    3) Left over_leave in account

    I think the key, like stated above, is to make sure your taxes are taken out first, then divide it however you need.
  10. I started very small and only positiion traded stocks.

    I added 50% of my pay check to my account. I traded and had full time job.

    When my commissions equalled my pay check, I kept working for two more years. Half my commissions were paid by pay check and half out of profits. Pay check became less of a contributor as time passed (including normal raises).

    Commissions were always a trivial expense.

    I also took major purchases out of trading account (MB sports coupe, travel to Europe every year, marriage, etc).

    At five year mark, I left my first job and we took teaching jobs to deal with another goal, we were no longer salary dependant. I also bagan blue water sailing then, purchasing boat on an interest only 2 year loan w/100% colateral. Principal was paid with less than 50% of grown original colateral.

    Performance of beginning traders varies. My first 5 to 7 years described above was positon trading stocks only. I had no SEC citations up to that time (pre computer era).
    #10     Oct 19, 2010