How much each individual requires to obtain a reasonable standard of living is a completely independent and personal factor. Obviously that is part of the formula. However, we still don't know the profile of his 5% monthly return. How many trades does he average per month? Is he achieving this number over the past six months by losing five consecutive trades in a row for 3% each before finally hitting a 20% winner? Or does his biggest winner/loser have just a 1/2% impact on his account? etc.
illiquid, I stated earlier I average about 90-120 trades per month. My max draw down has been 12% of my available equity (8 consecutive losses).
Nice post. Has your swing hold period gotten 10 to 20 % shorter? I think the annual account sweeping is a great idea. Did you ever pull much of your initial capital out? If so did you "feel" the efect of just trading on profits to some extent?
james, I was doing some calculations my self on the same topic the other day. I am 30, and would like to be able to go fulltime in 5 years. My numbers were more conservative. I also average about 10% a month at the present time, but understand that may not always be the case. My plan is to run the account up to $250k. have $100k on the side in case of emergency, and trade the $150k. Now, that is conservative becuse My house, cars and debt are all paid off (yipee, i am only 30!) I also live overseas in a country with a much lower cost of living. With the 150k, i would like to create 5k per month to live on...after taxes and all (40% return per year). in my country that is a BUNCH. My point in that is saying..be conservative. Realize that your trading may go up and down a bit, and that you may have a setback or two along the way. dont put yourself in a bad position. I am keeping my job, and shooting for just $200 per day....which is $250k in 5 years. that is even though i clear over $4k last week. make your goals, write them down, stick to them, work hard, enjoy. Dan
Common sense should have told you that to figure this out you must determine: (1) amount you require each month for living; (2) net monthly return of your strategy (all risk considerations included). Say you want $5000 a month and your strategy yields net 25%, you need $20,000: a low end five-figure account.
dac8555, thank you for the advice, this is what I was expecting, some personal experience and solid advice I am 21 years old, no debt, 10k savings and completed my higher education for back up. I'm self-employed, but only enough to get me by day-by-day without going into my trading funds. I will start with a long-term, conservative business plan of where I want/expect to be at each stage of my new career. My ultimate objective is to move abroad (Spain, Australia, USA) with at least 100k in trading funds and an average 5% monthly return, like yourself. Anyway, thank you again.
i'm not as smart as other traders here - i spent around 240-340K before i became profitable in 4 years and i didn't loose that much cashola trading - i paper traded for 3 years before going live - 60K -75K a year in expenses for me - if you can stay with mom then less will do...
I'm living in an apartment in London City Centre, thats why my expenses are a little more than otherwise would be if I lived on the outskirts or up North
The one thing I would maybe re-think is if you should base your long-term objective on a compounding profile versus an income profile. We all start out with some figure, compounded to infinity in mind. But ceilings get hit pretty fast, so be careful there. If you don't think a measly 10 contracts has any impact on short-term movement in a market like GBP futures, think again. On further thought, I think people are being a little casual in figuring out how much would really be required, myself included. It's really tough to start right off the bat depending on your weekly results in order to keep the lights on and put food on the table, so it's good that you have a bit of cushion already for living expenses. But frankly, I think one really shouldn't go full time trading unless their monthly expenses are just a fraction of what they expect to earn trading -- as if almost an afterthought. So don't even think about how much you need to take out of the market right now to pay rent, think of your 10K of savings as your expense account right now and just trade to trade (this is assuming you have 10K apart from your trading account). To give a personal example, after spending years of "re-learning" how to trade, I've put all but 5K of my trading capital in a savings account. With the 5K, I am back to trading a single currency contract on an intraday basis, and all I expect myself to do for now is to earn ticks, not dollars, day in and day out. Is 5k all that is needed to make a living? Perhaps for me from here on out, but not if you count the hundreds of thousands I gave back to the market in tuition over the years. So for me, percentage return means absolutely zilch; this 5K I'm trading with also doesn't really mean much as some absolute figure to start with. Just so you know where I'm coming from. Good luck!