Tuesday, June 16, 2015

The Cost to Trade for a Living



"How Much does it take?"


A few days ago I posted this








That survey, as vague as it might seem, has deeper truth.

Once you have exposed yourself to a certain degree of risk in the
 stock market, there would come a time when you would think







I noticed that a lot of people actually consider having a "career" 
in trading. To those who answered, thank you for 
your time - your entries are duly noted.

So let's talk about this survey shall we?

There were those who answered 50-100k, 3M, and even 
a whopping 8 Figures. Nothing wrong with those numbers. 
But Yes, to be on the philosophical safe side, the answer 
depends on your personal lifestyle.


Example


This is how my monthly budget looks. I consume a lot less, 
I guess around 16-18k. I'm not much of a spender, I stay home
 most of the time, and since I'm province based, living expenses 
are cheap compared to the big cities.

And just for sample's sake, here's my "made up" projected budget
 when my port gets reset by the end of this month. 




(As of 6.12.2015)
I call this, "The Table of Needs"
For those of you who just tuned in to my blog, Every 3 or 6
 months, I press the reset button on my trading port and it 
goes back to its original port size which is 2M.

The profits go to the projected budget above.

If no profits have been made, no withdrawals will be done and poor
 ZF will have to live on cup noodles and the emergency fund until
 the trading port yields gains and improves on the next reset.



On the table above and with my port size, I just need to make a
clean +1.25% or 25k in order to survive for a month. And 
+1.25% is something I can achieve with ease and no pressure.

I'm currently on the 6-month port reset mode and already got my
 2nd half 'needs' covered - anything excess of that +7.5% is the area that I consider

 "enjoying my stock profits"




But what if my port size was smaller? 

A lot answered 100k Capital. So let's see how that goes 
and how it will affect my current Budget.



To maintain my monthly "lifestyle" I'll have to at least make 
25% A MONTH! Now That's crazy and full of pressure.

You'll have to be a guru who always goes All In on basuras and can
 consistently see the future to be able to live with 100k Capital.

Di pa kasama yung "enjoying profits" area jan and some existing commitments 
I have won't be supported or would be "short sa budget."


So how about those who say, 500k Capital is the way to go?

In this example, let's assume I'm a family man living in the big city,
 got kids and a wife to support and I'll need to get 100k of profits
(+20k bonus) every month to sustain my family.




20% A month. And that 4% only gave a small boost.



Still a High number, budget screwed and is 
definitely NOT Sustainable. 

If you're single and have a smaller budget,
it might be acceptable.


I can imagine the look on people's faces when they've 
reached their target and got wiped out in a single trade 
because of the pressure to have "more"



----------------------------------------------


After discussing with my students on the subject, majority agreed
 that 5% is the "minimum" target one should gain in a month on his
 or her overall port that isn't too stressful to maintain as long as a
 system is in place and assuming trading consistency is achieved.


Now let's try ZF the Family Man with 3M Capital, 
Living in the big city, with wife and kids and 
a more balanced Budget.




A +3.33% monthly target ain't that hard right?
And that extra +1.67% or 50k pretty much gets you 
somewhere fancy for some R&R.


These tables are just projections. If you seriously consider trading
 for a living. You better be prepared and consider all angles. 

Here's a link to that spreadsheet If you wish to do 
some tweaking of your own:

Click here

And If you haven't reached your ideal Port Size yet, 
then dream big and work hard for it.

Because one day, hopefully,
You will.




I did.



20 comments:

  1. Liked as always, Boss Zee. Although in my case, I do not wish to leave my job. I like it somewhat. I am not averse to the idea of being in the same line of work even when I am older or can already trade for a living. I trade to build our housing fund. I promised my wife I'll build her a nice house. I hope to be able it do it before I'm 60. Haha!

    ReplyDelete
  2. Can you share your excel copy of that? :P

    ReplyDelete
  3. Edited the post and shared the link.

    ReplyDelete
  4. As always great post, thanks. Good read for people like me who are considering trading a full time job. Reading you blogs
    makes the learning curve more faster, Im almost 2 years but this is the only time I thought about having the right
    capital and the right system to trade. My journey to creating my own sytem is about to start.

    ReplyDelete
  5. Thanks for the enlightenment sir! I was wondering of this ever since. Am also glad with the 10% Tithes allocation. With that, may God bless you more!

    ReplyDelete
  6. Sir, the link is not working? tnx

    ReplyDelete
  7. thanks for this master zee. i hope to trade for a living like you do, before i get 50? hehehe.. God bless. -muzikerodude

    ReplyDelete
  8. wow, very nice read. thanks sensei!

    ReplyDelete
  9. 3.33% consistent monthly target or 40% per annum is still hard. It gives no allowance for mistakes and downturns. I think 20% per annum is more conservative. So perhaps a 5-6M trading budget is more realistic.

    ReplyDelete
    Replies
    1. This is for the last scenario -- Family Man with 100K monthly expense.

      Delete
  10. 3.33% a month is achievable. The mistakes and downturns are already factored in.
    This of course, is assuming that the person has mastery over a proven trading system.
    As of this writing, I'm up +204% since the start of the year.

    ReplyDelete
  11. I think i need 3M.. with zf budget. Miles to go.. 5-10 yrs from now.. not so long..

    ReplyDelete
  12. I know I can do this, taking small steps at a time with consistency and improving my system...

    ReplyDelete
  13. nice post..learned and realized a lot. :)

    ReplyDelete
  14. your personal budget on the upper right fall gets from the 25% allocation right?

    ReplyDelete
  15. thank you for the advice on reset. have bin trading for almost a year. learned my lesson Resetting the port help a lot in Locking in profits

    ReplyDelete
  16. Landed on your blog for the first time and it is really encouraging, all those people who have lost in forex must read this post they expect too much from it. And forget all the homework which is necessary for any business. To improve Trading Psychology and living best post I have read

    ReplyDelete