Trading for a living

….or can you generate enough gains by trading so you can stay at home?

There are multiple trades that one can do at home and generate income (or extras). From Freelancing to having a home business and why not trading stocks, forex, commodities or any option you can find. There are enough traders that do it, and for us, in the beginning, it looked like a dangerous affair. If we consider all the risk involved, to depend only on trading for a living, was way out of our comfort zone (especially with my trading history). Also, when I first started trading, I was thinking it will be a nice extra addition to our income (50USD per month, that was my target) but never had the nerve to think bigger than this.

But with the help of a tutor, I decided to make a plan, take a leap of faith in that direction. And just as information: I consider very important the help of specialized persons and I don’t think you have to do everything by yourself, especially if one has multiple areas of interest.

Plan ahead

So we started by making a ‘business plan’. And I want it to be called a business because it actually takes a lot of time to pull it off. I can make some assumptions regarding the time spent per week:

  • 2-3h each Saturday/Sunday to prepare the trades for next week (analysis and market browsing)
  • 1-2h each day from Mondey to Friday to take the trades and follow the graphs
  • 2h each week to redo some trade anaysis or search for other opportunities

That is a total of 10 to 15h per week. It is not that much but still it takes time, so it is not a passive income and in the current state is an active one. Now deciding on the sum we need to live with, considering our budget and current expenses (maybe cut a bit on the expenses) I will say the sum of 1500USD per month.

The bussines plan included the following:

  • the money we will start working with: 450USD
  • the money we will add each month:50USD
  • the gain factor we need each month: 5% wich is a decent enough target
  • the income we need each month for trading for a living: 1500USD
  • the total value of the account: 1500 * gain factor = 30000USD

Well…when we first looked at the needed account value I thought it was impossible. But there is another factor we didn’t mention till now: time. How much we are decided to work on this before actually profiting from the results. Let’s say 6 years. We can wait 6 more years before benefiting from this income

Using one of the multiple compound interest calculators (because the gain factor will apply to the current account value for each month) we will get the following results:

Calculator used

I will not put the unfolded graph for all the 6 years because it will result in a post that spams on your whole display and even request you to follow it to the next page (maybe 6 times…). So please find the attached image for the first 3rd year where we can see that income bouncing off faster than in the 1st and 2nd year.

We can see the value of each gain per month increasing

There is a small mismatch in the starting sum and the end sum, because of how I applied the gain factor (compound at the beginning of the month or at the end of the month) but the value is around there.

Well, now that the plan was in motion, the only thing was to obtain that monthly 5% gain.

Money management? Or risk management?

How can we obtain the needed 5% in a low risk method? Especially that FOREX is a risky business. And here comes the money management. You will find a lot of courses on the internet ( I found one also on Udemy).

Image source: Pixabey
Image source: Pixabey

After giving it some thoughts, together with the tutor, we decided that risking 1% of my account, each trade, and targeting a gain of 2% will do the trick.

For example: taking 10 trades, from which 5 of them are a loss and 5 are a gain we have: 5×2 – 5×1 = 5%. The only condition is to have that 10 trades in a month.

And to calculate the profit/risk of each trade, I will set the Stop loss (where the trade stops at a loss) and Take profit(where the trade stops at a win) at a number of points (deduced from the trade analysis – I will present you one in the next article), found out the ratio (should be over 2 – 2win/1loss) and adjust the trade size. For example: at an account of 450USD the loss per each trade should be 4.5USD and the win 9USD. There are multiple calculators online that help you find the value of a point used, but I like to count it as 0.10 cents each point for a lot size of 0.01. Then multiply from there the needed lot size.

Now, I am confident I can do it and I will try to present you each month the evolution of my account and maybe my favorite trade of that month. And I want to say from the beginning that I definitely won’t take 2% per trade, maybe 1% but I hope to not risk more than 1% of my account each trade. It will be a matter of discipline and controlling emotions.

Thank you for reading this!

Disclaimer: I am not a financial consultant, all the information you find here are my decisions, I taken in that moment, on my own analysis. I am open to any type of discussion about money. If you want to replicate my portfolio take into consideration that it is your money.

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