Thanks
Nulla for your reply
The below is not directed at you but is a summary of pondering over the years.
Agree with the Galah
For a forum with supposedly full time traders on board there isn't a great deal of
" this is how it is for me"
Lots of theory as to how you should succeed.
I've been on this and other forums for 20 yrs. In that time I've seen far more who want to be full time traders than those who actually are.
I've looked at the appeal and as a business owner myself certainly like the appeal of no or little staff (I have 18-24),No pesky Clients (Have 100s) and very little overhead (I have plenty needing $200 K a month to B/E in fixed and variable overhead). But trading for a living certainly has draw backs.
Most wage earners and most Business owners only supply themselves with a job some a very well paid job,very few exceptional. Traders are very similar in their business ---in my experience--I know a few full time and know a few more who trade for extra income and Investment/Excess capital management---like myself.
I've asked these questions further to my own pondering and observations of others who seem to derive some if not all their income from trading---some of my thinking is below with my own questions.
I want to know how they budget for TAX.
As said if your profitable you'll pay tax. I personally not only want to minimize tax but need to minimize tax,I have many ways of minimizing tax while building asset. One of the best and most profitable is being able to claim my interest on money earning machinery leases and depreciation of those machines. The boost to earning is dramatic.
Particularly when you have quite a few. This is something not available to a trader.
If your a great trader you'll earn over the $180K a year threshold so you'll be paying around 45% tax with little to claim.Not only that but you'll be pre paying it quarterly going forward so if your not budgeting for that and just winging it------Not ideal and I'm surprised the really successful guys haven't made mention of it????
How much they withdraw for living expenses.
I know personally my wife and I draw a healthy salary and always have. One of the biggest mistakes in small business is
NOT paying yourself FIRST! My $180k return trading wouldn't come close to covering our yearly living expenses. Would need a return of at learst twice that. So say $400k a year
How this affects their capitalization.
So what happens in a year where I don't make that or heaven forbid have a losing year. My lifestyle would be severely impacted at best and Id be out of business at worst! I figure that you'd need at least $200k to weather storms before you opened your trading business---for no other reason but to keep liquid. This is without starting capital for trading. So Id need to return $400k a year with a $200k buffer. I figure Id need $100-200K for Futures margin and twice that if attempting to trade stock.
So to start my trading business LIKE ANY BUSINESS I figure Id need at least $300k and more likely double that.
After all what sort of business return would you expect from ANY business that set you back $500K ish.
Rule of thumb is 30% on capital invested.
How their ability to obtain loans are affected.
To me a biggy. In my view if you want to be financially independent you either have an asset base which eliminates your need for out side help eg renting OR you have an income flow that generates a consistent return at low cost. Trading
CAN do one Investing can do the other but again not without a solid original capital base. If you want a loan for something you'll need to be able to prove equity and serviceability---two things very difficult to provide if your a full time trader---not impossible but difficult. A conventional Business can be a massive asset. Trading businesses are of little or no value to financial institutions.
See above on required capital bases.
Im of the opinion those with smaller bases (100-200k) will need to be discretionary day or very short term traders.
Larger capital bases could have the luxury of longer time frame and setting for dividends.But good dividends will require a solid stake in any company paying decent returns.
How they analyze their day to day trading.
I cant see how a fundamental trader can trade on a day trading basis.So longer term fundamental traders would need a much larger capital base. Technical trading in a discretionary manner gives flexibility and much tighter risk management. Systematic/System traders will also need larger capital bases even if they return 50% a year which year in year out Id say is impossible to mere mortals! Mind you very short term Methods can return 50% on capital at risk in a single session!
How long do they spend at the screen.
Id have thought really successful traders would not need to spend many hrs at all at the screen. Those i know certainly dont.
What sort of initial investment they began with
.
See above for the reasoning to this question. While businesses can be built from virtually nothing (I've done it myself) Its a really tough road and one I think less than 1% who embark on a trading full time life style will or can achieve.
What sort of on going capital base do they try to maintain.
Again see above. Maintenance would mean making up any losses and the cost of living. Not that easy!
Why they choose to trade for a living.
I can see the lure but I also know the reality
I think it a very important that people learn HOW to trade.
Trust me when you've reached 50 will be a very handy way to
Generate extra cash/manage your own super or invest for passive
Income. With retirement slipping further away and age putting up
Barriers from employers----you'll be glad you can! It maybe the
Only job you can get for yourself.
A very worth while legacy to pass down in your family!
To me a much more realistic goal for traders to aim and
actually achieve.