I want to quit the job and am looking to be a full time trader. Wanted to know if I can be a successful full time trader.
I get this question quite often, which is something like this.
I have a job [Job Qualification] where I am making [an amount (in range of 10 to 25k)] per month but I am not satisfied in my job. I want to quit the job and am looking to be a full time trader. Wanted to know if I can be a successful full time trader.
To answer this question I need to know lot more things and so normally I shoot few questions.
- What is the amount you are looking to trade and invest as a full time trader?
- What is your expertise in the market? I know for sure the person asking this question is most of the time a newbie in the market or planning to enter the market but still I prefer to ask this question.
- Have you considered technical analysis for understanding the market sentiments and how market works?
1. The Investment Amount
Most of the time people are looking to invest Rs 100,000 or less and have a target of 10 to 25k per month which means they are trying to double the money in time span of 1 year.
I am into the market for 7 years now and I am yet to double my money in any given 365 days timeframe. If you look at one of the most discussed trade that I shared here where I made more than 50,000 in just one trade, it was just 4% of my total investment. If I can make one such trade every month consistently (which is quite unlikely) and not make any losses (which is again impossible as I hit stop losses) still I may not be able to double my money in a given year. I will just make 12 times 4% that is 48% return on my investment amount.
So my answer is No you cannot be a full time trader and be successful because you are expecting too much out of the market.
So now the question comes what is return that you can expect when you trade and invest in market. Ideally in range of 1% to 2% per month to start with and once you are full timer with couple of years of experience, you can make it around 2% to 3%.
Ideally you should be able to double your investment in 3 to 4 year time frame and not before that. If you are expecting anything more than that, you will not be successful as a full time trader.
2. Market Expertise
I most of the time know answer to this question but still I prefer asking it because this is the most interesting part. The reason I ask them this question is because with an education qualification of B.Tech you normally get salary in range of 10 to 20k per month. So B.Tech is a 4 years course but normally we at least spend 3 to 4 years getting a degree and then a job.
Being an employer and entrepreneur I have a different perspective. So if I look at it from the other side of it. To make 10 to 25k per month, you invested 3 to 5 years of your time educating yourself.
So do you think you can just dive into the market now and make the same amount? Don’t you think you need to be education about how market works?
On top of that I try to explain that market is a zero sum game. Which means someone needs to loose money for others to gain money. Other businesses are not zero sum game like your job or may be a restaurant. If you go to a restaurant and pay for having food, you are paying the restaurant business for food and ambiance. So the restaurant as a business makes profit from you and you as a customer pay for it.
When it comes to market, the total sum of money in the market is from the people who invest their hard earned money. So if you are making a profit in the market means someone else has to loose the same amount of money. Yes it may so happen that he may not be loosing the money just when he is buying the stock but if he cannot find someone else buying even at higher price, he may eventually has to loose.
So in this zero sum game, smart investors needs people who are ready to try the market without much information so they can easily loose the money for them to gain. 90% of the people loose money in the market and so the rest 10% of the people can make handsome profits.
So if you want to be getting into the market without knowledge it would be tough for you to move from those 90% people to those 10% people.
3. Technical Analysis
If you want to be a full time trader, technical analysis is a must. For longer term investments of 3+ years technical analysis can be neglected but not for traders and investors who want to be investing for less than 3 years. Most of the time people have just heard about the term or have read few tricks on blogs here and there about technical analysis and so want to dive into market to try those tricks.
I try to stop them from doing such blunders because it is not about those tricks but as a trader, you have to understand pulse of the market based on technical.
How to be a successful Trader?
As a trader how one defines success will decide if he is successful as a trader or not?
At times I take a long break from the market because things don’t work as I expect. It is better to be not trading than being in those 90% of the people who loose money trying to force things. I also make mistakes like I anticipated a fall in market in the January to March 2014 timeframe that never happened.
If you decide based on how much money I have invested and what is return on the amount, I may not be considered a success because most of the time I don’t have the time for making trades and generating the most out of the money lying in my demat account.
So if you judge me on the basis of the above mistakes, you may say I am not a successful trader.
There is different perspective to it as well.
I have couple of blogs (One more blog about freelancing) where I write regularly, admin of fairly large online programming forum, my overseas clients and few other partnerships.
So I am not a full time trader but still roughly estimating 70% of the trades done by me are when I hit the target, 18% is when I hit a loss and rest were no profit no loss trades. In the middle of so many things to deal with, if I can manage those numbers, its pretty good going as far as I am concerned. I would say I am a successful trader.
Conclusion
Being in market is not a sprint but a marathon. Just invest in the right stock at the right time and the right price and then keep an active eye on your investment to be successful in market. Share your views in comments below and if you think this article will be helpful to your friends, make sure you share it with them.
Really appreciate your honesty. Rare to find guys like you in this industry wherein people promise the full moon and deliver the new moon.
The pleasure is all mine Murali.
Hi Shabbir ,
You indeed have good blogs written as read quiet few of them , but as full time trader with knowledge of technical analysis and saying that “Ideally in range of 1% to 2% per month to start with and once you are full timer with couple of years of experience, you can make it around 2% to 3%.” sounds highly overly conservative to me . Reasons :-
1) If person know technical analysis then the person is having the belly to go into Futures also as he have fair idea of exit and entry.
2) By entering into the Futures we get the leverage of max 6 times for many of stocks . i.e. if the stock change by 5% only in a month it will leads to 30% profit.
3) The safest way is Nifty , which has leverage of 6 times and considering only 2 rallies of nifty in a year with 10% change makes 120% profit for that year.
4) A technical trader by knowledge can trade all 3 phases of market
A) BULL B) BEAR C) CONGESTION
If you see the charts of NIFTY and remove the false trade the NIFTY itself has ability to provide you 100% return in a year.
Having said above , i assume that the person who is/want to be full time trader must have spent a considerable time in understanding the 3 things
A) His/Her psychology
B) Technical Analysis tool kit i.e. what tools and techniques he is more comfortable with.
C) Which list of securities he want to move ahead.
On final notes , if being a trader and taking a so much pain in having the eyes on all the things if you can not get a decent return of min. 80% then a person should quit as a trader and try himself as an investor coz at the end of day a person should have a proper reward for what he is putting.
Hi,
Yes I agree that 2 to 3% may sound conservative but then it is better to be under promising and over delivering and on top of that you have to consider the losses as well.
Once you add the loss to the above scenarios, you will see that more than 35% per year for an elongated period of time is not very easily achievable. Yes some time it is more but then average it for 10 years or so and that will not look very conservative but real.
I am not here to boost about how you can double your money and that is not the whole point but I help my readers achieve better than average returns and that is more important for me.
Warren Buffet has managed to get 15% return for 40 years where average return from bond is around 5% in US. Here in India it is close to 10% and so extrapolating on the same, it should be 30% for such an elongated period which is quite good estimate.
I hope it helps.
Hi Shabbir..what are your view on day trading..can regular good income say 1 -2 lakh be made in stock market?
Also are you more of day trader to Investor?
the income is on per month basis*
Yes very much possible and I do that regularly and have shared the same sometime back here
http://shabbir.in/50000-trade/
But then I avoid doing those because it is not what I am able to achieve but how you as a reader of my blog can do the same and there has been many of my readers who have been able to replicate what I have been doing as well.
Dear:
In my opinion only 1% of the people who are thorough with Day Trading are successful.
Further, they should always be alert and they have to skip the day-to-day enjoyment of
life. Instead one can do short term (buying at low level and selling at marginal profit or
buying the stock at low level and selling the stock, after 3 months with some profits).
In my opinion, people who are having FEAR and GREED should not go to the side
of Day Trading.
Regards.
S. Sridharan
Chennai 600 091.
S. Sridharan,
When you are talking about full time trader and those who are successful, it is the best job of the world because normally people work from 9 to 5 or 8 hours a day but they have only 6 hours of work when market is open.
About Greed I just wrote an article yesterday only and you can check it out here – http://shabbir.in/control-greed-market/ (Correct timing)
Yes fear and greed should be avoided and that is what makes market a market.
I traded the markets for 35 continuous years, (part time), lost about 10 lacks in total, and have stopped trading now. I took umpteen number of training programmes (which were conducted by people who were not traders themselves, but only teachers) but none of those courses helped me.
And the few successful traders I came to know, were not interested in teaching others how they trade.
If there’s a successful trader, who would mentor me on a one on one basis for a given period of time and teach me how to trade well, I’d give it a try again.
Sorry to hear that you have lost a million bucks in market in 35 years and I don’t think you need to test further. Have you tried trading or investing in market?
Good Article!
Full time trader as in investing your money to make money for yourself only from trading would be a risky proposition, at least for beginners. One may have to be real good at understanding markets to be able to do this. Secondly, Being greedy has helped no one. So, I think one needs to set realistic goals for oneself and measure success/failure based on this rather than being driven by peer pressure.
Yes very risky for beginners but if you know how market works and is educating yourself, you can try things with paper trading.
The article is interesting.The movements in some stocks many times defies logic.It is quite tough to select a good stock at right time at right price.I believe that an investor should have utmost patience when investing in the market.
I don’t see any rocket science to pick a stock at the right price and right time. You have just to keep educating about how to get that done and there are quite a few ways of getting that done.
Yes, your article is good but its base only stock market i.e. equity.
If your trade in commodity as a full time trader then what happened..???
I would say you definitely earn good amount with help of sound technical knowledge & patience with investment of say 1lakh rupees.
I don’t agree with you on this. When trading in commodity you are trading with margins and that means you can seldom make profit and chances are you can loose your complete capital. Check out why here – http://shabbir.in/no-margin-trading/
It was well articulated and nice article!!
But as everyone of us know greed and fear drives everything in the market, it would be helpful to us if you can guide us how to handle them carefully .
Greed comes in when you are not able to spot opportunities at will and surely I will keep that as a topic to be writing on Rajendra.
Yes, absolutely true. Explained in very simple language so that every could understand.Full time trading is a highly demanding profession which requires lot of money, time, patience and discipline.
A few profitable trades does not make a trader, just try 6 months honest paper trading and one will get the answer.
6 Months is a long time to paper trade and if you need so much time to test if you can trade or not, it means you are not a trader and are doing trial and error Devendra.
Hi Shabbir,
Nice article well said.
Not every one become a full time Trader as trading in intraday requires to control emotions. Also it will be very hectic whilst trading intraday.
Completely agree with you on this Raviraj.
Excellent article, I have been looking for answers for the same question. I have it now. Thanks a ton.
The pleasure is all mine Venkatesh.