Trading on the stock markets is easier than ever before. Thanks to online trading platforms and smartphone apps, it’s possible to make investment choices as simply as you update your social media profiles or make a shopping order.
While this has been a pull factor, empowering many people to try trading, rock bottom interest rates and poor-performing savings accounts have also proved a timely push – forcing people to look for other ways to make their money go further.
But, what if you’ve done well from trading? If you’re able to confidently answer ‘what is a CFD trade?’, ‘what is a VWAP?’ or ‘what type of trader is a chartist?’ and, crucially, you’ve started to make a tidy profit, could you quit your job and go full time?
Everyone’s personal circumstances are different – but here are the things you’d need to consider before taking the plunge and turning your trading hobby into a full time career:
What’s your specialism?
To be a full-time trader, you need to be an expert. You’re no longer dabbling, paying the bills depends on the decisions you make. You need to pick a platform you’re happy with and a form of trading that you’re confident about.
You might think that you know a fair bit from your experience so far but complacency is dangerous – do your research and ensure you are thoroughly prepared. Being blind to the potential risks of life as a trader will not help. Even if you’ve done well so far, make sure you know what the common mistakes made by traders are so that you know what to avoid.
Whether you want to trade forex or invest in funds, you have to do so with confidence and based on evidence. You also need to settle on a strategy – switching between different methods is only likely to lead to confusion and, therefore, losses.
Leaving a job to pursue trading full time isn’t just a career decision, it’s also a lifestyle choice. Do you have a room in your home you could turn into an office? Are you confident about being able to separate your work and home life?
You need to be self-motivated and be able to ignore distractions to get on with your work. You also need to put a good amount of time into this.
Spending one or two hours on your hobby is fine – doing this as a job requires more time. Equally, make sure you get some of the benefits from leaving your job. If you want to spend more time with your children, for example, build this into your schedule.
How much money do you need to make? This is the first question you need to ask. Note, this isn’t about how much you want to make. You need to start by setting out an amount of money that you need to earn in order to fund your lifestyle. Then, from there, work back and consider what it would take to deliver that.
This might help you to understand when you’re ready to quit and become a full time trader as you’ll know how much money you need to save to start. Clearly, in the medium to long term you’d like to outstrip this and make lots of money but, at the start, be realistic and make a living before you aim to make a fortune.
Treating it like a business
We’ve already touched on this above, but it’s vital that you approach your life as a trader as seriously as you would if running any other business.
That means ensuring your tax and financial affairs are in order, putting the right level of work into your new career and, importantly, drawing up a business plan outlining your goals and strategies and analysing your success.
Make sure you know how much you wish to invest, the risk involved in any investment and that you have a back up plan in case things go awry.