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  • Thomas Wong

7 Things you should do before trading for a living

So many people ask me how I came to the conclusion to leave my W2 job and trade for a living or how long it took for me to get to the point where I could. It seems like everyone wants to just have a lifestyle where you make a few hundred to a few thousand dollars a day sitting in their pajamas in front of their computer every day. However, in my opinion, everything needs to be put into perspective and thought out before you take that plunge. I had to find out some of these things the hard way and the goal of this article is to hopefully save you some of that headache and time. With that said, here are 7 things you should do before trading for a living.

First, get clarity. Do you really want to only trade? How long have you been trading? One of our favorite sayings at RLT is that “everything works, just not all the time.” If you have only been trading a few months, the chances are you have only traded through one type of market. Maybe it was a strong trending market where any dip was short lived. Markets change and go through cycles. Make sure you have at least backtraded different market cycles to get the feel for it and make sure you have strategies for different times. That said, is it that you really only want to trade? Or just that you want to change what you do day to day? If you want to just have a change, make sure you have thought of what job you want to change to and have researched it. Do you have the skills to go into that job? Do you know people in that industry that you could talk to in order to make sure it is where you want to go?

Second, plan what your day would look like. What times of the day would you trade? Are you going to sit in front of your computer trading all day? Do you only trade during a certain time of the day? If you had previously only traded during a certain time of the day (perhaps the first couple hours of the market for example) because you had a job later in the day, do you have data that shows you are profitable trading the afternoon and the close (or just any other time of day that you have not be trading)? If not, you should work on that first or figure out what else you are going to be doing throughout the day. I personally think we are wired to feel like we are progressing and having too much time on your hands tends make you feel like that progress is stalling out. It can also tend to make you fill up your time with random entertainment and leisure. While entertainment and leisure are great, is that really how you want to spend the majority of your time? Time is the only resource we will not get back and we don’t know for sure how much of it we have. How do you want to contribute to the world? Are there skills you want to learn? There is so much that you can offer the world if you want to do it.

Third, test it out! Before just handing in your two weeks notice, simply take a long vacation or ask for a sabbatical if that is possible for your industry (most of the time you don’t know until you ask). Try out your previously planned lifestyle and make sure you like it. Take time to step back and think about this being your new life. Is there anything you miss? If you are still in lockdown situation due to a pandemic (or are reading this sometime in the future when a new one has rolled around), then use that time to test out your new schedule. The people who came out a head during Covid-19 shutdowns around the world were the people who did not just sit at home, but started to learn skills online, started new online businesses, or used to time to get in better shape.

Fourth, get your personal finances in order. It is so much easier to trade when you do not have to make enough money to pay the interest on your credit card or make enough money to pay the rent next week. Track and project your monthly expenses to know how much money is flowing out and compare that to your data showing how much you are making with your trading. Be sure to account for any changes in spending perhaps due to more free time when you are not at your daily grind. If you need help with this, feel free to reach out to me as I do some personal finance coaching on the side. (Thomas at reallifetrading dot com)

Fifth, increase your account size. This is probably something everyone already attempts to do, but it is worth saying. It is much easier to grow your account when you are not only stacking gains from your trading, but also adding to it from your W2 income. You want to have enough money to trade so that you don’t have to double your account each month in order to pay all of your bills. It is much easier to make a smaller percentage of your money consistently so make it easier on yourself. Also, there are some very high win rate strategies that usually require larger account sizes to execute well.

Sixth, use your increased income to create some other income streams. Even if you have your account size to where you want it, you can always start to deploy trading gains and W2 savings into other assets to create other income streams for yourself. This can be anything from real estate, to dividends, to lending, to new marketable skills. These income streams can be as passive as you want them to be. Just know that for the most part income streams either take time or money and setting things up passively will probably eat into your returns. That said, I personally like knowing that just by waking up and existing each day, I will get paid from some of my income streams.

Seventh, join a trading community. Even if you don’t make the leap to leave your job and trade for a living, you can still do this one. Trading by yourself day in and day out can grow to become very lonely. Not to mention that getting into a trading community opens up other potential trades and strategies, but the real power can come from the network. This can be hard to quantify as you never know just how impactful this can be. Not all trading communities will present this type of opportunity either, but if you approach your trading community with the mindset to connect, provide value, and truly engage, the potential connections could be massive. I can say though that personally I have would not have the knowledge, opportunities, or network that I have today without a community like Real Life Trading.

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