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Reader Questions Answered

Is Trading for a Living Worthwhile?

Here is a very good inquiry I received from a trader named Yvan in Bern over the weekend regarding a post I did about trading for a living.

I’ve just read the article What’s the secret to making a living from internet based Forex? where you mentioned that if you want to make 2500 per month you need 100,000.

In that case i think it isn’t worthwhile, i live in Switzerland and my cleaner earns more than that net salary, she doesn’t even risk 1k and definitely not 100K, and probably spends a lot less time working than a trader to make this kind of return.

So my question is, can someone who is not a professional trader can really make a good living from trading, and i don’t mean 2500 but more like 10k/month? I read a lot that new traders aren’t realistic. Is that because if they were it wouldn’t be worth their time? Maybe that could explain why so many people sell stuff related to trading because that how they make their money and not from trading. Could it be like the gold rush in America where just a few guys became rich from finding gold but the ones selling pics and shovels were the ones becoming quickly rich.

I’ve spent the last few months trying to make money from trading Forex, but is it a really a good business to get in?

Trading for a living is something a great many new traders have as their objective (myself included once upon a time), but only a very small fraction ever accomplish. This is partly a reflection of difficulty, of course, as just being a long-term profitable trader is a challenge. It is also partly a reflection of financial needs and changing personal situations.

I do firmly believe that to have a realistic chance to successfully trade for a living over the long-term you need to be very well capitalized. You don’t want to have to make 20% per month (for example) just to cover your living expenses, never mind to grow your account over time.

Trading for a living is a lot like starting a business. It requires a high degree of knowledge and experience in the chosen field, sufficient capital to be able to produce reasonable income and some cushion against difficult times, and a bit of luck and perserverance as well. There are a lot of reasons why new businesses fail at a very high rate, just as there are a lot of reasons why new traders fail at a very high rate. And even beyond that, those that succeed don’t guarantee massive financial benefit.

Yvan asks the very legitimate question whether purusing trading for a living is worth it? In the end each trader has to make their own decision, but for the vast majority of folks the answer is likely going to be not. In my case the answer is definitely negative. For me trading and investing is about growing wealth. While I may reach a point some day where my market activities produce sufficient income to suit my needs, I do not have any plans to shift to specifically focusing on trading as my profession. Consider it my personal diversification plan – which is also why I will never hold any meaningful portion of my capital in my employer’s stock.

As to Yvan’s point about trading educators, etc. being like the pick sellers during the California gold rush, there is some truth to that. Not that we need to view it in a negative light. People need to learn about trading and the markets just like prospectors needed tools. Many trading educators use income from their work to diversify their income, which is not an unreasonable thing to do given the fickleness of the markets.

By John

Author of The Essentials of Trading

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