This is Part 1 in a free three-part training series. Part 2 (building a trading business) and Part 3 (trading discipline) will be coming soon.
I spent the better part of five years imagining a day when I could wake up, stay in a pair of sweatpants if I desired, go downstairs and make a cup of coffee, and then take my 30-foot commute to my home office.
My only task was to trade profitably for as long or as little as I wanted, once the market opened. Make some money (at least as much as my former day job paid me), or rather enough to live off of comfortably, and still save.
I was an intraday trader. No need for a job. No more commute, stress, or requesting time off.
It seemed impossible when this dream manifested itself, especially being in debt more than $250,000, only recently learning how to trade, and having lost more money than I could afford to chase trade alerts. Most importantly, my spouse was on the other end of the spectrum, believing that none of that was possible, “people have to have a job and work for a living…that’s the way it is.”
Fast forward to 2020 (almost nine years after the seed of that dream was planted), amid a pandemic, in a divided nation…here I am…completely debt-free…in the home, I imagined…with the office I envisioned…doing exactly what I believed I could do every day.
Getting to live life on my own terms, with as much time as I want to do things that matter to me and my family.
I hope you get value from this mini-course on how to prepare to make a living intraday trading.
Table of Contents
- Day 1: What’s The Purpose?
- Day 2: Get Prepared Financially – The Next Foundation For Long Term Trading
- Day 3: Your Relationship With Money
- Day 4: Know Your Numbers
- Day 5: Keep Crushing It With The Rest Of Your Life
- Day 6: Leverage Your Strengths / Understand Your Weaknesses
- Day 7: Transition Slowly
Before diving into the individual lessons, I want to start with a broader view and answer three clarifying questions:
- What is intraday trading?
- Why should you have a purpose?
- Why should you care?
When I use the term intraday trading, I am talking about trading “within the day.” The point is to buy and sell stocks, not invest in them. Intraday trading is about earning profits by capturing a portion of the movement of a stock within a single trading session.
Intraday trading has its risks and requires price volatility and volume. This is what provides enough range (movement of the stock’s price) to buy/short and sell/cover with a predetermined number of shares.
Ending the day with your account in all cash is critical in my definition of intraday trading. I often hear people ask, “why not hold stocks for multiple days and capture more range?” Let me be very clear about something – there is no need to hold stocks overnight or for multiple days when you intraday trade – you do not carry over risk, you end each day completely free and clear ready for the next day.
Your purpose for becoming a full-time intraday trader (someone who can generate enough trading profits to maintain an income to cover all expenses and savings) is the central core that builds the foundation for a system of control over all your trading decisions.
Trading full-time requires the mindset and understanding that you are running a business. Just because there is no brick-and-mortar building, or products and customers, doesn’t mean you haven’t made a serious investment with money on the line.
Why you chose to go into the trading businesses (over any other opportunity) is a personal decision. Once you have committed to it, you must have a purpose that you carry with you. It will provide a level of control over your mind, your emotions, and your decisions, giving you a much better probability of long-term success.
During the next few days, I’ll share an insider’s view of what it takes to get to sit in your home office trading for a living.
What’s The Purpose?
Why not just have the only goal and reason for trading be to simply make money?
The short answer that I give most people is that if that’s your only goal you will chase the achievement of that goal, and if you meet it, you will chase it again, and again. Eventually, you won’t hit your goal, and you will either change it or change what you are doing to try and hit that goal.
You will wind up in a cycle you don’t really have control over, you’ll just think you do.
Now my goal for this series is to cut through any hopes and dreams and give you actionable, transformative insights that you can implement in your life. I don’t know your personal, mental, or financial situation. It is not easy to change your perspective on one webpage, but go grab some coffee (or tea), put your phone in a drawer, and let’s dive in.
Your purpose is not something you find, it is something you build.
Understand that to build your purpose for trading (or any other business for that matter), first recognize that there will be multiple sources that impact your purpose: your family, your personal strengths, your work ethic, and discipline, for instance.
Knowing your purpose helps to:
- Give meaning to each day you approach the market.
- Guide you through times that are tough and making hard decisions.
- Encourage you to focus on following your instincts instead of the crowd.
- Motivates you for your own journey, regardless of what you face.
Before we get ahead of ourselves, we need to digest some related questions. What is the ‘purpose’ that we are working on and how do we define it? If we don’t take the time to answer those questions we’re not starting right.
We can define the purpose that we are working on as the driving force of our decision to make trading the thing that we do to provide for ourselves and our family, both in terms of financial, as well as the amount of time and freedom it could allow, depending on what you choose.
Narrowing further, your purpose will be based on multiple factors including who you are responsible for (a spouse, children), the lifestyle you seek to maintain (you could also be scaling back, or working towards increase), the strength of your desires for a certain way of living.
I’ll use myself to provide an example:
“I have dedicated my life to being a successful and long-term profitable intraday trader because I am disciplined and mentally tough enough to endure the challenge and risks. I am content with what I have. I do not seek excessive wealth or ‘stuff.’ Enough for me in trading is covering monthly expenses, and reaching a savings rate of 35-40% annually.”
“Time and freedom to do what I want with my family are the most valuable. I have no debt. I maintain savings, emergency, and surplus accounts separate from my trading accounts. My trading accounts are the asset of my trading business.”
“Money in those accounts is a tool to generate more capital (profit) each month. I worked for 19 years across fields such as the military, telecommunications, finance, and software, and trading is now me being my own boss.”
“Trading provides independence, self-control, and self-sufficiency needed to live a simple and rewarding life while supporting my family.”
“It allows us to go anywhere we want, live life on our terms, and focus on our relationships, health, and life experiences.”
“This is my purpose. This is why every day I follow my plan and rules. Staying patient, staying focused, trusting my judgment are all key to my long term success.”
Now for your first assignment, you should grab a pen and paper and start to clearly define the foundation of your trading business. Your purpose for taking this journey on and making this endeavor what provides for you financially for the long-term.
Here are some questions that will help you get started defining your purpose?
Why is trading the best opportunity for you? (You may not want to necessarily own a business or leave your job just yet. What we’re looking for here is clarity about the reasons why trading fits your personality and lifestyle. Are you passionate about trading? Don’t obsess over the nuances of your feelings – just get a sense of whether it’s a real desire or not.)
Are you financially prepared? (Have a separate trading account from your living expenses, savings, and emergency funds. Can afford to lose your entire trading account and still be financially stable.)
What strengths, weaknesses, and other characteristics do you have that will impact you as a trader? (Patience, discipline, contentment, fearlessness, risk-taker, adaptable, mentally tough, independent, forward-thinking, etc).
Take the time to answer these questions as precisely and thoroughly as you can. What follows over the next several days will build on this foundation.
Get Prepared Financially — The Next Foundation For Long Term Trading
Several years ago I thought all I needed was a couple of thousand dollars in a brokerage account and a decent platform, and I could trade enough times with enough wins to grow the account, without much risk. Boy was I taught a lesson fast.
Becoming a full-time trader is essentially becoming a business owner. Whether you know what a business plan is or how to even start one, you have to go into any business opportunity prepared (both mentally and financially) for the possibility that it could fail (most people don’t.)
It doesn’t matter that your business is trading and there are no products or customers. If your business fails and in this case, failure is losing most or all of the money you started with, the rest of your life financially can not and should not be impacted by such a fate.
This requires preparation.
While a large majority of that preparation has to do with how much money you have set aside for your expenses, your savings, and your emergencies, it also has to do with how you manage your finances.
For starters, do you maintain a monthly budget for your household expenses?
Dave Ramsey does a good job of defining a budget:
“A budget is just a plan. It’s not a restriction on spending—it’s a plan for what you’ll do with your money. It’s a plan for what’s coming in and what’s going out. When you budget every month, you’re giving your money purpose. You’re taking control.”
You are basically telling your money where to go each month. Not just the bills, but your discretionary spending as well. If you have never budgeted before, now is the time to start.
If you are going to be living off of your trading profits, which are going to fluctuate from month to month, you have to have a plan. You need to know what’s coming in and what’s going out.
I personally track all expenses via the Every Dollar app. I use the free version and simply copy the budget from month to month making adjustments to any new categories as needed. Whenever a transaction occurs I simply add the transaction into the appropriate category.
On top of the app, I use an Excel spreadsheet to track all of our account balances monthly, as well as my trading P&L daily (which I update every morning).
This allows me to see every day what our estimated monthly expenses will be as well as the income that has come in up to that point.
Since we have other streams of income I need to see how my trading performance is adding up against our other sources so I know when we have exceeded our monthly expenses. From that point, everything above that goes toward savings and our surplus account.
Our surplus account is used for spending over and above our budget, mainly vacations or larger ticket items (like a new laptop for example).
The way I do it is not the way you have to. My point is that tracking finances and budgeting are important. It provides control and certainty around your cash flow. Remember in trading you don’t have some guaranteed paycheck coming at the end of the week. You have to make that paycheck daily.
It is important to note that you don’t want to be in a position where you are trying to trade to get to a certain dollar amount each month, just because you can see the numbers. If that is something you battle, you should consider the Alpha Rules Mindset.
The key is to respect your accounts and your money. When you are ultimately trading consistently and profitably on a daily, weekly, and monthly basis, tracking the finances becomes easier. It helps build your confidence and your awareness of where you can spend more money and how you are maintaining your savings goals.
For example, I can track my savings rate % using a spreadsheet. The goal is 35-40% minimum. If I am covering our monthly expenses, any surplus expenses, and our overall balances (net worth) has grown when I total everything at the end of the month, that’s a good place to be.
Now let’s talk about your homework.
Do some research on budgeting. Take a look at the app I recommended or find one that you like if apps are your thing.
Nothing wrong with spreadsheets, I love them. Google spreadsheets are my go-to option.
Create a budget list either via an app or with pen and paper (there is no shortage of templates online for free). Write down all of your expenses as well as your current income.
It’s important to note that if you are not trading full time right now and have a full-time income that you will be leaving at some point to trade, you may want to review expenses that may be reduced as a result and create an additional sample budget of what expenses might be like without a full-time job.
(Some examples would be reduced fuel costs, fewer expenses on eating out for lunch, or clothing.)
If you are new to budgeting you might benefit a lot from taking a look at your bank and/or credit card statements and going back at least a month and writing down all your spending. You might find surprises at what you spent versus what you thought you spent.
If you are finding a lot of spending that could be avoided like impulse buys, make a note. Use this as an opportunity to cut unnecessary costs, subscriptions, and other expenses out of your life.
Trading for a living is not just making enough to live off of and not have anything left over at the end of the month. Like with any endeavor, be it a job or a business, you still want to enjoy your life and have extra income to spend, and at the same time be saving money as well.
Remember, when you trade full time, if you end up trading similar to me and only do it for 30 – 60 minutes a day, you are going to have a lot of free time. There is more to that free time than just going out and spending your money. Knowing where your money is going, spending wisely, and being a bit more frugal is key.
The other side of being prepared financially has everything to do with how much money you have saved or set aside outside of your trading account as well as how much capital you have to start trading with.
[I’m going to share some ideas to plan this more effectively on day 4.]
Up next – your “relationship with money” (and a better way to think about how you spend it). Until then…do your homework!
Your Relationship With Money
I can’t think of a better way to introduce a book that completely changed the way I think about money. Your Money Or Your Life, written by Vicki Robin and Joe Dominguez, introduced me to the concept of life energy.
“Our life energy is our allotment of time here on earth, the hours of precious life available to us. When we go to our jobs we are trading our life energy for money. You could even say that money equals our life energy.”
In other words, the idea of looking at your money and how much of your time you spend making it. Then turning that into how much life energy is used when you spend it.
Check out the Life Energy Calculator on the Your Money Or Your Life (YMOYL) website.
I encourage you to read this book. No, I don’t mean you have to follow everything to the letter, but you need it to help foster and reshape your relationship with money, your mindset gets altered in a good way.
How I used the concepts early on was to realize just how much of my life I was spending working a job. I wanted to find a way to either create a business to allow me to build passive income or become a trader. (Fortunately, both happened, until I sold my online businesses to focus 100% on trading).
So gaining this perspective on how much time you spend relative to how much you actually earn helps to further fuel the desire and reasoning to leave a full-time job and get to the point where you can still make a full-time income trading an hour or less a day.
As a result, you reduce the time you spend earning an income and gain more time than you’ve ever had in your working career.
That’s the ultimate goal anyway, right?
So for the sake of discussion let’s say you agree with the above, even without the book, you are already sold on the idea that you can become a consistently profitable trader and earn a full-time income.
Your relationship with money needs to factor in how you spend your money.
I used to spend like most people, on my credit card. I would take on debt and pay interest because it was normal.
When I realized there was no way I could stop working and earning an income and try and become a trader with debt, my entire approach to money changed. Not just budgeting, but what I spent my money on and how I avoided new debt.
This allowed me to become more focused and diligent with money, and even a bit more frugal.
I also became a minimalist.
Not saying you have to go there, but it certainly helped me live more comfortably with less stuff.
I got caught up in the FIRE Movement. This entirely different perspective on what it means to become and be financially independent, and often well before typical retirement age.
While there are 658,309,403 blogs on Financial Independence (FI), some of the more popular and my personal favorites are:
Simply absorbing information on personal finances isn’t enough.
You have to take some intentional action. It doesn’t mean that you have to go find a financial advisor, open a bunch of retirement accounts, reallocate everything you have.
Everyone is in a different place. You may have IRAs or 401ks and be well versed in how they are invested. If not, just starting research on personal finance with those blogs will make a huge difference.
I don’t have a single IRA or 401k account. I manage all my money via checking, savings, and brokerage accounts. During my working years, I used to have 401ks and IRAs but I was very ignorant money wise and I would often take early withdrawals from my accounts between employers.
When I started online businesses and trading more, I closed a couple of remaining IRAs and decided that I would rather pay my taxes every year, than try and grow accounts tax-deferred or tax-free.
This is a personal decision and I certainly do not recommend you do things any particular way. I think it’s important you realize that everyone is going to have a setup that’s a little bit different and that is ok.
For example, I rent and no longer own my home. I also lease a car. These two things go against both Ramsey and FI. After all, I am not “building wealth” by owning my home (which I don’t believe I would if I did), and I am paying a lot more for my vehicle by having payments.
Now I used to agree that owning a home and paying it off one day with no mortgage payments was great. Until I realized I do not want to live anywhere for 15 or 30 years and I don’t want my money tied up in a house.
I make a full time living in 30 minutes a day. It’s a completely different experience when I can make my monthly lease payment in less than 30 minutes in just one trading day of the month, instead of working two full days in an office.
When it comes to renting, it’s the same math for me. Besides, I don’t have to worry about maintenance, never had to give up a bunch of cash for a down payment, don’t have to pay property taxes or home insurance, and can plan to live somewhere new in the future, with plenty of flexibility (such as short term Airbnb).
Financial Independence (FI) doesn’t have to mean to you what the movement says about having 25x of annual living expenses and then using a 4% rule for withdrawals. That’s not something I focus on when I define it.
FI for me is not having to work a day job and still making a full-time income doing what I want when I want, such as trading 30 minutes a day.
It is about peace of mind and convenience — and it circles back to my purpose for trading as well.
Is it going to mean the same for you? Not necessarily.
You don’t have to do things my way, you have to discover your way. You have to develop a belief system and a foundation for how you handle your money. I’m sharing how I adopted mine so you have an idea of what it looks like.
The reason you need more personal finance knowledge and a dose of financial independence desire is that that is ultimately what you are after when it comes to being a full-time trader anyway.
Maybe you’ve already hit FI — if you do some math later based on information found in the blogs above.
Maybe you are nowhere near those numbers, still working a job, but have just enough money to fund your trading account. In this case, you still have more work to do, and that’s totally fine. That’s why you’re here.
Take some time to browse the concepts of FI and personal finance. Think about and try to answer these questions as you research:
- How do I define financial independence for me?
- How has my relationship with money been over the years?
- What areas of personal finance do I agree or disagree with regarding FI?
For extra credit run some calculations to get an idea of where you are on the road to financial independence.
There are plenty of FI calculators online just do a Google search. Here is one of my favorites — Playing With Fire (also a great documentary you should watch.)
Finally, let’s agree for now that the goal is not to become “financially independent” before you start trading for a living.
Instead, let’s focus on the key aspect of your finances — your relationship with money and your thought process around transitioning from someone who is used to working a job, trading time for money, to someone who is trading for a living and making enough money to live a great life.
You’re going to get a better idea about how to have your finances set up — to focus on trading — next.
Know Your Numbers
One of my favorite shows is The Profit, hosted by Marcus Lemonis. I agree with something he says pretty often:
“If you don’t know your numbers, you don’t know your business.”
Shifting from traditional business and even your trading business, I want to focus on the business of your finances. If you don’t know where your money is and what you are doing with it, you won’t be in a good place when you transition to trading for a living.
Knowing your numbers means knowing how much you’ve allocated to the various areas of importance in your life, and where that money is.
I will go a step further in that you have to know and decide what that point is where you can start trading full time.
Here, I am not talking about a path where you trade on paper or trade part-time while you are still working until you are profitable before making the transition. I am talking about the moment where you decide to make the transition itself. That moment is based on how much money you have in all of your accounts and what it’s set aside for.
Once again I will use myself as an example to give you an idea of how finances can be set up.
I think it’s important to note that when I left my final full-time job to trade for a living I had a passive income stream from a blog I had grown and was earning ad revenue.
Not everyone will have such an income stream (or safety net) while they start their trading business.
This situation proved valuable for me, but for the sake of the rest of this discussion, assume no additional income sources exist aside from trading income.
I’ll start with the makeup and uses of each of my accounts.
As I mentioned earlier the only accounts I use are checking, savings, and brokerage, split across two local credit unions, and my go-to broker for day trading Lightspeed as well as Fidelity.
My checking accounts are used for regular monthly expenses. Think recurring bills like electricity, phone, internet, and insurance. The savings account is used as an emergency fund account. An emergency for me would be something that is an unexpected, urgent expense such as a vehicle repair.
There are two accounts at Fidelity, one checking and one brokerage. The checking is used to write checks against (yes we still write checks from time to time) and for certain surplus expenses. The main type of surplus expenses we have include reservations for an upcoming vacation such as lodging, or a higher expense item not part of our normal monthly budget (like a new computer).
Finally, I maintain two trading accounts at Lightspeed and rebalance them every 3-4 months to similar balances. I move the trading profits achieved from that time frame and allocate them to the checking accounts at our credit unions and our Fidelity accounts. This allows me to replenish the expense accounts from the previous few months in checking as well as add to longer-term savings and surplus accounts.
The brokerage account at Fidelity is not used for trading very often. I may place one or two trades every couple of months. This account subs as a long-term savings account.
So there is a brief overview of the various accounts I use to manage finances. It might not seem straightforward to you, but it works for us.
Now let’s shift gears because we need to get to the meat of knowing your numbers and that means how much money you actually have in each of your accounts by the time you find yourself at home trading for a living.
I actually prefer to make this pretty simple math. Of course, these are just estimates, and you may need or want more or less depending on your personal situation, budget, expenses, and goals.
Here are my recommendations for how much you should have set aside when you start trading full time. If you did your homework previously you’ll have a good estimate of your monthly budget and therefore annual expenses.
- Living expenses (checking accounts): Minimum 1 year, ideally 2 years
- Emergency fund (savings accounts): Minimum 6 months
- Trading account: At least $30k, preferably $50k
Long-term savings: This depends on where you are in life when you start and how many years you’ve worked and saved in the past. You may have IRAs, 401ks, or cash at a bank. Ideally, if you are in your 20s (1 -2 years annual expenses, 30s (3-4 years annual expenses), 40+ (5+ years annual expenses).
So let’s use actual numbers. If your calculations revealed to you that as a full-time trader your monthly budget is going to be $4000 per month, that’s $48,000 per year. Keep in mind this doesn’t include any surplus spending such as vacations or planned higher-value purchases, and that’s ok, just keep that in mind.
Using that number you can easily get an idea of how much total money you’d want to be saved up: between $102,000 – $122,000 (with 1-year expenses) or $150,000 – $170,000 (with 2 years expenses) not including long-term savings.
Here’s the breakdown (2-year expenses):
- Living expenses: $96,000
- Emergency fund: $24,000
- Trading account: $50,000
- Long term savings: $100,000 – $200,000+
The more you have set aside outside of your trading accounts, the better. You don’t want to be in a position where you need your trading profits for the first year of trading.
Now one question some might have is if you have other sources of income (preferably guaranteed and consistent) whether that’s passive (from a business) or from a settlement, disability, pension, retirement, etc., can any of these numbers be less?
The short answer is no for your trading and emergency accounts. For expenses, you could reduce the total amount of the source of income from the annual target number.
If that seems like a lot of money — it is. Not your typical start trading with $2,000 or $5,000. That might be disappointing if you are just getting started.
Here’s my overall opinion on the cold hard truth. You need money to trade and you need to have a cushion and secure finances before you trade full time.
If you have a spouse or children and you are trying to accomplish this you definitely need to have your finances prepared, especially if your income is a majority of the household.
This isn’t (and should never become) an endeavor to gamble with your life or your relationships.
This is a business that requires serious commitment and serious investment both mentally and financially.
You have to have a plan and you have to know your numbers.
Now it’s time for you to get to work…(look at your numbers and your accounts). Continue calculating what you’ll need and compare that to where you are financially in your life. If you are already there mathematically, great.
If not then we’ll dive into how you can continue getting closer in the next lesson.
Keep Crushing It With The Rest Of Your Life
I mentioned earlier that it took me almost eight years from the first real desire I had to trade full time to get to a point with my trading ability and finances to actually do it.
What did I have to do for those eight years? I kept working.
At one point I worked two jobs to save up to pay cash for a car (a 1995 Honda Civic Hybrid with 150,000k miles) that I drove for over three years. I left one job for another with more opportunities and in 4 years was promoted three times. Between more income, stock options, refinancing debt, and selling our home, I got rid of the debt and started saving as much as I could.
Alright, so what does that all mean for you?
By now you should have a good understanding of where you are at if you’ve done all your homework. If you aren’t in a position financially because of debt or lack of enough savings to trade, know that it’s not impossible. You simply have to work and save.
Unlike a traditional business opportunity, you can’t just borrow your way into trading. You have to use your own money.
You need to find ways to excel at what you do so you can get more opportunities to increase your income.
There is no shortage of side hustles and businesses you can start.
I did everything from retail arbitrage, mall carts, selling stuff I no longer needed on eBay, affiliate websites, blogs, flipping websites, and working a second job to increase my chances of saving as much money as I could.
It may seem counterintuitive to what you are used to seeing and hearing from the many trading websites out there, and even the number of traders who are only trading with $2,000 accounts using a mobile app.
That is not the recipe that we are trying to make here, that should be obvious by now.
You cannot compare the two.
Crushing it with the rest of your life involves:
- Continuing to pay down debt if you have any.
- Doing your best work in your current job (or perhaps finding a new one) to increase your salary when internal positions open up.
- Taking on a side hustle or starting a small business that can bring in extra money (even an extra $300-$500 a month makes a huge difference).
The goal is to provide yourself with as much opportunity to get to that place financially where trading for a living is possible. The moment you can be in that position after all the effort made will be worth it.
It’s probably worth mentioning here that this is going to look very different for a lot of people. You might already be in a financial position and not need to focus on any of this.
On the other hand, you might live on the west coast and can trade for the first two hours before you even go to work, and don’t plan to leave your day job for trading. Therefore your entire financial outlook and perspective will be a lot different.
The point is, don’t worry if none of this applies to you as it may not. Don’t think you have to do anything.
Personally, I don’t care how you get there financially, I just want you to get there. If if you are going to trade full time, being in the position financially is just as important as your trading skills.
Your homework for today is to look over your situation and identify where there are opportunities to excel to get closer to your goal of trading for a living. You could write out your ideas, or just look up content that caters to what you prefer to help get more perspective.
Leverage Your Strengths / Understand Your Weaknesses
I find that many traders don’t take time to review their personality, experiences, and habits, all of which impact their trading.
Where do you start?
Fortunately, there is no shortage of assessments and tools out there that can help you analyze your personality and strengths.
One of my favorites is StrengthsFinder by Gallup. If you purchase the book, you’ll get a code to take the assessment.
If a personality test is your thing, you should check out 16personalities. If you’ve taken this or something similar in the past and already know your personality type, I encourage you to take time to read through the insights they provide. It will only take a few minutes.
Pay particular attention to the Strengths & Weaknesses area.
My personality type came up as INTJ, or Introverted, Intuitive, Thinking, and Judging personality traits. This is based on Myers’ Briggs theory of personality type.
Knowing your strengths is helpful but leveraging them in trading is a different story.
You might be a patient person and very risk-averse. These can be strengths in trading because you won’t have a tendency to jump on a trade that doesn’t present a good risk/reward ratio. You’d also be willing to wait days for the right setup on the trade versus trading a name too early.
Being aware of the strengths you’ve been used to and have used most of your life and understanding how they can help you with your trading is important to your long term success.
Realize that they matter and will have an impact on your trading.
We should always leverage our strengths. Keep in mind that this is highly subjective. What you consider strength of yours could be viewed as a weakness in someone else. Worse, what you think is a strength that can be applied to trading, can actually hurt your trading.
What matters is that when you see that happen in your trading you recognize it and correct it. This is easier said than done.
That’s why it’s important to self-analyze through assessments and reflection and understand that the information you gain from it can be very useful.
Ok but what about weaknesses?
We all have weaknesses and there is no shortage of opportunity to have them exploited while trading.
Having a lack of patience, not willing to accept being wrong, greed, FOMO — all weaknesses.
While some personality traits and characteristics you identify as your personal weaknesses can play out, even subconsciously, I think a lot of weaknesses are developed as many people begin to trade. Biases are formed. The comparison game is played. Then there are a lot of emotional attachments to money that start to affect decision making and the ability to consistently follow a trading plan and rule framework.
You may not fully understand all of your weaknesses (or your potential to develop them) until you begin trading. That’s why having your financial house in order is vital.
Losses are inevitable in trading. How you manage through your first months and year as a trader is key. How quickly you leverage what you are good at (strengths) and recognize and understand what mistakes you are making, biases you are forming, and when they occur within your trading (weaknesses), the better you will be at minimizing losses.
It starts with knowing you will be good at some things in trading ( such as certain trade setups, types of stocks, technicals), and not so good at others (buying the dip, shorting the front side, recognizing weakness).
Take some time to go deep with exercises that help identify your strengths and weaknesses. It’s valuable to everyone regardless of their endeavors and you will be surprised how valuable it is to you as a trader.
“So when do I actually leave the job and trade full time?”
I know that question is probably on many minds — for good reason. It’s one thing to have your purpose, mindset, and finances all in good order. But what about your actual trading skills?
While there is no black and white answer for everyone here, I’ll say that it certainly is ideal for you to have a decent level of trading knowledge under your belt.
Understanding fundamentals, terminology, reading charts are all things you can study with free resources online or some books about trading.
If you are past the basics, you have to start developing a trading strategy and rule framework.
In the past, I started with a $25,000 account to meet the pattern day trader rule to trade. If you don’t have this set up yet, opening even a $500 account might be somewhat beneficial.
Why not just get Think or Swim and paper trade?
I never recommend paper trading. My personal opinion on the matter is no matter how you perform with fake money, it will not translate to having real money on the line. Emotions are different, decisions are different. Forget about it.
While I’m not all for starting with a small account, the concept behind having an actual account (despite not being able to place more than 3 intraday trades in a 5 day period) is that you get started executing.
You may not have the first hour of the day and if so, I wouldn’t worry about the account. But if you do have the time, now is the time to learn how to scan, find the types of setups you are most comfortable trading, and then building a watchlist of stocks each day or a permanent watchlist of stocks you focus on every day.
You would then be able to trade maybe 1 or 2 shares at a time. It doesn’t matter if you are making or losing $2-3 or even $10 in a day. The point is to learn entry and exit, when to get in and when to get out when you are wrong.
Defining risk/reward and understanding what you are seeing happen on a chart are things that you should be focusing on.
What’s important is developing and exercising that trading muscle. It might seem ridiculous to even attempt this but trust me, this is as slow as you can get and still be able to learn.
Keep in mind you will not be able to place an unlimited number of intraday trades with an account of less than $25,000. So trading every day is not an option going this route. Even if you have $25,000 already but not all other finances in order, trying to learn with that amount of money is a recipe for disaster.
It might be easy to think you’d still only trade small size, or you wouldn’t add to a losing position because you can “afford to,” but there is no point in putting yourself in a position to test your self-control.
So that’s where I’d start. I would try to devote each evening to identifying a few stocks to watch via a free scanner like Finviz. Then 1 – 2 days a week or whenever possible I would attempt to schedule a time to focus on the market from 9:15 am – 10:00 am minimum and trade 1 or 2 shares of stock off my watchlist.
Seek to answer:
- Am I able to identify proper long or short entries?
- Can I sell/cover within an anticipated range?
- Am I practicing scaling out of my position such as 50%, 25%, 25%?
Unfortunately, you may not get the best executions unless you stick to limit orders as you will likely be using a broker’s online web platform unless you use a free platform like Fidelity’s Active Trader Pro, or TD’s Think or Swim.
Brokers with a direct access platform that you’ll need for intraday trading, may require higher minimum opening balances. Again no need to get ahead of yourself seeking this type of account (there are offshore brokers that you can open a small account with and day trade with but I strongly encourage you not to go this route.)
Transitioning slowly isn’t an easy process. I can’t possibly recommend a single way for everyone. Some of this could work for you, or none of it could, it’s only one way to approach things. Ultimately how you grow your skills and learn more about trading during this time is completely up to you.
Of course, I built DIYtrades.com to help you with developing everything you need to become a consistently profitable intraday trader.
I’m working on a few courses to help you develop your trading mindset, rule framework, strategies, and overall trading process to become a consistently profitable trader. Review the Products page on DIYtrades.com for my latest training and read the Articles for the perspective that I share on trading.
To trade for a living you’ve got to adopt the long-term game mentality. You will climb an uphill battle if you come into trading playing the comparison game or taking on a mentality that causes you to focus solely on making as much money as possible in the least amount of time.
Transition slowly into this business and into a new mindset. It is easier said than done, and it took me several years. When you get there it is much easier to stay there, because you’ll be able to look back and see that it actually works.