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Trading Education Posted by Team Topstep February 23, 2022

7 Criteria for Full-Time Trading Readiness

Starting Line

For many, trading has a unique appeal from other professions. While it involves tremendous risk, there are opportunities to control and enhance one’s income. As a result, younger traders begin to dream generously. Many traders develop the goal of doing this on a full-time basis. This is not a bad thing; traders have the entrepreneurial spirit, and who doesn’t imagine working for ourselves?

However, if you’ve considered going full-time, you’ve probably experienced both fear and optimism, two hallmarks of trading life. The fear should be taken seriously; after all, going full-time is quite a leap and should only be undertaken with ample planning. On the flip side, believe it or not, some are prone to the feeling of blind optimism that it will just work out suddenly, without extensive forethought. 

I’ve seen a handful of traders survive their time trading for a living. However, I’ve also observed many more who attempt and fail. So the relevant question is, how do you know when making the launch to full-time trading is right for you?

This article will examine relevant factors for anyone considering making a full-time profession out of trading. From the onset, I will suggest that there are a variety of additional factors that one must consider that extend beyond the scope of this article. However, if you need an initial checklist, this is a good place to start. 

7 Criteria for Full-Time Trading Readiness 

First, I will talk about the less-heralded facets of full-time trading. While these elements may not be as sexy as other topics, still, they are absolutely crucial to consider before taking the next step.

Strong Mental Aptitude and Space

Consider your mental status. It’s not about whether or not you need to be highly intelligent; it’s more about the availability of your mind. Trading, especially on a full-time basis, absorbs a significant amount of brainpower. Accordingly, you will have plenty of intellectual exhaustion. If you use your mind to capacity, you might reconsider if going full-time is for you. 

For example, I knew a trader who intended to balance returning to school and trading, two goals that require extensive brainpower. You might guess what happened. His trading suffered when he focused on school, and his schoolwork suffered when he focused on trading. Downturns in trading made it worse all the way around. It became a vicious cycle. Trust me; full-time trading will use every bit of your mind, so make sure you have plenty of brainpower in reserve. 

Emotional Stability 

Another less sexy but crucial element to consider is your emotional availability and status. Trading has a way of stretching emotions. If you suffer from volatile emotional reactions, keep in mind that it will likely push you to the extreme. Furthermore, losses have a way of bringing out the worst emotions possible. 

I should also mention that trading full-time can test your close relationships. Traders have suffered divorce and various other relational meltdowns because of the emotional exhaustion of giving their time and energy to the vocation. With that, when considering the transition to full-time trading, it’s imperative to have healthy connections with your partners, friends, and family. Otherwise, the relational instability will affect your trading, in addition to your trading affecting your relationships.

What Makes You Happy?

Do you want to trade full-time? Will it satisfy you? It’s pretty alluring. Some end up realizing that the dream doesn’t actually come true. 

Trading full-time can also be an anchor in your life. Some feel secure with that anchor, while others feel weighed down and prefer a more flexible lifestyle. However, sitting in front of screens and analyzing markets isn’t everyone’s version of fulfillment. Furthermore, some who trade full-time lose a sense of purpose and dream of contributing more to society than pressing buttons on a keyboard while moving futures or forex contracts. Remember, not all that glitters is gold.

Having said all this, now I will discuss the more tangible aspects of preparing for full-time trading.

How’s Your Bankroll?

I conversed with an award-winning poker player who earns a substantial portion of his wealth from gambling. He said that the primary element of doing what he does to earn a significant income is already having an adequate bankroll. Many of you have heard the adage, “it takes money to make money.” 

Well, when considering full-time trading, this also applies. So how much is enough? It would be senseless to supply an arbitrary number, but I can put it in other terms. 

Can you have multiple losing days and be comfortable that you are not at risk of missing your quota for the week or a span of several months? Can you trade just a small portion of your account and make enough money to meet your quota? Can you survive two months without making any money without it alarming you or causing you to panic? Can you have a bad month and not let it not affect you psychologically?

These are good initial questions to ask yourself. Simply put, you have to have the bankroll to survive while losing, or it will tremendously impact your healthy lifestyle.

What’s Your Track Record?

I have frequently seen traders have one great month and decide to go all-in, making it a full-time job. This can be a problem. The optimism to believe that success will automatically continue is beautiful. Still, it’s hardly accurate or likely, at least not in terms of basing your expectations only on your best months. 

Slow and steady wins in trading. More often than not, big winners are followed by large losers. Do you have a track record that demonstrates you can put together several successful months at a time with a reasonable drawdown? Of course, this isn’t the only consideration, but it is a potent start to exploring your fitness for full-time trading.

Are You A Risk Manager?

Even before profit, the preservation of capital is the most prominent key. Sometimes football coaches are accused of “playing not to lose” rather than “playing to win.” This is often a reflection of taking a conservative approach. In football, such a strategy is debatable. In trading, preserving your lead or capital is the right play design. If you are not a risk manager, you are much closer to a gambler, which means that you’re less likely ready for full-time trading. 

What Gives You An Edge

Casino managers often assert that they only need the most marginal percentage increment in their favor. However, they have their defined edge when combining that with high volume. Before transitioning into full-time trading, you must know what your edge is. You must have some methodology, rules, or system that enables you to compete with other professionals and outperform the 95% who fail. It doesn’t have to be rocket science, but it needs to be clear, identifiable, and demonstrable. 

Wrapping Up

In closing, remember, you don’t have to go full-time. Some prefer flexible living, and others lose interest after being too closely tied to screens. But, if you are like me, your trading is much better when you have additional sources of income than when you intend to derive more than 50% of your income from trading. 

Others do better at swing trading and don’t have to do it full-time. Recognize yourself, know yourself, and develop into the best you can be. So live life to the fullest and trade responsibly. Until next time, trade well!