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Day trading has it’s very enticing rewards such as potential of high income, not having a boss, and having the flexibility to set your own schedule, or work from anywhere.
And anyone who has fallen in love with it, I think we’ve all thought about quitting our 9 to 5 job to day trade full-time.
The truth is, this question of, “should I quit my 9 to 5 to day trade full-time?” will vary from person to person as everyone’s goals, interest, and financial situation is different.
But if you’re in that train of thought, here’s a list of questions you should ask yourself before considering to quit a steady income source.
When you’re working a job, the only asset your risking is your time. But when you’re a full-time day trader, your risking your cash.
Aside from the cash you will use to trade with, do you have 6 to 12 months worth of savings for you to continue to pay your credit card, car loan, mortgage, rent?
Before embarking on this journey, you want to think clearly and stay focus. The last thing you need to be stressed out about not having enough cash to pay your rent or mortgage 3 months from now.
To know how much savings you need, create a list of all your expenses. Here’s a quick list of items to consider:
Make a list, calculate the total and that should give you a rough estimate.
By the way: Pro tip, once you get the total, check if you can cut out any unnecessary items to help you reduce your monthly cost.
Day trading is a high stress, and high performing job. It’s important to ask yourself truthfully, and analyze for a period of time if you have your emotions in check when you’re winning trades and especially when you lose trades.
If you’re consistently thinking about your loss, and it ruins your day, then you might want to take a step back and re-evaluate.
The worst part about losing control of your emotions, is trading with your emotions. Which can lead to some serious repercussions.
You need a trading plan, if you haven’t set one, create one…
Going into day trading without a plan is like going hiking without a map.
Instead…
Of going in without a trading plan start with something basic and simple, such as a daily stop loss, a proper position size, and perhaps some technical analysis on the stock you want to trade.
Stock trading is all about discipline and executing your trading plan. If haven’t yet build the discipline to do so, ask yourself why that is.
Having discipline is what sets the difference between profitable traders versus non-profitable traders.
Day trading is short-term trading, which means you hold positions for seconds, minutes, sometimes all day. With that said most traders are doing a lot of intraday technical analysis to be able to make their trades, and this type of intraday trading comes with a lot of volatility and risk.
Before you quit your job to pursue day trading full-time, you want to build up your risk tolerance. Risk tolerance is a process and it usually comes from:
Before thinking about quitting your job to day trade full-time, you may want to have a few years of experience underneath your belt.
You need to give yourself some time to develop your trading skills, and have control over your emotions.
There’s no exact number of how many years or how long it will take for you take the leap of faith to quit your job. This is only something your gut intuition will let you know.
Day trading require a lot of time and commitment to staring at stock charts, so you need to make sure how to analyze charts by building on your technical analysis.
Technical analysis doesn’t just mean indicators, it also means:
And many other analysis to give you high confidence on your trades.
Another good question to ask yourself before quitting your job is, do you have to quit your job?
For some people, who do not want to take orders from no one, or can’t stand being on someone else schedule, then being a full-time trader could provide that flexbility.
But if you’re the type of person who loves their career, and just want to make extra income as a part-time day trader, then maybe you don’t have to quit your job.
Another benefit of not quitting your job is that you have a second income source – which is better than having only 1.
This question is pretty self-explanatory, if you’re thinking about quitting your job to be a full-time trader. If day trading doesn’t work out, do you have a backup plan?
Can you land another job?
This one is extremely important because sometimes plans do fail, and your 12 month savings could running dry.
Being a day trader is not always sunshine and rainbows, and you will have negative days–it’s just part of the gig.
Try to surround yourself with positive, and supporting friends and family to help pick you back up.
I think, I can speak for most of us, we all want to be millionaires being a day trader, but the truth is we need to set realistic and measurable goals.
For example, “I want to make $1,000 this month in profits.” This is a measurable and realistic goal that a lot new traders can achieve.
Another measurable and realistic goal can be, “I want to make high probability price target trading decisions.”
Setting realistic price target expectations, is measurable and very realistic–as long as the price target is not +$5 out the money.