Last Updated on May 25, 2022 by Neera Bhardwaj
Trading is sometimes perceived as having a high barrier to entry due to various reasons – it requires through domain knowledge, ample financial resources, and dedication to not move away from the screen during market hours. However, an increasing number of people are seen trying their luck these days. But should you ever consider quitting your full-time job to trade stocks and make it your primary source of income? Read this article to know more.
Thousands of people have taken the risky decision of quitting their professions to focus solely on stock trading in past years. Some struck gold and became wealthy by trading stocks at their leisure. Nonetheless, this group is a minority because most individuals start out influenced by the examples that they see around or hear about. But as in the case of success, a lot goes on behind trading. It may seem all floral, like a money-minting machine but trading without knowing the basics of markets and technical analysis is like shooting in the dark. Only here, you not only miss the aim but also risk your hard-earned money.
Hence, quitting your job to trade stocks full-time is a step you must carefully examine before taking. Chances are that you may fail and although this is unfortunate, it is a truth that you must acknowledge and make peace with before resigning.
This begs the question: Can you improve your chances of succeeding at trading? You can always try. Take a look at the crucial points listed below.
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In this context, education does not relate to a college diploma. It is more about having sufficient knowledge and competence in what stock trading entails. Understand the nuances of trading – what you need to look at when starting or stopping stock trading on a particular day, how to trade, what to make of various charts, and so on. Or better yet, take up webinars, workshops or courses. Plenty of them are available online.
Be emotionally prepared
Regardless of how good your trading tactics are, you are bound to lose some deals. That is the fact. As a result, stock trading is not for the faint of heart who become discouraged after just a few losses. You will also no longer get monthly paychecks or any other sort of fixed income. You would only make money when you win trades, which may not happen every day. So be prepared to deal with such losses and shut off your emotions before switching to trading full-time.
Maintain an emergency fund
As with any new task, it may take several months before you fully understand a trading technique that will make enough money for you. So, how are you going to get by over the next several months? This is why having an emergency fund is so important. Generally, your emergency fund should be enough to cover your basic necessities for at least 3-6 mth, but considering the nature of the task at hand, having a year-worth kitty doesn’t hurt.
This will not only help you sustain yourself financially but will also allow you to focus on finding out stock trading techniques that work best for you.
Choose the best trading option for you
When it comes to stock trading, there is no one-size-fits-all solution. As a result, you should select the best choice that meets your requirements and is the most effective for you. Even before you quit your work, venture out to find your trading style. Here are two of the most effective trading alternatives available to you.
Independent stock trading
Trading stocks from home is a good alternative if you want a flexible and simple trading solution. This option enables you to plan your trading schedule around your everyday activities. As a result, you have complete control over your trade. Nonetheless, the main difficulty in trading stocks on your own is that it demands large funds. So ensure you have enough financial resources if you want to trade stocks on your own.
If you believe that independent stock market trading is not for you, you can do so with a proprietary trading firm. In general, proprietary trading firms have simplified the process of stock trading for traders by providing excellent training that may help you learn about stock market trading. Some businesses also have procedures in place that allow traders to begin trading for a cheap initial investment.
It is important to remember that when you join a private trading firm, you’re really working for them. However, you are not an employee of theirs but rather a contractor. You do not have the right to a set pay. You are only entitled to a portion of their profits from stock market trading.
However, this does not negate the necessity for personal discipline if you want to make a living from proprietary trading. It will help to inquire about any proprietary trading firm’s trading models and work structure before joining. While some firms allow their traders to work from home, others require their traders to come to an office to trade during particular hours of the day. Before you commit to them, be sure you understand their terms and conditions.
Be willing to adjust to changes
The stock market is continually changing, and traders must be ready to make the required adjustments in order to make the best profits. Keep an eye on the stock market for the most recent developments if you want to know what modifications to make. Furthermore, be willing to learn from other successful traders. If feasible, seek a mentor who has been trading for a number of years to gain advice on the next steps to take.
For starters, consider a hybrid system
Considering that stock trading can be risky, it may be prudent for you do it in phases. That is to say, begin trading while working your full-time job. Once you are confident of trading for a living and also begin earning a stable income out of it, you can make a full-blown switch.
Overall, quitting your job to trade stocks is a significant step that may either make or break your bank. You, however, are the only one who can decide if it is worthwhile. As a result, sufficient and timely planning is required. It would also be beneficial to study additional trading technique materials to comprehend the complexities of stock trading better. Furthermore, look into several internet brokers to see what they have to offer and decide what is ideal for you.