How Can You Swing Trade For a Living?
One of the most common questions I get from new blog readers is: can you make a full-time living from swing trading (or day trading?) And how much money do you need?
So in this blog post, I want to answer this popular question once and for all!
Because the truth is…
While I believe you can make a full time living from swing trading, it’s not easy. And there are some very common reasons that most new traders fail to achieve their dreams of trading full time.
That’s why I want to pull back the curtain and provide a bit more insight into what is actually required to swing trade for a living full time.
So to get started, let’s review why most new traders aren’t able to trade for a living.
Why Most People Can’t Swing or Day Trade For a Living:
In my opinion and experience, many new traders attack the markets with passion, excitement and dedication. Yet despite this commitment, most new traders come up short. Why is that?
Well, there are many different reasons. But I think it can all be boiled down to two big factors. So let me show you what those are.
Trading For a Living is Hard!
This might sound obvious if you’ve been trading for any amount of time. But the truth is: trading is hard!
Markets are HIGHLY competitive. And there are millions of people (and algorithms!) trying to outwit you for stock market profits. What makes you think you can beat them?
Most beginning swing or day traders realize the potential money they might be able to make, then read a few books or blog posts, and start firing off trades.
And to make matters worse!
“Since no university or college offers trading degrees or certificates, there’s a feeling that anyone can EASILY do it!”
Because opening a brokerage account and placing a trade is so easy, many people start trading based on hope, rather than a concrete plan that’s proven to be consistent.
Instead of carefully learning over time and finding a reliable trading system, they dive in head first, only to learn the expensive way… that… trading success isn’t easy!
And unfortunately, trading full time is even harder!
That’s because not only do you have the day-to-day pressures of a highly competitive market, but you’re also under pressure to cover your living expenses. You see…
Unlike a regular job where you’re paid by the hour, trading profits don’t necessarily correlate to the amount of time or effort invested.
This can add another dimension of difficulty because although trading profits may be irregular, your monthly bills are NOT!
As a result, you may be tempted to force trades and try to squeeze money out of the market to meet your obligations.
But this can easily lead to costly trading errors. And actually, this challenge is related to the BIGGEST reason most people fail to swing trade for a living.
Not Having Enough Money is Why Most Traders Can’t Make a Living:
When it comes down to it, I think the reason most swing traders and day traders fail is because they simply don’t have enough money.
The sad fact is…
“Most new traders are HIGHLY undercapitalized!”
After all, we’ve already established that markets are hard. And if you try to grind out a living without enough money, you’re almost guaranteed to lose the small grubstake you have.
…Now don’t get me wrong!
I’m not trying to be depressing or say it’s impossible to trade for a living. But I DO want to be real with you.
So think of it this way…
Most buy-and-hold investors are expecting 7-8% returns (before inflation). And the competition to beat that benchmark is tough.
Remember, 95%+ of professional active fund managers can’t beat their benchmark continuously. That’s a fact.
So if you come into the market hoping to start your swing trading career with $10,000, well, you’re in for a VERY rude awakening.
Just think about the math…
Imagine you need $40,000 to live for a year. In the Western world, that’s by no means BIG money but it is a pretty reasonable benchmark for getting by. But if you’re starting with only $10,000, that means you need to make a 400% return EVERY year!
… Do you know how hard that is?
Well, it gets worse.
Because not only do you need to make huge returns, you need to make them consistently every month in order to pay your rent, buy groceries and maintain your internet connection so you can trade.
Are you starting to see why this is so challenging?
Here’s a short video I made for you to really illustrate the simple math. Check it out if you’re curious:
How Much Money Do You Need to Trade Full-Time? [VIDEO]
Even with $100,000, you still need to make a 40% return, which is obviously easier than 400%, but still NOT easy!
And again, you have very little room for error.
So I hope you’re starting to see the point here. And I’m sorry to crush your dreams of striking it big with weekly options or penny stock gambles.
“Because while it might be possible, it’s much more probable that you’ll lose your shirt!”
And there are some caveats: if you live at home with your mom, or somewhere really cheap, you might not need $40K a year to get by.
But assuming you DO eventually want to make it on your own that’s a reasonable benchmark to keep in mind.
Now… I know at this point… you might still be wondering…
Exactly how much money do you need to swing trade for a living?
Well, it’s hard to pull a number out of the air. But if I had to pick one, I’d say you probably need close to half a million dollars in the bank before you try swing trading or day trading for a living.
… and don’t worry if that sounds absolutely impossible… there’s another way to get there which I’ll show you in a minute…
But first I just want to share the math behind this.
Because with $400-500 thousand as capital, you might be able to earn a living off a more modest return goal (like 10%).
A ten percent return is NEVER guaranteed. And there are lots of other moving pieces you need to get right in order to make this work. But at least it’s in the realm of possibility when you are properly capitalized with enough cash.
You’ll have a lot more runway and won’t be as worried about living expenses or day-to-day money pressures, which can really impact your trading.
Finally, the other thing to keep in mind is that building wealth is a long term commitment. I know you want to get rich now. BUT…
You should also feel a responsibility to grow and manage your wealth consistently over time. I don’t mean to lecture you, but taking big risks to indulge a glamorous fantasy trading lifestyle probably isn’t in your best long term interests.
Instead of obsessing about swing trading or day trading full time, why not think about how you can leverage all your skills to build wealth as effectively as possible to give you and your family the best life?
After all, that’s what most of us really want at the end of the day.
… So what’s my advice?
First: Don’t quit your day job! Because chances are, you’re going to need that cash flow.
Second: Keep learning about markets and start building systems for saving and investing consistently. Snowball your wealth consistently until it’s less risky to manage your money full time.
Or… there’s another approach….
What To Do If You STILL Want To Trade For A Living:
Look, I get it. Some people just want to be traders. That’s cool. And fortunately, you’re not completely out of luck.
So here’s some tips and a potential path you can follow if you really want to trade full time:
- Read Broadly: I don’t know how experienced you are, but I recommend reading widely about trading and investing. Learn about day trading with candlestick patterns, efficient market theory and fundamental value investing. Understand all the different ways people are trying to make money in the markets. Reflect on what resonates with you. Go deep on the things you’re attracted to. One good book in particular is Trading for a Living by Alexander Elder.
- Get a job where you can trade: Remember, the journey of a thousand miles starts with a single step. If possible, try to get a job where you can watch the markets a bit, and maybe even do some trading. Most office jobs are actually pretty good with this, especially considering online brokers have ever-improving trading apps. Our world is so connected you can keep tabs on your stock trades from almost anywhere. And if you can get someone to pay you while you learn, this really reduces your risk.
- Start trading on a longer-time frame: I’m always a bit astounded by how many people want to be day traders. First, I think sitting in front of a screen all day every day is a bit boring and can quickly become unhealthy. But it’s also really hard. Markets move fast on short time frames and reacting to these moves all day can be an adrenaline rollercoaster rife with mistakes. On the other hand, if you swing or position trade using weekly charts, you’ll see things unfold a little bit slower. This gives you more time to think, reflect and properly execute your trading methodology. You need to walk before you can sprint.
- Join a prop firm: If you really want to trade for a living but you don’t have enough money saved up, then joining a proprietary trading firm might be you best bet. If you’re not familiar, these firms will give you their money to trade. And as far as I know, it’s the easiest and fastest way to get millions of dollars in buying power so you can make enough money to live on. Just be warned, most prop forms are day trading shops and they vary in terms of the kind of training and education they provide. Plus, you usually have to share 50% of your profits with the firm. Nonetheless this is probably the best way for new traders to get started trying to trade for a living.
Conclusion: Trading For a Living is Hard But Doable If You Have Enough Money
I hope this article has given you a sense of what it takes to trade for a living. While it’s certainly doable, it’s also challenging in a wide variety of ways.
Personally, I encourage you to learn about markets and try trading part time before diving in head first. And if you’re truly committed to the cause, a local prop trading firm might be worth a closer look!