Trading For A Living Myth: Trading Is Not a Salary

Many traders dream of quitting their jobs and trading for a living. But for most people, this dream does not survive a simple look at the numbers.

Suppose you need $75,000 a year to support yourself and your family (unless you live in the US). With a $50,000 trading account, you would need to generate a 150% annual return just to cover your expenses. And you would need to do it year after year, without suffering a major drawdown or a prolonged losing period. Unfortunately, this is not possible unless you use a lot of leverage, and then eventually you will blow up.

Even with a $250,000 account, you would still need to earn 30% annually. To put this into comparison, sustaining that level of performance would put you ahead of almost every professional fund manager in the world!

A Personal Reflection

I have been trading and investing full/time since 2001. I started with a $ 50,000 deposit at a prop firm called Echotrade (now closed). In all modesty, I did fairly well and managed to make a decent amount of money. Because I earned more than I needed for my lifestyle, I invested in stocks and real estate.

But it was not easy living off my income from trading. It’s always in the back of your head that you need to perform.

But as a general rule, I would say this: unless you are not making enough to put aside for a rainy day, you should not aim for a trading career. You have to make more than you would as an employee or self-employed.

The Withdrawal Problem

Then there is another problem that is often ignored: withdrawals.

Every dollar you withdraw to pay your mortgage, groceries, and other living expenses is a dollar that can no longer compound. A trader who regularly withdraws money from a small account may never be able to grow the account meaningfully. The backtested returns might assume that profits are reinvested, but that is not what happens when the account must also pay the household bills.

This is why claims such as “make $10,000 every month from trading” should be treated with caution. Trading does not normally produce a stable monthly salary. Returns are uneven. Some months are profitable, some are flat, and others result in losses.

Do This Instead

For most people, a better goal is to trade part-time while keeping another source of income.

This is easier than ever because many rule-based strategies can now be automated. Orders can be generated and executed automatically, reducing the need to sit in front of a screen throughout the day.

A regular income allows you to pay your bills without constantly withdrawing from your trading account. It also removes much of the emotional pressure. You do not need every trade, month, or strategy to be profitable simply because the mortgage is due.

Trading can then be used for what it is best suited for: growing capital gradually over time or as diversification for a long-only stock portfolio.

Instead of expecting a small account to immediately replace your salary, you can allow it to compound while you build experience, test strategies, and diversify your sources of income.

Over time, trading may become a larger part of your financial life, but it does not need to carry the entire burden from day one.

For most traders, the sensible objective is not to trade for a living. It is to build a life in which trading is a profitable, increasingly automated part of a broader financial plan.

Oddmund Groette