Almost three years ago, in a thread similar to this one, a poster who calls himself ropunzel asked two questions about full-time trading.
I’m paraphrasing his questions here:
How do you budget monthly expenses, given a fluctuating income stream from trading?
How much trading capital is required to support a given lifestyle?
Regarding the trading capital question, I offered a formula for estimating the initial capital requirement, based on assumptions of (1) the trader’s required monthly living expenses, and (2) the trader’s proven, long-term, consistent, average monthly ROI (return on invested capital).
The formula suggested a range of $100,000 to $600,000 in trading capital to support monthly living expenses of $4,000 (before taxes), depending on assumed ROI ranging from 6% per month, down to 1% per month.
These estimates of required trading capital are higher than any suggested elsewhere in this thread, but I think they represent the reality of trading for a living in a sustainable way.
By sustainable I mean a capital base which can (1) weather monthly fluctuations, seasonal slow-downs (the well-known summer doldrums, for example), changes in market conditions, occasional (albeit infrequent) black-swan events, and temporary illnesses or other personal problems, (2) allow for stress-free holidays and vacations, and (3) grow over time.
Here’s a LINK to the post in which I laid out my formula.
Much as you might yearn to escape your nine-to-five job, become your own boss, and begin trading for a living — this is not a leap you should make without meticulously careful planning.
Adequate starting capital is necessary. But, equally important is the requirement in bold-type, above.