XAO (ASX) Short Term Trading Week Starting: 3 Sept

Originally posted by markeewan ↑

Thanks for the input @Freehold, and absolutely it is a big consideration being able to handle the sequence risk of giving up work and then immediately being hit with a bearish market.

No one wants to be collecting Woolworths trolleys from the carpark after a corporate role and that is exactly what can happen if one is out of the workforce for a number of years.

But then it is a dilemma, because when does one jump from the safe ship to the uncertainty of trading as a source of income? When does one move from what is bearable, but not your real life passion, when does one overcome the fear of failure and be as prepared as possible?

Like many things in life, there is no certain outcome and my wife had some wise words when I told her I was considering retirement. She said, "make sure money enough".

No pressure though.

The challenge is how to be as prepared as possible for anything the market can conjure up.

I will throw it open to others who have more experience and can comment. If you are trading full time, what do you wish you did differently, what skill set should you have had at the outset?

Is three years expenses in cash a large enough buffer or should it be more?

Should you have a second source of income, eg consulting, as a safety net?

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Well, that's the million $ question isn't it? I recon it is different for everyone and there's no surefire recipe, as everyone's life situation and skills (luck?) is different. I'm real big on security, so my bible is the IT mantra: Always have a backup. Then have a backup of your backup, and even two more survival emergency backups stashed away somewhere separate from your work AND backup. Translating this to full-time trading, I believe everyone takes a huge risk not having a secondary, and even tertiary income source lined up just in case when going into full-time trading, even on top of the almost compulsory 2-3 years worth's of living costs put away for rainy days. No matter what an ingenious trader you are, or rather you believe yourself to be, if you have no hedge somewhere, you can fall prey to Mr Market just as much as any gullible rookie, especially when all clouds pour rain from every angle and pros are out for blood (like now). When that happens, you must have a passive income source to fall back to, even if it means to survive on 2 minute noodles for a while, otherwise you have to get back to the 9-5 grinder at a much lower level, and you can kiss goodbye to full-time trading for a long time if not forever.

I'm trading full time for over a year now, but I did not even consider it until I could not set up my life on a way that I can treat this a hobby while I keep my businesses running with my personal management involvement time reduced and flexible around trading hours. Even this is a risk as business is too volatile and I cannot always rely on the cozy income coming in, but at least this way I can increase my involvement in it any time if needed, worst case I go back full time (meaning 60 hours a week LOL) doing the thing that steadily works, and just reduce or stop trading if it falls over, without having to re-start my life after loosing everything. Would that be business, a large sum stashed in an income fund, income producing properties, or well paying dividend shares, it does not matter, but have a survival income apart from trading. Even if you rely on 2-3 years worth of living expenses stashed away you take a huge risk, as many people who loose their trading capital are tempted to tap into this stash, and when its gone too, you are back to ground zero.

Just my 2 cents, good luck and trade safe!