Should You Trade Stocks For A Living?

Since it is not uncommon for individuals to retire into their side businesses, it should also not be odd to retire solely into passive earning or investing

One of the most common strategies towards building wealth and attaining financial freedom is to have multiple sources of income. For some people, this means trying their hands on a few businesses while remaining in full time employment, and for others, it involves having passive sources of income – most of which are tied to one investment or the other.

Since it is not uncommon for individuals to retire into their side businesses, it should also not be odd to retire solely into passive earning or investing. However, if stocks are what you want to invest in, you would most likely be making a shift from a long-term investor to a stock trader.

Simply put, stock trading simply involves transferring securities from a seller to a buyer in exchange for money. Consequently, a stock trader is involved in trading the equity of companies with the goal of making profit on price variations.

For some people, investing in stocks is complex enough without having to be involved in the day-to-day process of stock monitoring to obtain profits. However, for the professionals, stock trading much like forex trading is a way to make good money.

One of the first things to consider in trading stocks is whether you can do it or not. Also like trading forex, no matter how much money your friends tell you they’ve made from it, starting it without understanding it to a good level is simply a fool’s game that would definitely amount to losses.

The business of trading stocks has changed over time. In terms of the ease of trading, technological advancements has set the barrier to entry really low. The required capital is little and with the many guides available on a wide range of Apps like Yochaa, a stock trader or investor has most of the tools required to be successful at it.

However, it is one thing to trade stocks by the side and it is another to be a day trader or a full time stock trader.

For one, the profit requirement changes. When investing passively, it is assumed that you are investing money you don’t need immediately. As such, losses especially suffered as a result of short term volatility would not matter because they would net off with time.

However, trading full time places you in the precarious situation of targeting immediate gains. And for the traders who are not good at handling money, reinvesting would be a challenge.

There is also the risk of the ultimate bear market or a recession. Over the past decade, the global stock market has not experienced any extreme crash. As such, traders who only just started trading might not have experienced what it means to lose all their money at once as they have not experienced any real loss.

This would have created the façade that they are good at trading. However, the people who should trade full time should not just be able to make money in average markets or in bull markets; they must also be able to make money consistently in bear markets.

If you have no plans on surviving when a big crash occurs, you are really best trading by the side because it would most probably not be a pretty experience.

Another thing to consider is the risk involved and whether or not you have the capability of dealing with the anxiety that comes with it. Can you withstand multiple blows without changing your plans, strategies, chickening out, or losing your confidence?

If you cannot, it is best to stick to long term investment with a safer source of income coming from another source.

Finally, stock trading as a full time job in its crude form also means that you would be trading on your own. This means you would lose more money than if you are part of a large institution.

In order words, it is one thing to trade on your own and it is another to be a part of a company that trades. Trading on your own, that is, retail trading, leaves you open. However, with an institution, you have the advantage of trading in large volumes – which serves as a buffer from losses.

As such, to trade on your own effectively, you probably need to have more money to spend.

It is only when you are comfortable and assured with all of these factors that stock trading can serve as a full time career path.

Written by Lawretta Egba.