Market Trading For A Living: The Process

Market trading for a living is an intensive process that starts early in the morning and goes well into the rest of the day, with the actual trading action only taking up 10 percent of the work involved. Here we take a look at the main things a trader needs to be aware of.

Typical Progress

Learning how to live off market trading typically goes through three stages with most people. There is the first phase of complete blundering ignorance. Most people fall out at this stage because they don’t come in with enough resources, and they lose what they have too quickly. No perfect, winning formula exists no matter how many technical averages are followed.

Stage two is the realization that despite all the best technical information, sometimes trades go well and sometimes they don’t. Understanding the reality that there is no market investment state of perfection is critical, because they the trader learns that loss will occur and the real trick is to have enough persistence and smarts to outlast it.

Eventually, a trader gets to the third stage where the importance of cash flow comes to the forefront. Having sufficient cash flow allows one to live, to trade, and to be able to take advantage of opportunities when they do occur. This is where good traders thrive. They don’t shove all their money into the market and hope that it all goes well in time to sell. They move in and out, keeping cash available for needs while having resources to buy when good entry points occur.

Figuring Out the Basics

The concept of market trading isn’t hard at all. You pick a stock and buy a certain amount by executing an order. Most people who have invested already know this process. Making a consistent return and profit is another matter. And a consistent gain is what’s needed to “live” off the market rather than lose to it. Ideally, the goal is to consistently perform so that one’s trading hits a reliable percentage of gain for the year annually. There will be bigger wins and losses in between, but the average produces a reliable gain which one can live on.

That said, while 5 percent may seem like a conservative number to aim for, the resources involved are what matter more. A person will not be able to live off of 5 percent of $100,000. He could live modestly on 5 percent of $1 million. So starting out with the right size pot is the first pre-requisite for trading for a living.

Once the resources and appropriate psychology is in place, the trader then needs a game plan and system. This is what provides the trader the “edge” needed to perform consistently. It does not involve wearing a St. Christopher’s medallion or looking for the next Google IPO. It does involve a whole lot of work and research.

The System

Everyone’s system will be different but what matters is having a good ruleset and following it religiously. This ruleset limits losses by forcing sales when parameters are met. It also forces sales to avoid getting greedy and getting slaughtered by holding on too long. In this regard, the chances of earning a consistent gain become more probable since outlier risk is eliminated.

Developing such a ruleset takes training to understand the market environment and possibilities. It takes time testing as well which should be done with real money. Psuedo-testing doesn’t stick in the head as a lesson like a good old-fashioned loss. When a system is developed, a trader needs follow it, only making tweaks outside of the market when enough time has passed to see whether an approach is working or not.

Finally, traders need to keep good records, both for tax reporting and to see what doesn’t work. Hard data is the best information to have, so traders have to accept working spreadsheets after transaction is just a necessary evil and part of the job.


Life traders still need to perform all the basic research as any other investor, understanding the companies or assets invested in before trading. However, unlike a sideline investment, life trading involves commitment to a process. You are your own mutual fund manager with your portfolio. The system and following it make the difference.

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Pete Southern

About Pete Southern

Pete is an active investor with knowledge of all sectors but his first love are IPO's. A failed day trader who now understands research. A love of economics and writing seen Pete begin to publish content for various finance blogs. Our main editor and collator of contributions, he is your point of contact via editorial at

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