Forex trading is the place where all kinds of people buy and sell currencies for a reason: to make a profit. Whether everyone succeeds or not, that’s another story.

The decision of buying or selling a currency pair comes at the end of an analytical process. Either technical or fundamental, the reasons behind a trade come from the methods used.

Traders come to financial markets and Forex trading in particular because of its potential. It keeps the financial independence dream alive, as slowly but inevitably all traders end up thinking “what if I’ll trade for a living?”.

When trading for a living, it means all working hours (and more) are dedicated to Forex trading. Because the markets are open all week, challenges arise all the time, at every hour.

While many wish to trade for a living, they don’t realize what it takes to do that. Hence, this article aims at explaining the ins and outs of trading for a living, what are the pitfalls but also the opportunities for doing that.

Trading for a Living Explained

Trading for a living begins when trading stops being a hobby anymore. And, continues when monthly bills end up being paid from the income stream generated by trading.

As it is the case in most of the capitalistic countries, when trading for a living as a retail trader, one is subject to declaring the profits. Typically, this is done on a yearly basis, when the income corresponding to last year is declared.

What remains after paying the taxes is the true profit from trading. Divide it by twelve months, and if it is enough to make a living of it for you and your family, then trading for a living makes sense.

The reason we mention taxes here is that most traders ignore them. All you hear is how they bought here and sold there (mostly buying at the bottom and selling at the top because this is what human nature does to all of us), and how much profit was made.

In reality, slash that profit by the tax-man cut and divide the rest by twelve. This is trading for a living explained so that everyone understands.

Let’s review the trading costs again:

• commissions and spreads – belong to the broker as a fee for the services offered
• swaps – mostly negative, are a cost for keeping positions open overnight
• deposit and withdrawal commissions

Only after deducting these costs and paying the due taxes, traders have the real profit made from trading. A simple calculus tells them if they are ready for trading for a living or not. More precisely, if they can afford it.

Advantages of Trading for a Living

Independence tops the list. That is financial independence, first.

Those willing to take their chance in Forex trading love financial markets. When earning a living doing what you love, no effort seems too big.

Trading for a living also gives traders the freedom to plan their trading activities accordingly. Hence, planning the working hours too.

Here, the size of the trading account and the trading account type play an equally important role.

Some traders use short-term trading strategies, scalping their way in Forex trading. This is a time-consuming activity that keeps them “glued” to the trading screens. They have to put the screen hours day in, day out.

Some other traders use theories like the Elliott Waves. While accurate, using it as the sole base for Forex trading is a time-consuming process. Again, traders end up spending a lot of time in front of the screens. In most cases, more than working a regular day job.

Finally, some traders use the bigger timeframes to trade. They blend technical analysis from the daily charts and above with fundamental and economic news before opening a trade. Obviously, they have more time on their hands and use it to strengthen the money management system and to research the fundamental side of every trade.

Trading for a living is like running your own business. You need to plan all the steps, the potential income, the expenses, and the make sure your trading generates enough to keep the lifestyle wanted.

Disadvantages when Trading for a Living

To reach that level of time and financial independence requires sacrifices. While it seems a piece of cake to buy and sell currencies, doing that day in and day out is a tremendous task.

If you add to this the pressure that mounts every month when the bills are due, you have the picture of the true challenges when trading for a living.

The problem comes from how the markets react. The thing is that they don’t move all the time.

In fact, currency pairs spend a lot of time in consolidations, sometimes for months in a row. When such consolidation takes place on essential currency pairs (e.g., EURUSD, USDJPY, etc.), the entire Forex market becomes petrified.

Hence, the only thing to do is wait. However, when trading for a living, every day has a cost, and inactivity is expensive.

Therefore, one of the most significant challenges of trading for a living is to find a balance between trading and sitting on your hands.

Typically, the way to do that is to have yearly goals. However, to run a yearly goal it means to have enough money put aside to survive for an entire year. At least!

And what if there’s a year when you won’t make a profit? Everything is possible in Forex trading, and if it is the living style you choose as your career, make sure you understand that negative years are a reality. Better be prepared for them in advance!

Tips and Tricks to use when Trading for a Living

Here’s a list with a few tips and tricks to consider when trading for a living:

- Ignore lower timeframes

• this way you’ll ignore the noise that tells you very little about the long-term picture

- Be well-capitalized

• don’t trade with money you can’t afford to lose as the pressure will mount and it’ll lead to wrong trading decisions

- Have yearly goals

• this way you’ll deflate the tension of making it every month and end up facing pressure given by consolidation periods better

- Have a few years cash buffer for living expenses

- Don’t force a trade

• let the market come to you
  

Conclusion

Everybody dreams of becoming a professional retail trader, but few know what to do when reaching that point. It is like a dog that for his entire life chased the neighbor’s cats and one-day corners one and realizes it doesn’t know what to do next.

The point here is that Forex trading can give you everything. But also, it can take everything away from a trader.

Hence, careful planning and consideration is of utmost importance in Forex trading. When trading for a living, trading stops being a hobby anymore. Real-life challenges kick in!