»Fast Profits Daily by Equitymaster

On This Day - 10 NOVEMBER 2021
Before Quitting Your Job to Trade, Watch This

Vijay Bhambwani, Editor, Fast Profits Daily

I've received a lot of queries from people, especially after the covid lockdowns, who either want to consciously quit their jobs or have been out of jobs and want to take up day trading for a living.

Is this a good idea? Should you quit your job to start day trading for living?

This is a complex topic and I want to do justice to it in this video.

Let me know what you think in the comments. I love to hear from you.

Hello friends, this is my Vijay Bhambwani here. I hope you're doing great in the markets and the markets are treating you well. Also, I hope I'm able to add a tremendous amount of value to your trading and investing experience.

In this video, I want to touch upon a topic which I am sure interests almost all of us. You see, I've been getting a lot of queries from people, especially after the covid lockdowns have been triggered from people who either want to consciously quit their jobs or have been out of jobs and want to consciously take up day trading for a living.

So the hot topic is, should you quit your job if you have one? Should you quit your job to start day trading for living, especially if you've just started trading?

Now you see, the answer is far from a black and white, cut and dried, yes or no. This is a very complex issue. This is a sensitive topic. What happens to you in life will depend upon your choice. So we take it up from there.

Number one. What you are seeing the market is a recent phenomenon. It is only now that what you buy goes up either on the same day or at best, in the next couple of days. It's a bull market and a raging bull market.

So will this continue forever? I don't think so. I think there will be corrective phases and those corrections will be equally vicious. Are you prepared for that? Number one.

Number two. Once the monthly cheque stops coming, the monthly cheque meaning the salary, believe me, a whole lot of us turn into cats on a hot tin roof on a summer day. I mean, you're going to be jumpy. Every time I trade goes against you, you're gonna get worried and you're gonna make more and more emotional mistakes.

So imagine if the monthly cheque is to stop coming. How long will you be able to trade without being pressurised about the monthly bills?

Number three. Now, this is the crux of the argument. This is financial. This is behavioural finance and it is also a trading money management related item. Hypothetically assumed that you need Rs 1 lakh, 100,000 rupees per month, basically make both ends meet. Now a month gives you 20 trading days to be able to make that Rs 1 lakh. If you were to break down that goal, it comes to Rs 5,000 a day.

Now the markets are just not made to basically give you money on a platter. You are not going to make Rs 5,000 or higher, day after day like clockwork. There will be some days when there are going to be no trades. There will be some days when you gonna get money. There will be some days, unfortunately, when you're going to lose money.

So what really happens to a trader who makes 5,000 bucks? Hey, you done nothing great alright? You've just done your job. This is something that you were supposed to do.

But for whatever reasons, you were not able to trade on day one. You were unwell, you had to visit somebody, attend a family function of whatever. There was no trade set up. You didn't know what was going on in the market and therefore didn't trade. Whatever.

On the next day, you will have to make double the amount of money to just get back on track. Not just before you start thinking that when you have to make double the amount of money, the stress will be doubled, banished the thought. The stress will multiply.

And in the unfortunate event where you lose Rs 5,000 on day one, you've going to have to make Rs 15,000 on day two. 5,000 to make good of the loss, 5,000 to basically cover up the loss that you were supposed to have fulfilled on day one, and 5,000 for day two. So you will have to make triple the amount of money just to get your target back on track.

Now here the trader comes under a tremendous amount of duress, and believe me, when your mind and under pressure, it can play tricks on you. It will start showing you signals. It will start showing you trades where none exist. It will start showing you signs of fear where fear should not have been an option. So you will basically start taking inappropriate decisions.

Now, these are behavioural aspects that a trader must be absolutely non-negotiable, geared to fulfil. Once you've done this, then you should consider possibly because I am not done yet, possibly consider quitting your job. Now let's go down to another aspect of trading.

What if your trades were to be kept aside as a profit centre and your house, your home and hearth, and your survival expenses, were not to basically infringe upon your trading capital. Now this is the ideal situation that every trader should have.

As a matter of fact, I believe in this a full 100%, which means you create a passive income or a fixed income on which, you should be able to run your house if not even turn out a mild amount of saving, after the interest income covers your household expense.

Now going by that 100,000 bucks a month example, assuming an average fixed income, especially high grade sovereign debt income, which will yield approximately, I'm using the word approximately, don't hold me on to it, approximately 6% per annum, I would suggest that you first before you quit your job, you first create a float of a minimum bare bone minimum Rs 25 million i.e. Rs 2.5 crore in fixed income. The higher the better.

If somebody viewing this video says look am already got Rs 5 crore in fixed income, now what? Hey, you're fulfilling that minimum criteria by a long, long shot and then some. All the more power to you.

But when you have this amount of money and the interest per month will mean that you do not have to square up your trade for the want of household expenses, you are not diving into or infringing upon your span margin account which is lying with your broker, then you will not be trading under pressure. You will be trading whenever your signals justify the trade, either entry or exit or even profit taking, and you will be performing optimally. So unless you have this kind of a float, don't even think about it. Don't quit your job.

Number three. You have this float of Rs 2.5 crores, Rs 25 million and the passive income is already coming in. The interest income is already coming in. Then what? Even then, I would suggest keep one years, if not two years, household survival expense as liquid investment. Liquid so that you still have a big buffer, a big margin, a big cushion, and you still are covered in the God unforeseen circumstances Act of God, sicknesses, illnesses, emergency repairs to the house or want not.

Then you have to put up a float for your trading account. If you scroll down the playlists, I have recorded a video with the title, how much money you need for short term trading. Please go through that video as well. If you're thinking of making Rs 100,000 per month and I'm now reverse engineering. If you're thinking of earning Rs 100,000 a month from trading, do you think it is possible to earn 2% per month from your trades on an average? I am not saying regularly. Please, you will not be able to make money 20 days out of the month. There will be losses. They will be profits. There will be days when you don't trade at all. So we're taking a ballpark hypothetical figure. Will you be taking 2% home per month, month after month, from trading?

If you are looking at a 2% return, then you are looking at a minimum, a minimum Rs 50 lakh as a float to be able to collect Rs 1 lakh on an average. Higher the better, of course, but you will need that much.

So all my friends who are so gung ho about quitting your job tomorrow morning, I want to be my own boss, I don't like my office, I don't like my work, it's too much pressure, it's too much work, and I can make money in six hours and fifteen minutes of trading between 9:15 AM 3:30 PM. I can be my own boss. Unlimited riches coming my way, sitting on a beach in some foreign location, having Pina Coladas and enjoying life. All that is fine, but the reality is that you have to sit down and put numbers to the game.

And then comes the part where I think it concerns you. Trading is not something that comes to you like this in a jiffy. It takes a great deal of experience to be able to trade in a bull market, a bear market, and a chicken market. A chicken market is when the markets are going sideways. There is no clear trend. So how much is the trading experience required?

Now sports trainers basically tell us, Wimbledon or Olympic level champions, start early, and they put in a minimum of 8-10,000 hours of practise before they reach the level of proficiency that they have reached. Now take 8-10,000 hours, divided by six hours and 15 minutes. That's how much, how long a stock trading session is, or divide it by 15 hours, that's how long commodity market average trading session is, and you have a ballpark.

Some guys will get it faster. Some might take that much time. Some might take a little longer. But take the most optimistic scenario and say, okay, 10,000 hours divided by either 6.5 hours or 15 hours, depending on whether you're trading equities of commodities. This is how much exposure, training, trading, and experience I need before I can kick the job.

Do remember that all these conditions all these criteria, capital, fixed income, one or two years of household expense money to be set aside, experience in the market, must all be fulfilled together. You can't say I have one of them, but not the other two or other three. Not happening. It's not happening. So you either have it all or you don't have it.

Once you fulfil all these criteria, then, of course ideally speaking, your trading profits from your trading endeavours should be higher than your current salary. That is when I think you're ready. Do not displace an existing structure unless you already have a new structure in place.

If you're earning Rs 100,000 from a salary and you're going into trading assuming that you're a good trader and you're churning out money month after month but hey, if you wanna make out 40,000 a month, if you ask me, you're suffering a lower lifestyle. You will be compromising on things. You will be cutting corners, and at some point in time, you might even get exhausted.

So reach a level of proficiency where you're trading income is either equal to or higher than your current salary and then, by all means, consider quitting your job. I hope I've answered almost all the questions that would have come to your mind.

In the comments section I would love to hear from you. Good, bad or ugly, keep it coming. If you have questions about it, I'll be happy to answer and before I sign off from this video, a gentle reminder to subscribe to my YouTube channel if you haven't already done so. Click the bell icon to receive instant alerts about fresh videos being put up out here and help me reach out to fellow like-minded investors and traders by referring my video to your family and friends.

Friends, thank you for your patience and watching my video. Till we meet again in my next, this is Vijay Bhambwani signing off for now. I wish you have a very profitable day ahead. Thank you. Bye.

Warm regards,

Vijay L Bhambwani
Vijay L Bhambwani
Editor, Fast Profits Daily
Equitymaster Agora Research Private Limited (Research Analyst

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