Many people dream of quitting their jobs, avoiding traffic, difficult bosses, and unpleasant coworkers, and devoting themselves entirely to trading. But does it really work? In this article, we’ll examine what it takes to make trading your main source of income, with a special emphasis on topics that few talk about: emergency funds, cost of living, daily goals, and the reality of profits and losses.
Have an Emergency Fund
Before you consider quitting your job to live off trading, it’s essential to have an emergency fund. Generally, it’s recommended to have between 6 months and 1 year of your cost of living set aside in highly liquid investments (such as a daily liquidity CDB or other fixed-income products). This amount should not be used for market speculation or investment opportunities; it’s there to cover unforeseen expenses, providing peace of mind and security in emergency situations.
Example:
- Monthly cost of living: R$5,000
- Emergency fund (6 months): R$30,000
You should keep this money in a product that you can redeem at any time without significant financial loss, ensuring it’s available if unexpected events occur.
Define Your Cost of Living and Daily Targets
To live off trading, you need to earn enough from the market to cover your monthly expenses. Suppose your cost of living is R$5,000. Divide this amount by the number of business days in the month (on average, 22 days). You now have a rough daily goal of about R$227.
However, keep in mind that not every day will be profitable. There will be losing days and days where you simply won’t see any trading opportunities. That’s why you’ll need to offset losses on favorable days when you may earn above your average target.
Simple Calculation:
- Cost of living: R$5,000
- Business days: 22
- Approximate daily target: R$227
Assess Your Capital and the Need for Leverage
For those with limited capital (e.g., R$2,000 or R$5,000), trading leveraged markets like mini index or mini dollar might be the only way to reach those daily targets consistently. If you have significant capital (e.g., R$200,000 or R$500,000), you can trade stocks with little or no leverage and still generate good results.
It’s crucial to understand that leverage increases risk. If the price moves a few points against your position, you can lose much more than you would without leverage. This requires discipline to use stop orders and rigorous risk management.
Understand That Fixed Daily Gains Don’t Exist
It’s impossible to maintain a fixed gain every single day. There’s no such thing as “earning R$100 a day” consistently. You may aim for a weekly or monthly average, but daily profits always vary. Some days you might earn more than expected; others, you might face a loss or find no viable trades.
Plan with Realistic Trades
The entry-level markets for Day Trade in Brazil are typically the mini index and mini dollar, due to their leverage and liquidity. However, you must be realistic when evaluating how many points you can usually capture, and how many contracts you’ll have to trade to reach your financial goal.
Mini Index Trade Example:
- Every 100 points on the mini index, with 1 contract, equates to around R$20 in profit.
- To obtain R$200, you’d need about 1,000 points in total (sum of several trades or a single, more extended trade).
- It’s not always feasible to extract these 1,000 points daily.
If your cost of living is lower (e.g., R$2,000), your daily target drops to around R$90. Even so, you’ll have bad days that must be offset by more profitable days.
Swing Trading Is Still an Option
If you can’t spend the entire day monitoring the market or don’t feel ready for Day Trade, Swing Trading is an alternative. In this approach, you can keep your current job while operating on the daily chart or a 4-hour chart, for example. This method requires less screen time and can be quite profitable for those who master longer timeframes.
Only Quit Your Job When You Have Consistency
The best way to know if you can live off trading is to prove to yourself, for consecutive months, that you can earn more from the market than from your current salary. That means having consistent results, not just a week or two of good luck.
- Study: Dedicate time to learning and practicing on simulators or with minimum lot sizes.
- Manage Risk: Set daily and monthly loss limits.
- Track Results: Record every trade to analyze your progress.
Once the income from your trades surpasses your job salary and you’ve built up a robust emergency fund, quitting your job becomes a much safer prospect.
Conclusion
Living off trading is not easy. It involves a lot of study, self-awareness, discipline, an emergency fund, and realistic daily goals. If you’re starting with little capital, you’ll probably need leverage, but that also increases the risk of losses. Rigorous risk management and goals aligned with market reality are essential.
If you want a safer path, keep your job while you gain experience and accumulate profits. Only after you’ve confirmed genuine consistency and built a solid emergency fund does it make sense to consider a complete move to trading.
If you decide on the Brazilian market, BTG Pactual is one of the top choices for Day Trading and investments, and it’s also a partner of our channel. Good luck with your trades, and see you in the next article!
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