Hey folks, welcome to CCB. In today’s post I’ll share my thoughts on why day traders should have multiple sources of income.
Let me begin with my sources of income. I own some dividend yielding stocks, I make money from ads on my blog, I do affiliate marketing for books, I day trade and finally I own one third stake in my grandmother’s properties.
Enough flexing, let’s get back to the topic, the main reason why day traders should have multiple sources of income is, it doesn’t put you on pressure to earn daily from the stock market. When one is under constant pressure to earn for a living she/he may take a trade in spite of unfavourable conditions. This results in losses. Some of the unfavourable conditions are RSI above 80, stock at all time high and high chance of trend reversal etc.
Meanwhile if one has other source of income she or he can place a bet only under favourable conditions and do other stuff when market is sideways or unfavourable.
Another reason why day traders should have multiple sources of income is, when one blows up the trading capital she or he can stay in the game by adding fresh capital. When one is learning to drive the vehicle, she or he may learn to drive by utilising five litres of fuel. On the other hand some may need ten or fifteen litres of fuel to learn the art of driving. Here the fuel is trading capital. Some traders end up blowing huge capital and say trading is gambling. But when traders have different source of income they can infuse new capital and learn the game. Once learnt perfectly you can recover the losses and make more money. During the start of this year I blew 4% of my capital on one trade and made 12% profit in the coming two months.
Lack of money can be a reason for most of the problems. But a stable income can prevent most of the problems. Being an Indian I’d say we take job safety pretty seriously. Many people prefer a groom who has a government job over those working for Fortune 500 firms. Some years back I was attending tuition for one of the elite Indian government exam and students in the classroom included pilots, doctors etc.
Also if you have a family who depends on you, then day trading alone mayn’t be a good source of income. Imagine a situation wherein the tuition fees for your kids’ education depends on market movement. Well, that explains the risk day traders carry.
So what should you do if day trading is on top of your priority list ? The answer to it depends on your age and financial conditions. Earlier I said that you should have multiple sources of income, but the problem with that is by the time one attains it she or he would be old and the time left to make a fortune from day trading would be very little. Also day trading has a learning curve and it takes some time. But since you already make sufficient income via your other sources of income, you can spend a fraction of your monthly income by investing in good courses, ‘TIME IS MONEY’ so learn from someone who has already made the blunders, so that you don’t make them. Learning what not to do is equally important as learning what to do. If you are looking for FREE knowledge regarding stock trading then do check out my other posts.
Well the aforementioned was for the old and rich. What if you are young and poor ? I would say that you should get a job in finance. Since you love stocks you would love your finance job too. Also some of the top colleges offer scholarship for finance degrees, if you are young enough to go to college then do go. Also I was checking on the salaries of highly paid professions and people like hedge fund managers made more than tech CEOs. Also I watched some videos where supercar owners were asked ‘What they do for a living ?’ and many of them fell under the category of investment banking. However the con here is finance field too is like engineering, when the supply becomes greater than demand… you know what happens don’t you ? Most MBA grads asked me not to do an MBA and if I did one I was asked to do it from the elite colleges. Also one can take up exams like CFA etc.
Now I would like to address those of you who don’t want to do the aforementioned. If you are from an upper middle class family and young make sure you have a decent saving in fixed deposit that would give you decent interest every month. You can start trading from the monthly interest you receive. If you end up blowing your capital, you again receive the interest next month. So you will not be out of fuel while learning to drive. Eventually you’ll be a better trader. When you become a better trader you can compound your profits to generate a bigger day trading capital and a bigger profit. Also learn to take some of the profits and invest it in safe instruments which will be your another source of income. Some time back I met a trader who made 80 lakhs from 7 lakhs and then blew up the entire account. Don’t fall under such category. When you make big profit put a part of it in instruments that are safe. Also don’t trade large volume just because you made huge profit. The risk appetite varies from person to person and I say play safe. Also have sufficient balance to take counter trades. Don’t put all your money on one trade and if you don’t know adjustment strategies then just take the stop loss and exit. If you take a counter trade without understanding the market, you’ll end up blowing more money. Also you won’t be beating inflation when you have money in fixed deposit but if you generate big profits from the interest you receive then you’d be doing good, I’m bad at math so I wouldn’t be talking on how much should one make from the interest money to beat inflation. By the way stock market too doesn’t beat inflation in short run. One of my investment is down 35% from all time high. So I’d say that short term fixed deposit isn’t that bad either.
Well this post got lengthy, I’ll talk the rest in other post. If you aren’t tired yet, then do check out my other posts. Byeee 🙂
Disclaimer : Trading stocks is subjected to market risks. Please read all the terms and conditions before investing. The motive of this lesson was to teach little things about stocks for those who do not understand much about stocks. Candidcanblog.com will not hold any responsibility for any losses incurred to the readers of this post.
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