How much can I expect to make in my first year trading?

[Alchemist]

One of the most common questions I always get from new traders is “How much can I expect to make in my first year trading?”, or “How much should I be making in my second or third year trading?” By researching the subject a bit and surfing other trading related websites on the Internet, I then find out that beginner traders asking this type of questions are far from a few: there’s a bunch of them!!! My best answer to them would be: assume ZERO!

To be successful at trading, new traders must treat it as a business. There is really no way out of this. Trading is a business, and a very hard one. As with any other type of businesses, trading has its start-up costs which, in this case, are mostly represented by trading losses occurring during every new trader’s learning curve. Then, you have any other variable cost like commissions, hardware, educational materials and so on. Having said that, should a new business owner expect to make any money from his newly started venture until business picks up? Probably not. Then, why a new trader should?


NEW TRADERS' 3-YEAR TIMELINE


1st year


Traders in their first year trading should not be concerned about making money at all. Traders who are constantly preoccupied with how much they should be making should be scolded as they do not understand what trading is all about. To the question “How much can I expect to make in my first year trading?”, I would answer with a rigid “Assume ZERO!”.

It is already widely known that successful traders can take home astronomical paychecks. As a result, new traders should not really worry about the amount of money they should be making in their first year. Rather, they should concentrate on studying the markets and developing capital preservation techniques to get them over their learning curves no matter what.

Regard your first year trading as your freshman year at College of Trading. Take your time to listen to the markets, get acquainted with price and volume analysis as well as basic chart patterns and technical analysis indicators. Make sure you have more than enough money to support yourself during your “freshman” year. I would advise to always have an additional source of income as that takes a lot of pressure to perform out of trading.


2nd year

Traders reaching their second year trading who still have their capital (or most of it) intact should congratulate themselves! You are now part of a small minority. You should be very proud of yourself as you have probably managed to develop discipline and sound money management techniques by now. In terms of earnings, you should be approaching the break-even point. If not, don’t worry, you are very close to it. Traders reaching this stage are ready to start asking themselves how much they should be making by YEAR’S END.

By now you should already have a pretty good idea of what works and what doesn’t work in trading. You should already have one or two main strategies with which you feel comfortable making a few bucks with. Concentrate on those couple of strategies and slowly add a few more. Remember to always start slow and bet little money when testing new strategies out. The more strategies you have up your sleeve, the more diversified your trading income will be. What’s more, you will be able to choose from a basket of several different strategies when some of them stop working!


3rd year

You should now be net positive in terms of trading profits. You should be VERY proud of yourself. You are really among a select few! There isn’t really anything else to say to traders reaching their 3rd year but to congratulate them for their achievements. You are now ready to make some serious money at trading. So put some decent size on it, and show me the money!!!