Living From Automated Trading System – How Much Money do you Need ?

Well, since most people start trading forex to get out of their 9 to 5 jobs and gain financial independence, I decided to write an article just about that. This article will try to cover several aspects about how much money you actually need to become independent and star to earn a living from forex automated trading. You will see that is not as straight forward and easy as most people make it seem and it requires far more skills than the ones expert advisor sellers would like you to believe.

First things first. Can it be done ? Yes, I have been doing it for the past 6 months. Sure, I still work (because I love my job) and also have other streams of income like this website. Would I leave every other stream of income to live from forex automated trading ? Probably not, and there are several reasons why this is not the case.

But well, realistically, how much money do you need to have in order to maintain your living standards and quit your day to day job ? I would have to say that you would need to have at least 2 times your yearly income saved up. Any other way, you are just going to get grinded by the market or you’ll not make enough money as you do now with your full time job. The reason why this happens is called market exposure. In real life, it is very difficult to make money in the forex market (that is, make money you will be able to keep) and when you put your money out there and make some, you are exposing your capital.

So what does this mean ? Well, it means that the more you make, the more you are likely to lose. In profitable systems (in my experience) this means that you will sometime lose 50% of what you will eventually make. So for example, a 25% yearly profit would have a maximum draw down near 13% (not exactly, depending on the system and other variables but sort of). So if you want to be safe, you could be making 20-30% of your capital each year but to live from this, that 25% must be equal to your current yearly income so you would need 4 times your yearly income or at least 2 times your yearly income but your capital’s risk would be higher (50% profit with about 25% draw down).

Now if you are currently making 40K USD a year, do you have those 80K USD saved out there ? My best guess is that you don’t since most of the people who want to live from forex are generally in debt or have a small amount of savings generally in the order of 10 to 20% their yearly income. Now you know another reason why so many traders lose money. Most of them are undercapitalized not to say undereducated (forex wise).

Why will I continue to work ? I would not consider living completely from automated trading systems since they are, after all, high risk investments and they lack continuity in the way they make money. Most profitable trading systems will have draw downs which can last for 2, 4, or even 6 months and well, I do need food every month. So I consider automated trading systems as a saving strategy towards an early retirement. I would like to have a few million in 20 to 40 years and I really do not mind if there are a few draw down periods along the way as the money that is invested is money I do not need at that very moment.

Well, if you would like to learn more about commercial and free expert advisors I use to trade, experts I have programmed, bought and reviewed, please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

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