How much money for -good- living with tradding?

[M25]

How much base money do you think is necessary for living only with tradding? Being an economist


Let's see what people think...

[Atheles]

I need to make $30 a day for $150 in a five day work week to maintain my standard of living which is, renting a room, two cars, bicycles, internet, running water, refrigeration and heat to cook with...and Drinkin' money.

The key is low overhead. I don't have a car payments or other luxuries like cable TV and especially, I don't have a high credit card debt. I pay it off at the end of the month.


There's no reason why I can't work and invest on the side for extra cash.

[rffrydr]

Not too much.
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[nodoodahs]

I would define the stake you need to live off of trading your own account in terms of multiples of the annual budget you need to live comfortably, and I would work backwards from anticipated returns from trading to get to that multiple.

For example, here's a quick and dirty approximation.

Imagine compounding at 20% annually, on average. Annual increases in the cost of living eat about 4% of that up, so if you withdraw annually 16% of your stake to live on, you have no margin for error - AT ALL. Compound 20%, take 16% out, next year compound at 20%, take 1.04*16% of the original out, etc. The first year you have a shortfall will make you very likely to go back to work. Unless, of course, you have a string of very lucky years at the beginning.

So 1/0.16 or about 6 times your anticipated annual budget, as a trading stake, is the minimum to even begin to have a fighting chance.

I've done some Monte Carlo on this with some (to me) reasonable return approximations, and I think 15 times budget is about the minimum I'd be comfortable with "retiring" on, if using trading exclusively for my living.
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