Earning income from derivatives

Hi Everyone

I have been trading in the Australian stock market over the past 6 years and recently started a margin loan account. To date I have been successful with this strategy but the market has done extremely well during this period.

I'm now ready to take my investing to the next level in an attempt to learn how to not just invest in the financial markets but to earn an income.

I'm looking to start small at first and if I find it successful I would look to devote more and more time to it as well as money. (Suggestions on what amount of money you should realistically start with would be appreciated as I have heard some people on start with a few thousand but others seem to have tens of thousands of dollars)

As I know very little about the derivatives market I'm interested to hear other member’s opinions on how they earn an income from the market.

For example do you trade?

Options
Warranties
CFDs
Or others which I would mostly likely not know about

And why do you trade them?

Also suggestions on how you started trading and what company you use would be appreciated.

Read the 2 threads labelled - Trading the SPI, and International index trading.

Alot of great advice in these.

Good luck.

Yes I have been reading through the threads and have learnt a lot so far.

If you are thinking about income from trading you should go about it the same way you should any business. Do a breakeven analysis first to see what your cost will be just to not go backwards. For example your cost would include but not limited to,

Data fees, Market as well as Internet.
Computer repairs, replacement and emergency redundancy systems.
Accounting, Book keeping setting up of a trading company and Tax reporting.
Likely amount you will spend on Brokerage per year.
Office expenses.

And the most important,
Wage that you will draw on to live for the first year. If you haven’t got another source of income just in case you don’t make enough money from trading you could be doomed from the start. Nothing will blow your account quicker than having to trade to replace what you have taken out because of living expenses.

If you did this as an full time job you would think you would need to make about $30,000 to $40,000 in your first year just to break-even.

So now to answer your question as how much you would need in your account that simple.
expected return say 30%
Need at least $30,000 to live

Then you would need to have at least $90,000.

Hi Codyheit

Your idea of starting off small is a very good idea especially if you are thinking of trading in the derivatives market. However, with these instruments it is imperative that you are accurate and specific with your trading systems entries, exits and profit targets.

If you can read and understand a chart in all time frames and you know each of your stocks price buying and selling levels intimately, there is no reason to pay for data.

By working a job on a partime or casual basis you will free up trading time, as well as relieve the isolation and financial stress. I would also suggest you don't tell anyone what you are doing. People get very personal and emotional about your money - they're all knowing and worse than sports commentators. Cultivate an indomitable spirit by movement of mind and body and don't take yourself too seriously.

By starting small, I mean trading one $2000 position at one time with a $2000
buffer to maintain the position size.

Cheers
Happytrader

Thanks for the great advice.