So You Want To Trade For A Living: Monetizing Your Trading


If you have gotten this far in my series on trading full-time and are still intent on making the plunge, you are going to find one of the most frustrating things you will have to deal with is your income, or more specifically, the ebbs and flows of your income.

The goal of every good trader is, or should be, to make a consistent and steady return; something you can count on every week, or month, or quarter.  It’s a nice theory, something to strive for, but in the real world it’s pretty much like communism…only really works on paper.

You are going to have times when you make money, sometimes a lot of money (hopefully).  And you are going to have times when you lose money, sometimes a lot of money (hopefully not).  This back and forth can play havoc with you mind, causing you to lose focus, stray from your methodology, and ultimately undermine your ability to be profitable.  What you need is something that helps to normalize your income, that smooths out your equity curve, and this is where thinking of your trading as a business comes in.

First off let me say that I fully acknowledge that most traders at heart are mutants.  Mutants in the best mad scientist, comic book mogul, Howard Hughes-ian sense of the word.   Yeah, we give lip service to the whole “freedom” part of the story; how we can come and go as we please, decide when and how much to work, and trade on a beach from our laptop if we want to, but come on?  Why not just throw some princesses, fairy dust, and a pink unicorn named “Spirit” into this yarn while we are at it?

At the core of our freakish psyche we know why we really want to trade; so we don’t have to deal with customers, or employees, or bosses, or HR departments, or OSHA regulations.  We basically just want to sit in a room, by ourselves, and coin money without distraction, free to urinate in a Gatorade bottle at our desk if we wish.  And as beautiful and uplifting of an image as that seems, unless you are an extremely talented trader, it is just not a reasonable reality; or at least not one you can expect to achieve as a newbie full-time trader.

In a previous post in this series I mentioned that the most important thing that you could do in preparation for making the transition to being a full-time trader was to track your trading for an extended amount of time (minimum one year) and to be able to display your percentage return and drawdown in report form.  And here is why.

By treating your trading like a business, and by being able to show a track record of trading success, it opens up ways for you to monetize what you are already doing, with the goal of providing additional streams of revenue that will help stabilize your income, and give you piece of mind.  There are numerous was to do this, some of which I have listed below, starting with those that are the most intrusive to your trading and ending up with some which are very lightweight add-ons.

Running Money

A lot of retail traders don’t think about this option, and for good reason.  There are a variety of regulatory, legal, and structural issues involved in setting up what in essence is a hedge fund and these may be too complex and cost prohibitive for the average full-time retail trader to attempt, especially as a newbie.  However, if done correctly, the compensation may be worth the aggravation for the more adventurous of traders.  And it really just comes down to math.

If you have one hundred thousand of your own money to trade and you make twenty-percent in the first year you pocket twenty grand before commissions.  But if you are trading one million dollars of client’s money and make that same twenty percent, based on a normal two and twenty structure, (two percent of total assets as a management fee and twenty percent of profits as a performance fee), then your compensation for the year would be sixty thousand dollars. Ding, ding…..!!!  That’s two hundred percent more income than if you were just trading your own money.

And if you are really good, and make outsized returns for your clients, you can raise your fee structure to “two and thirty.”  And if you are really, really good; like Stevie Cohen good, you can raise your structure to the same as SAC Capital’s “three and fifty.”  Of course SAC has averaged a 30% annual return over the last twenty years and only had one losing year, but its nice to have something to shoot for.

This is a “heavyweight” way to monetize your trading.  It involves approaching high net worth individuals and “selling them” on your ability to bring them unusually high returns; which is why having a documentable history of your trading is so key.  This, in addition to giving them some feel for your performance, will show them your methodology, and their expected average drawdowns, all information that most serious investors will demand.

Trading Newsletter/Chat Room

You are already going to be doing charting and analysis for your personal trading, so why not make it available to others and charge a monthly fee?  A nightly newsletter showing set ups or potential trade candidates is a pretty simple way to do this.  This option is definitely much more lightweight than running money, although it will require you to manage your subscriber base and set up some sort of payment processing like PayPal.

Another option that can be either an add-on to your newsletter or offered as a standalone service is a trading chat room.  During the trading day you can allow subscribers to login and watch your live commentary and trading calls while you trade your own account.  You can choose the amount of back and forth interaction you have with your chat room participants based on your comfort level.  I’ve seen traders even run their chat rooms with audio or video chat, both of which can be muted if you need to bring the Gatorade bottle out.


Still a mutant?  Still want to just trade your own money?  I wish you the best of luck, but if you find that the swings in your P&L are making you uncomfortable, don’t be afraid to branch out just a bit and leverage what you are already doing to give yourself some financial piece of mind.

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