[abuguapo]

For anyone who already trades for a living:

It seems the more specific the MM topic, the harder it is to find any information on it.

I was wondering if any of those who trade for a living would care to share anything on the topic of paying yourself ie. trading for a living while paying yourself on a weekly basis/ bi weekly basis.

How do you take profits? i.e. not "how do you technically take profits from a trade on the chart" but "how do you take profits to put in your checking account after you've won?"

Do you use a formula that gives you a percentage and then kick some back to your trading account? What accounting do you use to pay yourself - to pay your mortgage or your car payment?

Philosophy, practical implementation, any reads you recommend?...anything. And if you'd care to mention; input on minimum size of account you think necessary to maintain while at the same time being able to make enough to pay yourself as you trade.


Any help is greatly appreciated,

gg

[brownsfan019]

I'm sure others might have complex calculations to do this, but basically what I do is:

1) Take enough to pay the regular bills + cushion = checking accounts

2) Figure out what I want to keep in the trading accounts

3) Rest goes into a mix of savings/money markets/etc

If the need arises, I can quickly wire money to and from any account.

[abuguapo]

Thanks Brownsfan,

And I guess you've captured the essence of my question. So you are figuring out your monetary requirements - on a say bi-weekly (monthly?) basis?

In other words you don't have set % you abide by? I.e...I always give myself 30%...the trading account gets 30%...and 30%+ to retirement?

Is that because you don't know how much you'll make on a given month coupled with fluctuating monthly bill requirement?

In short - you don't have set rules because you can't (no one can) predict how much they are going to pull in - not to mention you can be down - a given month?

gg

[Spydertrader]

Originally Posted by abuguapo »

For anyone who already trades for a living:

How do you take profits?

At the end of each month, I withdraw profits from all of my trading accounts leaving enough money in each account to meet the margin requirements of 40 ES contracts (my current [self-imposed] size limit for any one trade). I move these excess funds into a savings account until the end of the year. At that time, I move a dollar amount equal to my yearly expenses (plus an upward adjustment due to inflation or changes in lifestyle), and my estiamted remaining tax liability, into my checking account. As a result, I 'live' in the current year off profits earned in the previous year.

When I first started trading, I'd perform the same functions - but on a weekly basis - as my top priorty (at that time) was growing each trading account. As the accounts grew, I transitioned to a monthly budget, until finally, I settled on a yearly budget with a monthly withdraw.

The most time consuming part of this whole process involves the creation of a monthly / yearly budget. Your checkbook log (combined with credit card statements) helps with the broad strokes, but you'll want to be as detail oriented as possible when it comes to the budgeting process. However, when finished, you'll have the added benefit of knowing exactly where all your money went - and whether (or not) you want to continue spending in those specific areas in the future. I found the entire process quite eye-opening. I'm confident you will as well.

Lastly, always, always, always make sure you set aside a cut for Uncle Sam (and / or whatever governmently entity currently has its hands in your pockets). Seek (and pay for) top of the line expert legal advice when it comes to your taxes (preferably someone who specializes in trader taxes). This is one area where you do not ever want to cut corners.

Good trading to you.

- Spydertrader

[brownsfan019]

Originally Posted by abuguapo »

Thanks Brownsfan,

And I guess you've captured the essence of my question. So you are figuring out your monetary requirements - on a say bi-weekly (monthly?) basis?

In other words you don't have set % you abide by? I.e...I always give myself 30%...the trading account gets 30%...and 30%+ to retirement?

Is that because you don't know how much you'll make on a given month coupled with fluctuating monthly bill requirement?

In short - you don't have set rules because you can't (no one can) predict how much they are going to pull in - not to mention you can be down - a given month?

gg

It fluctuates b/c I simply don't know what the results will be, but usually check each month.

[DugDug]

Similar to Spydertrader.
Key to remember is that this is a business.
my advice is to initially - maintain a fairly simple lifestyle initially, keep way more than you need in a trading account (inefficient maybe but you dont want to get stuck - business risk is something a lot of people forget about - you must remember to pay the bills, especially the tax man - unless you are in the Caymans, BVI (or risking it))
Remain conservative in the trading and shuffle money off elsewhere to invest in some other traders. Which means you will probably never be a person who turns $2000 into millions. But it will (I hope) mean you never go broke. I would prefer to use more leverage in the trading account whilst trying to keep the risk similar.
Ensure you keep good records - you dont want to have to spend weeks each year trying to work your book keeping out. Keep your personal and business spending separate - makes it easier.
Depending on the amounts you have and the area you are in - corporatise yourself. taxes are usually lower. Of in the UK use CFDs (tax free)
A lot of this depends on how much you have to play with, and the lifestyle needs of family?

Or just put everything into trading and go for it. Either way you will either never need to worry about it again as you will either be back working for someone, or rolling in it.

[TradeRunner]

Originally Posted by DugDug »

Of in the UK use CFDs (tax free).

CFDs - No stamp duty, but there is capital gains tax on profit.
Spread betting is tax free.

[abuguapo]

Thanks (both) SpyderTrader and DugDug for the thoughtful responses - I'll take all your suggestions into account in forming my own strategy.

Thanks Brownsfan for keeping it real.

Does anyone have any suggestions about good resources on the topic? Anybody read anything that speaks to this specific issue?

Cheers,

gg