The first question most people ask when they contemplate trading, is how long it will take until they can earn enough to live on, from trading.  I had the exact same question at the start of my journey.

Over the years I’ve come to realise that I was looking at it all wrong. When I started unitizing & pricing my portfolio like I would a stock trading at NAV, so that I could track my performance overtime, something ‘clicked’. I realised that my trading account is actually like a fund I’ve invested in, much like the ETFs I’ve bought, or the funds in my RA or pension fund. The only difference is that I’m the fund manager responsible for the returns.

Consider the performance of our oldest listed ETF the Satrix40 which tracks the JSE Top4 index: The fund has returned a 7.8% CAGR (Compound Annual Growth Rate) over the last 24 years. If you had invested R1000 in the ETF back in 2001, it would be worth approximately R11 000 today. And a R1000 monthly investment would be worth approximately R1.3 million.

Alexandra Elder argues that the first step to successful trading, is deciding that you want to be a trader, even if it’s 20 years in the future. A while ago I wrote a post entitled “Don’t quit your day job to trade”. One of the main things I pointed out there is that your job, is a source of funds for your trading account.

In that sense, you view your trading account as an investment fund that you’re invested in (and adding to, with the intention of compounding your returns). Unfortunately, general accepted research finds that 75% of active fund managers under perform the index. So there’s a high likelihood that you too, will under perform the index (especially if you’re rushing to out-perform).

Rather than obsessing with what returns you can expect, think of your trading account as a long term investment. Focus your energy on the craft of trading itself. Over the last 5 or so years my trading account has grown an average of around 25% a year (disclaimer: there’s an outlier year that skews the numbers quite significantly). While I haven’t yet had a losing year, it’s taken several years to learn how to trade successfully.

Ultimately the returns you generate are the results of your edge and the luck of market opportunity. Notwithstanding luck, the better your edge, the better the returns from your ‘fund’. So instead of focusing your energy on some arbitrary return number, rather focus your energy on sharpening your edge. Once you’ve honed that edge, regular monthly investments in your fund can build a portfolio for financial freedom. But it’s not going to happen over night.

Traders share a peculiar characteristic: they’re fiercely competitive, but only with themselves. In practice this means that they see every outcome as an opportunity to learn, and they’re brutally honest about both their failures and successes. This also means that they’re hungry for knowledge. They don’t sleep easy with unanswered questions. And they’re seldom satisfied with just one answer.

Njabulo Nsibande is a founder of Village Trader, and Sakha Ingcebo investment club. His interest in trading began in 2016, alongside a rash of Instagram ‘fx traders’…

Find him on Twitter: @njabulo_goje.