A living expense fund is also an absolute must for all full time traders. It is not necessary for part time traders as it is assumed that you earn your living at something other than trading and therefore pay for your living expenses with this income. The living expense fund should contain a minimum of 12 months but ideally 24 months of living expenses that you will live off of until you become a successful full time trader. Living expenses are considered expenses incurred to maintain your current lifestyle.
How is a successful full time trader defined? That is when you have the discipline to consistently follow your trading plan and money management rules and when your trading account shows a positively sloping equity curve with modest and short lived draw downs. What this means is that once your winning months are at least 3 times greater than your losing months and that your winning months are at least 40% of your total trading months you are a successful trader. (For example your average winning month is $3,000 and your average losing month is $1,000 while you have had 10 winning months out of the past 24 months) Under no circumstances should you believe you are a successful trader if you meet the aforementioned criteria prior to trading full time for less than 12 months no matter what your account statement says. Ideally, you should really have 24 months of full time trading under your belt while meeting the criteria above before you can call yourself a successful trader.
Don't think that you will reach successful trader status right away. Some of the most successful traders of all time took 5 or more years of full time trading before they were able to fine tune their psychology and system to achieve successful trader status. Once you have achieved successful trader status, there is really not a need for this living expense fund. Therefore, you can close this account and do as you please because you will still have your emergency and reserve funds in case you hit a bad stretch of trading.