A reserve fund is also an absolute must for all traders. It should contain 12 months of living expenses that will ONLY be tapped to pay for living expenses during periods when your trading is not profitable (and every trader goes through these). Once you get back on track, you MUST replenish this account. 3 months of living expenses should be kept in something highly liquid and the remainder should be put in a portfolio of laddered CD’s that come due in regular intervals. So you initially would purchase a 6 month, 9 month and 12 month CD and then roll each CD into a 12 month CD as it comes due. Reserve fund will be use to live off while you are paying your dues during the 1st year or 2 of being a trader. I can guarantee that most if not all will have to tap into this fund during your first couple of years as you are learning. Also if you make the transition to a full time trader and you find that trading is not for you and you need to get back into the daily grind, this fund can be drawn upon until you land a full time job. This fund should never be used for discretionary (i.e. non essential) purchases.