Most day traders want to leave their jobs and live off the markets. Day trading may be done in two ways:
- With a lot of cash and a little return, you may create a nice monthly income. More cash, less expertise.
- Start with $10,000 to $30,000 and produce bigger returns to earn a living. Less capital, more expertise.
Below is a plan for increasing your monthly returns to at least 10%. Although with $10,000, you will make $1,000 every month, and therefore that revenue will rise as your money and/or returns increase. If you trade stocks, currencies, or futures on a daily basis, you should base your strategy on the methods explained in this article. With hard effort and skill, you might well be able to earn a livelihood day trading in seven months to a year's time.
How Long Day Trading Takes
Know the risks before day trading professionally. Day trading attracts hordes of individuals, yet few earn a profit or a livelihood. Most day traders lose most or all of their money. Day traders seldom earn a livelihood at it. It's harder to make a livelihood. Those who earn a career from the markets usually devote seven months to a year to study, practice, and trade. The following plan will make you one of the select few traders capable of making a career from day trading, with the possibility of eking out monthly profits of 10% or more.
Success in Day Trading is Now Limited to Four Numbers
You may be a winning trader if you maintain these values in the goal zones. Trading success boils down to four variables: the amount of risk taken on every trade (position size), the percentage of transactions in which you are successful, the reward-to-risk ratio, and the number of trades you actually execute. These four figures can help you day trade professionally. All numbers work.
Per-Trade Capital Risk
Control exchange risk for success. You should only risk 1% of your whole balance each deal. If you possess $10,000, invest $100 each transaction. Set a stop-loss strategy to protect 1 percent of the account. Calculate your lot size based on your entering point and stop-loss level.
One percent may not seem like much, but successful deals should always be greater. Your goal should be to take home between $150 and $300 for every $100 you put in, or 1.5% to 3% overall. Only risking 1% implies you won't lose much if you lose 5-10 deals in a row. A few profitable deals and you've recovered. Risking more than 1% may demolish your account.
Reward-to-Risk
The reward-to-risk ratio compares successful transactions against lost ones. If you consistently risk 1% of your money, your reward-to-risk ratio ought to be at least 1.5 to 1. That implies you gain 1.5% (or more) and lose 1% on transactions. To do this, put your profit target farther away from your point of entry than the stop loss. If you purchase a stock at $10 & set a stop loss at $9.85 (representing 1 percent of your account balance), your aim should be about $10.08. Lose $0.06 per share, gain $0.08 that’s a 1.6-to-1 reward-to-risk proportion. Win rate depends on reward-to-risk.
Win Rate
Win rate is a proportion of deals won. Your win percentage is 53 percent if you win 53 of 100 trial transactions. Win rate affects reward-to-risk.
Statistics Combined
If these numbers are off, your results will suffer. Trading profitably is a fine line. If you make 100 transactions, winning 50 of them results in a great income, but winning just 40 results in a break-even or a loss after fees. You may go from being lucrative to being unprofitable by having a little decrease in your win rate or reward-to-risk. When you have a losing streak, increasing the amount of money you risk on each transaction might soon wipe out your whole account. 50% wins doesn't imply you'll constantly win, end up losing, win, end up losing, win. Randomize wins and losses. You could execute trades every day and lose them all on some days while winning them all on others. No daily trading limit exists. If you want to make 10% every month, you need average at least two transactions per day.
Only a demo account can tell whether a strategy can achieve the aforementioned figures (or better). Take a ton of trades, and assuming that the technique delivers the outcomes mentioned above (or better), you may reasonably assume that it will continue to produce similar returns in the future, but there are no promises. Small tweaks may be necessary over time to maintain the strategy's alignment with the aforementioned metrics. Only trade a strategy that delivers such statistics. Do not trade using any technique that has not been well tested, since this will often result in a reduction in either your win percentage or your reward-to-risk proportion.
Day Trading Market
Stocks, currency, and futures are the primary day-trading markets. Creating or following a strategy that keeps the aforementioned statistics will provide comparable results. All markets give comparable returns, so don't pick solely on that. Instead, choose a market based on your interests and available cash. Day trading requires $25,000 minimum. If you possess less than $25,000, day trade commodities or currency. Futures trading requires $7,500. Start FX trading with $500. Beginning trading capital affects your revenue. 10% of $25,000 yields $2,500 every month. With a $500 balance, you will earn $50. Choose a market where you may trade with your capital. Less capital means more time before you can create a sustainable monthly revenue from it.
Summary
The numbers add up, and there are plenty of publicly accessible trading methods that allow for two day trades each day, a success rate of 50% or higher, and a reward-to-risk ratio of 1.5:1 or higher. No matter what tactics you adopt, you should limit your exposure to loss to 1% or less. The biggest issue is that, although the arithmetic makes sense after 10 or 100 deals, it is extremely difficult to keep the larger picture in mind during individual trades. Because they can't bear to lose, most novice traders will cut their winning trades short at the first sign of a little profit. They refuse to cut their losses while trading and ultimately lose considerably more than 1% since they are holding on to a bad position. That distorts up reward-to-risk ratio and might demolish their account.
Remember that victories and losses aren't equally distributed. Several deals may win or lose. A winning run does not automatically qualify you as an exceptional trader who should forgo your plan. Losing streaks don't make traders terrible. The only metric that counts is your win/loss ratio based on a hypothetical 100 transactions each month. Win well over 50 trades with a 1.5-to-1 reward-to-risk ratio, and you'll be a lucrative trader, although if you end up losing every transaction for a few days. Try out your day trading strategy on a trial account with hundreds of mock transactions to get a feel for your win rate, reward-to-risk proportion, and daily volume. After hundreds of transactions and a profitable approach, use real cash.
