Do You Have The Stomach To Day Trade?

Do You Have The Stomach To Day Trade?

If you are an amateur, you may be playing with fire.  Your odds of success are like those of any other high stakes gambler.  The professionals really know their stuff.  Typically, they are well-established, disciplined traders who are experts in the markets.  The other characteristic is that they invest large sums of money, which they can afford to lose.  That seems strange, but in fact, they need a lot of money to capitalize effectively on small price movements.  The other factor is that when you trade larger positions, you are faced with reduced commissions compared to what a small day trader will face. They have money to risk; it is called “risk capital,” which is the money that they allocate for speculative purposes.  This is where the high-risk/high-reward investment strategy comes in to play.   They do not bet the whole farm on one trade because they could be on the wrong side of the market.

There are two types of day traders:

Professional Day Traders

These people work for large financial institutions.  I think that this is a great way to start.  First, you will be trained by professionals. You may even get a mentor who will watch over you.  They have all the latest tools for trading and the information on order flow and “stops” that are placed, so they will have a leg up on the small trader.  You will be paid a base salary and then a bonus.  Secondly, you are not investing your own money, so you have nothing at risk, except your job and your time.

The base salary at a New York financial institution “… may be about 50,000 – 7000 dollars US.  This is just enough for you to pay your cable bill, feed yourself and maybe take a taxi or two.”  They want you to be hungry and make your bonus because, if you make money, it means that you have made money for them.  You should be earning about 10-30% of the profits you bring in.

Individual Day Traders

These people do it alone.  Just being familiar with the market is not enough.  They really need to understand technical analysis and have sophisticated tools to understand chart patterns, trading volume and price movements. Learning and understanding how these indicators work only scratches the surface of what you’ll need to know to develop a personal trading style.

It’s important to remember that trading requires enough invested money in taking advantage of relatively small price movements.  Without the price movements, you won’t make money.  If you are investing small amounts of money, the gains will be minuscule and may not even cover the trading commissions you will have to pay.

Is Day Trading For you?

If you are convinced that day trading is for you, try it out.  The point is that you must develop your techniques of when to get into a position and when to get out.  It sounds like advice you would give a gambler, right?  Well, it is.  Most traders develop a very disciplined process and stick to it and know when to close out a position. You can trade just one market or even several markets. Again, do this for about a 6 months and calculate what you make and lose each day.

The success rate for day traders is estimated to be around only 10%, so … 90% are losing money. I´am even more pessimistic (or realistic) when I´am saying,  “Only 1% of [day] traders really make money.”  It’s because of the “social mood.”  Put simply, by definition, if you are buying, someone else must be selling; that is the social part.  The markets are a real-time thermometer; buying and selling, action and reaction.  If someone is making money, someone else is losing money.  You would have to join the crowd as the market is moving up and be smarter than that crowd to get out before they do, if it starts to fall.

Most people think that a day-trader is a guy who got 2 hours of sleep last night because he was trying to trade the overnight session, now he’s up at 6am trying to day-trade the next session. Many traders get sucked into trying to become a rich day-trader largely because that’s what they think is socially acceptable or “cool.”  This scenario gives me a stomach ache, which is exactly the point. Focus on the best times to day trade when volume is high and price action is at its best like the London or US open. If you are day trading for more then 4 hours a day that is in my opinion too much. 

You know my advice.  Any system of betting is not designed so that the majority of people can beat it. If you are going to dabble in day trading, set aside some money that you can afford to lose, because chances are, you will.  You also may want to remember the words of Aristotle, (who was not a day trader, by the way), “Bring your desires down to your present means.  Increase them only when your increased means permit.”

Live trades taken in the Live trading room on Monday July 8th 2019:

I continue to post the live day trading videos on my Youtube Channel where you can find more live trades from the last 4 years, all taken live in our Live Trading Room.

TRY THE ONE TIME ONE-MONTH TRIAL FOR $149.50, YOUR FIRST MONTH WITH A 50% DISCOUNT!

WHAT YOU WILL GET:

  • 1 FULL TRADING MONTH INTO THE LIVE DAY TRADING ROOM – VALUE $299
  • TRADING SPREADSHEET STOCKS, OPTIONS, FOREX AND FUTURES – VALUE $199

YOUR OFFER TODAY: $149.50 INSTEAD

OF FULL PRICE $499

 

Live Trading Room

Live Trading Room

Use this coupon code: TRIALTRADEROOM for the 50% Discount!

NO Market replay is involved, date and time are always visible in the windows taskbar! In market replay time from trading platform and taskbar will not match!

DON´T FORGET TO GET YOUR FREE COPY OF THE E-BOOK ´´ THE BENEFITS OF A RULE BASED TRADING SYSTEM´´

Hope this helps,

Alexander Soares

 


Also published on Medium.