Can I Make Money Day Trading?

Trading has become a hot topic over the past few years, fuelled by the rise of cryptocurrencies such as Bitcoin and Ethereum and movies which glamorize the life of a day trader.

A lot of new traders rush into the markets expecting overnight riches and although a few may get lucky, the vast majority will not.

The actual answer to the question also depends on the individual and means something totally different depending on who you ask.

What is day trading?

Before we delve any deeper, it may first help to define the term day trading. There are many, many ways to trade the markets, however this article is centred around the practice of opening and closing trades within the same trading day, often referred to as a day trade.

Day traders take advantage of intraday price movements and use a variety of techniques and strategies to profit from these fluctuations in price. Day trading is inherently risky but can provide huge returns for the most disciplined traders. So, onto the big question..

Can I make money day trading?

Simple answer to this question is absolutely, yes. The stark reality though is that the vast majority of traders will lose money over the long term, so don’t give up your 9-5 just yet.

As somebody who has personally spent 10 years trading the markets and having poured thousands of hours into self-study, I can at least give you my non-biased opinion and delve deeper into what on the surface seems like a simple question.

Before continuing, I must stress that I am not a financial advisor and this is not investment advice. Always do you own due diligence and seek professional advice before committing any real money to the markets.

Setting your expectations

Before setting off on your trading journey, please understand that day-trading is a skill much like any other profession. An electrician doesn’t turn up on day 1 and successfully wire an entire house. Neither should you expect to start trading and consistently make vast sums of money in the early days. Beginner’s luck is unfortunately very real in the markets and can quickly skew a novice mindset into thinking trading is easy.

It is vital to understand that consistency is key to longevity. One good trade doesn’t define a trader, consistent profits over months and years is what will keep you in the game. In order to succeed and become consistently profitable, you will need to study and put in the hard-graft.

When I first started trading, I knew nothing. I had no experience in the financial markets and like many others, I dreamt of quitting my day job to live the trader lifestyle. I gave no thought to the journey and how to get there which quickly led to unreasonable expectations.

The only thing that I knew is that I REALLY WANTED IT. I lived and breathed it. It’s all that I ever thought and talked about.

Having spoken with many other successful day traders, this seems to be a common trait. You will undeniably go through some challenging times along the way, you’ll feel as though the whole market is trading against you, but rest assured, if you manage risk, put in the work and stick with it, you can be successful.

Where to begin…

You may have heard people refer to the markets, however this is a very broad term. Before you start, you need to determine which market(s) you are interested in trading. There are many assets that can be traded in different markets, including;

  • blue-chip stocks
  • penny stocks
  • crypto
  • forex
  • futures
  • options

This largely comes down to personal preference, how much money you have and risk you are willing to take. It may also be beneficial to speak with a professional tax advisor as this may influence your decision.

For many day traders, penny stocks have proved extremely popular due to the huge volatility and returns that can be made with a relatively small amount of upfront capital, however, please remember that where there is high-reward, there is always high-risk.

Penny stocks are typically stocks which trade less than $5 per share, often on the US markets such as the NASDAQ, NYSE and OTC markets.

In order to trade these markets, you will need to choose a broker that allows you to buy and sell shares from stocks listed on these exchanges.

Choosing a broker

When selecting a broker, there are various factors  which may influence your decision such as where you live, how much money you have available to deposit, your choice of trading strategy etc..

I would however initially recommend choosing a broker that offers a paper-trading facility. This is an account with demo money, where you can trade the markets, without putting your capital at risk.

This will allow you to get your feet wet, familiarize yourself with the software and make beginner mistakes without risk.

What is a broker?

A broker is a company that allows you to buy and sell securities. There are different types of broker, for example a stock broker, or forex broker.

What is a security?

A security is a type of financial instrument that can be traded. Stocks are a type of security know as an equity security.

A few popular broker choices. For a full list, please check out our Brokers & Trading Platforms category.

Getting an education

This is very important, please DO NOT jump in head first and start trading your life savings. Education and time in the market is key to long term success.

There are a plethora of resources online to help learn the basics of day trading, check out our Education & Mentorship section where we are building a list of both free and premium training resources.

Education is a never ending process and it is vital that you incorporate this into your trading routine. After 10 years, I am still investing my time into education to keep up with the ever-evolving market conditions.

In addition, self-reflection is an important step. Identifying your stengths and weaknessess, never being too proud to take a step back and learn from others.

Once you begin trading, ensure that you are regularly reviewing your trades. This can really help you hone in, tweak and perfect your strategy. Please check out our Trading Journals section where we have compiled a list of popular software traders use to review their trades.

Strategies and trading psychology

Consistency in the markets come from having both solid strategies as well as unfaltering discipline used to execute them. Most traders would agree that identifying a strategy with a decent win rate isn’t the difficult part. Having a strong enough mindset to execute within your rules and parameters is where it can all come unstuck.

I can vouch from personal experience that this is easier said than done. Trading psychology and controlling emotions such as FOMO (fear of missing out), greed and revenge can be overwhelming and overcoming them forms a large part of becoming a successful day trader.

In the beginning, you may be tempted to take random trades, however in the long term, this will ultimately lead to random results. It is imperative that you build strategies which formalize your rules. Some traders use back testing tools to figure out how profitable a particular strategy is, using historic data.

We will be covering strategies and trading psychology in future articles so make sure you sign up to our mailing list.

Finding the right trading tools

This site is dedicated to highlighting some of the best tools to compliment your trading and help you make better, more informed decisions.

That being said, when first starting out, I would highly recommend focussing in on your education and immersing yourself in the markets. Once you have an idea of how trading works, some of the tools can then really help you develop and inspire your trading strategies.

Check out some of the tools on our site by following these links. Most have free trials so you can explore their features without spending a dime.

Wrapping up

At the start, I mentioned the question of making money day trading had a different meaning for different people. What I mean by that is often people come into trading looking to make a quick buck. Some see it as a way to make supplemental income, others view it as a profession.

For those looking to make money quickly, yes you may get lucky on one or even ten trades. Eventually though, you will give it all back if you don’t put in the hard work required to be consistently profitable over the long term.

When I first started trading, I was convinced there was a magic formula for becoming successful. Something that you could buy or learn to become immediately profitable. Sorry to disappoint, but I can confirm that this does not exist, or at least not that I’ve encountered yet. Successful traders are people who have committed a vast amount of time to their trading education and developed both their strategies as well as their mindsets.

It’s been said a thousand times before me, but this is defnitley not a get rich quick scheme. My purpose is not to put people off day trading, rather inform on the reality so you can decide for yourself whether you think the hard work is worth it.

For me, it’s been an incredible journey where I have learned not only a lot about the markets, but a lot about myself at the same time. Financial freedom is the end goal for many and it still amazes me that the markets exist as one of the biggest wealth making machines in existence, ready and waiting for those willing to put in the hard work and study to find their own edge.

I hope this has been useful as a starting point if you are interested in getting involved with day trading. We will be publishing regular articles to help develop profitable strategies as well as building a trading mindset so feel free to sign up to our mailing list if you haven’t already.

 

Have fun and stay safe out there.

Comments

mood_bad
  • No comments yet.
  • Add a comment