Can You Make Money in Day Trading?

by Manny Backus, Day Trading Strategy Expert

Can you make money in day trading?  While there are many people who make money in day trading, there are just as many who lose quite a bit of.  Just as with any business venture, to achieve success in day trading takes many years of experience and a great deal of time and effort to become as knowledgeable about the market as possible.  

Most people that do make money are usually ex wall-streeters, that is, those who have worked in the stock exchange for a long period of time and have retired to pursue their own dreams.  They are people who have spent many years studying the market and who are most disciplined in their specific craft.  Those who think they can just trade without any experience are often recipients of a very costly lesson.  Day trading is a game of consistency.  Anyone can become lucky in the short run; however, it is making money over the long haul that is difficult.  Day trading is often about limiting your losses, since profits usually take care of themselves.

A recent report stated that out of 40 individuals chosen to determine whether or not they could become successful day traders, 20 turned in profits of 100%.  These individuals were well-trained and, fortunately for them, they became success stories.

It has also been suggested that the number of profitable day traders is an important link in ascertaining whether it should be embarked on as a career choice or not.  The question then becomes: As a whole, do day traders make money or lose money?   To bring home this point more succinctly, a study used a hypothesis in which approximately 10 out of every 100 people who are day traders make money.  If one were to assume the average loss for each of the 90 individuals is $50,000, while the 10 profitable traders earned an average of $1 million, it could be said that the expected return for all day traders is greater.

If nine lose $50,000, but the one in ten earns a million dollars, the hypothesis has changed and the outlook is quite different.  Therefore, based on the numbers delineated, it can be said that day trading is a better method than winning the lottery or gambling in a casino where the percentages are more in favor of the casino than for those who place multiple bets.

Therefore, when analyzing the success of day-traders, there must also be a clear and concise method in which not only the number of day traders who make and lose money is clearly defined, but also how much they win and lose as individuals or as a group. Whatever analysis you choose to agree with, day trading is most certainly for those people who are not only in a financial position to day trade, but can undergo substantial losses as well.

As an example, let’s assume Ed has decided to become a day trader full time, after having just retired from his firm.  Let’s also assume he has $400,000 in capital but only intends to utilize ¼ of that money as a day trader.  Putting aside living expenses and other costs, Ed uses the $100,000 for day trading only.  After a few months, Ed loses $50,000.  Realistically, Ed could have invested the $50,000 in stocks or bonds and received a higher rate of return.  Thus, he may have lost more that the original investment as indicated. 

While you can make money in day trading, there are significant advantages and disadvantages which come into play and for which a proper assessment of one’s holding is mandated.  Certainly if one is not in a position to day trade or does not have the knowledge such as the aforementioned Ed, the risk factors would be extremely higher.  Therefore, take stock of your assets; put aside funds with which you can maintain your lifestyle and living expenses, and then decide how much you are willing to gamble in the field of day trading.  First and foremost, however, know the market and learn as much as you can before choosing the path to this expensive venture.

One of the basic tenets most experts discuss regarding the stock market is to leave out all emotion when day trading.  It is a day filled with ups and downs, and if you become too upset or stressed, success will elude you.   Understanding your own strengths and weaknesses and accepting them will afford you the opportunity to achieve your goals.

Join a daytrading club with a proven track record and you could start making money as early as tomorrow morning. Sign up below to get more information:

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