Successful Way Of Trading For Living – Cory Mitchell is a Chartered Market Technician and day trading expert with over 10 years of experience writing about investing, trading and day trading for publications such as Investopedia, Forbes and more.
Chip Stapleton is a Series 7 and 66 license holder who has passed the CFA Level 1 exam and is a CFA Level 2 candidate. He holds a life, accident and health insurance license in Indiana. He has eight years of experience in the financial industry, from financial planning and wealth management to corporate finance and financial accounting.
Successful Way Of Trading For Living
Emily Ernsberger is an award-winning fact-checker and former newspaper reporter with extensive experience in government and court cases. She also serves as editor of weekly print publications. Working as a paralegal with a law firm helped her access legal, political and financial information.
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The ultimate goal of most people who start day trading is to quit their job and make a living in the markets. There are two ways to make a living from day trading:
Below are plans to increase your returns to 10% or more per month. This way, even if you start with $10,000, you can earn at least $1,000 per month, and your income will increase as your capital and/or returns grow.
Whether you day trade stocks, forex or futures, you should align your trading process with the strategies discussed below. With hard work and practice, in six months to a year, you can be one of the few traders who trade live day (compared to those who try).
Before you start trading for a living, understand what you are dealing with. Day trading attracts many people, but most of them do not make money, let alone make a living. Most people who try to day trade will lose most or all of the funds deposited in their trading account.
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Few day traders can day trade for a living. the ability to make one
Livelihoods are much smaller. Those who make their living from the markets usually take six months to a year, full-time (about 30-40 hours per week) to study, practice, and trade to reach this level .
The plan below will help you become one of the few traders who can day trade and get 10% or more off the market every month.
Create or follow a strategy to keep those numbers in the target zone and become a profitable trader. Successful trading can come down to four factors: risk per trade (position size), win rate, reward-to-risk ratio, and number of trades.
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Knowing these four numbers will help you achieve your day trading goals. All the components/numbers work together.
To be successful, control the risk of each trade. The risk per trade is not more than 1% of your account. For example, if you have a $10,000 account, you risk up to $100 per trade.
Place a stop loss order to avoid another 1% of your account. Once you know your entry price and stop loss level, calculate your position size (how many shares, lots or contracts you have in the stock market, foreign exchange market or futures market).
One percent doesn’t seem like much risk, but the winning trades should always be more important than the losing trades. Even if you only risk 1%, your goal is to earn between 1.5% and 3% by risking $100 to earn $150-300. Only 1% risk also means that even if you lose 5-10 trades in a row, you haven’t lost much money. With several successful trades, you made up your losses. However, with a risk of more than 1%, continuous losses could devalue your account.
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Risk-to-reward ratio is the ratio of the amount you gain from a winning trade to the amount you lose from a losing trade. If you always risk 1% of your capital, your risk-reward ratio should be at least 1.5 to 1. This means you earn 1.5% (or more) on winning trades and 1% on losing trades.
To do this, set a profit target that is further from your entry point than your stop loss. For example, if you bought the stock at $10 and set your stop loss at $9.95 (this risk is about 1% of your account capital, depending on your position size), your target should be closer for $10.08. If you lose, you lose $0.05 per share, but if you win, you get $0.08. This is a reward-risk ratio of 0.08 to 0.05 or 1.6 to 1. The reward-risk ratio is related to the odds of winning.
The win rate is how many trades you win, expressed as a percentage. If you place 100 trades on a demo account and win 53, your win rate is 53%. Win rate relates to the rate of return and risk.
A day trader should aim for a win rate close to 50% or higher; this way you will be a profitable trader if the reward and risk per trade is 1.5 to 1 or higher.
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Let’s say you can maintain a risk-reward ratio of 1.5 over 100 trades. You add a 1.5% bonus to your account and lose 1% of your account funds for losses.
In those 100 shares, your account capital is increased by 25%. If you win 40% of the trade, you are not making any money
Do you see how the odds and rewards relate to risk? If you are winning only 40% to 50% of your trades, try to increase it to 50% or more by making small changes to your strategy. Alternatively, you can try to reduce the risk a little or increase the reward a little to increase the reward-to-risk ratio. Small changes can turn this break-even or break-even strategy into a profitable one.
Based on the numbers above, your goal is to win more than 50% of your trades and earn 1.5% or more with 1% risk. If you do, the more transactions that still allow you to keep these stats, the better.
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If you trade one a day, that’s about 21 trades a month. If you win 50% with a reward-risk ratio of 1.5, you get 11 x 1.5% – (11 x 1%) = 5.5%. If you make two trades a day, you win 22 trades and lose 22 trades, but your monthly percentage returns increase to 11%.
If you only trade for two hours – that’s all you need to earn from the market (this is the bottom line, you will want to spend at least a few hours a day learning and practicing first) – you should be able to. get between two to six trades per day transaction that allows you to maintain the statistics above. Note that due to unfavorable conditions, some days have no trades, while others may have 10 trades. With an average of four trades per day, if you keep the above stats, you will get a 22% return on your capital within a month.
However, don’t trade for the sake of trading; it will not increase your profits. All trades made must be part of a strategy that allows you to win 50% or more with a risk reward ratio of 1.5-1 or higher. Trading when the probability of winning is low or the reward does not cover the risk will lower your stats and result in lower returns or losses.
Problems with any of these stats can hurt your results. This is a fine line between profitable and losing trades. Over 100 trades, a win of 50 means good income, a win of 40 means you will only pay commission or loss.
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A slight decrease in win percentage or reward risk can take you from profitable territory to unprofitable territory. Taking too much risk on each trade can quickly destroy your account if you lose money in succession. Winning 50% of your trades does not mean you will always follow a win, lose, win, lose pattern. Wins and losses are distributed randomly. Some days you may lose all trades, and some days you may win all trades. There is no specific number of transactions you should or must do every day. However, if you want to exceed the 10% monthly return, you should average two or more trades per day over a multi-day period.
The only way to know if a strategy can deliver the numbers above (or better) is to test the strategy on a demo account. Take hundreds of trades and you have some guarantee if the strategy produces the above (or better) results, but there is no guarantee that the strategy will produce these numbers in the future. Fine adjustments may be needed over time to align the strategy with the above numbers. Only trade a strategy if it produces these numbers. Do not trade any untested strategies as untested strategies will often reduce your win rate and/or
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