Can You Actually Make Money Day Trading?

You don’t have to look too far online before you get an offer for an elite day trading program. The promises are massive and the commitment is often touted as only needing 30 minutes a day.  In this post, I will give you an unbiased look into the world of day trading!

 

DISCLAIMER: Cheeky Investor is an independent company that provides an information service. The content in this presentation is not advice. There is no explicit or implied endorsement of any particular companies, products or strategies. The information presented here is intended as a general overview and no responsibility can be taken for any change in the personal circumstances of any person acting on this information. You are advised to discuss your personal situation with your Financial Planner, Accountant or other industry professional. This presentation is not intended as a technical training, but will make you aware of the issues that you need to consider when deciding if or when managing your finances. We are not licensed financial planners or stock brokers. This page is purely for information and entertainment purposes.

 

Too Good To Be True?

 

Making money through trading is something that catches the imagination of a lot of people. We hear the stories of people turning $5,000 into $3m by trading stocks and get caught up in the possibilities of our own success.

 

There’s always the random Facebook ad that shows you how to make money from stocks and foreign exchange. But the big question is can you make money from trading?

 

The answer is yes. But it wont be easy.

 

 

What the Spruikers Say

 

You see, trading stocks is like mastering any other skill. It takes time and practice. Most people promoting these trading courses undersell just how long it takes to make money.

 

They promote things like replacing your income for trading just 30 minutes per day. I can tell you from my own experience that to get to the point of where you are only trading for 30 minutes a day will take years and years of practice.

 

What Professional Traders Do

 

In fact if we look at it logically why would big finance companies pay their traders to work for 12 hours a day if it were really possible to make decent money from only 30 minutes a day?

Every professional trader and fund manager in the world is paid a base salary. This salary is generally funded by the management fees that they charge the investor.

Bonuses are paid when the trader or firm hits a certain level of return. Note, that the best traders in the world have a basic income that has nothing to do with their trading performance.

 

Lessons From My Experience

 

In terms of making money, I liken it to learning to drive. You can read the “learn to drive” book  all you want, but it’s only when you get into the game and start to learn by doing before you see the results.

 

I’ve been buying shares and trading for 14 years. Mostly I’ve taught myself various strategies and learnt A LOT from many mistakes. Whilst I haven’t made millions of dollars trading I have been able to at times quadruple my investment.

 

There will be somewhat of a learning curve. Practice is what will make you a much better trader. Also, feel free to reach out to me via email if you need an extra support.

 

I remember early on in my trading where one trade I screwed up and started losing $10 a second. I panicked and closed the trade in less than a minute. Only to see it go up significantly a few minutes later. My execution and timing was fine by the book, but I reacted poorly to market conditions.

 

Setting Your Own Goals

 

In terms of setting goals, it can be very difficult to set an exact dollar figure on what you want to grow you trading account to each month. That’s why more seasoned traders aim for a percentage return over a longer period of time.

If you can constantly return 2% per month for an 18 month period you would be considered a top trader. Sorry to disappoint if you thought that you would double your money every month or make a million dollars in your first year.

It’s much better to grow your account at 2% per month opposed to being up 10% one month, than down 20% and up 25% in the third month. A systematic approach to trading will be profitable.  

 

Running The Numbers

 

Let’s run through a few scenarios for you to see the real outcome of trading for income.  

Starting Balance – $100,000

Income required – $50,000 per year or $4,166 per month. Or 4.16% per month  

 

See how the income approach is a slow burn to 0? As I mentioned before some of the best traders in the world only average 2% per month so even in the above scenario if you average 4% per month you will eventually burn your balance to $0.

 

The other aspect is that to generate this level of return it won’t be from a passive income point of view. It will be equivalent of a full time job of at least 8 hours per day.

 

And I can assure you that for all the stress and anxiety you will go through being a trader is not worth the $50,000 per year that you will pay yourself.

 

In fact a better scenario would be to work in a full-time job paying $50,000 per year and invest the $100,000 returning 12% per annum.

 

After 12 months you will have been paid a wage of $50,000 and your capital will have grown to $112,000.  

 

If you’re keen, look at this

 

If you still want to trade for an income it would be worthwhile treating it like a business or hedge fund. Pay yourself a small percentage of earnings and only a bonus when you hit a certain level of profitability.

Remember many business owners wait years before drawing an income so perhaps there is something to be learned here when applied to trading.  

Below is a schedule of a trading plan achieving a target of 2% return per month. The thing with trading is to think of it as another asset class but the return is directly influenced by your involvement.  

So generally over the long term as indicated by 30 years of data cash will return 7%, property 10% and shares 13%. If you can produce a return of 2% per month or 26.82% per year you are doubling the returns of the overall stock market.  

 

 

 

Your job now is to write down what you would like to achieve from trading. Perhaps it’s an asset that you just keep building over time.

For me I like to start with a certain amount say $1,000 and build it to $5,000. Then withdraw and do a bit of travel.

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