A long time ago, the only individuals who could engage in active stock market trading were those employed by big banks, brokerages, and trading houses. Instantaneous news dissemination and the introduction of online trading have leveled the playing—or should we say trading—field. The commissions of trading services such as Robinhood, TD Ameritrade, and Charles Schwab, along with the user-friendly trading apps, have made it easier than ever for retail investors to try trading like the pros.
If done correctly, day trading can become a lucrative career. However, it can be difficult for beginners, particularly if they don’t have a well-thought-out plan. And remember that even the most experienced day traders can lose money during difficult times.
While many dream of generating substantial daily returns in the stock market, achieving a consistent 1% per day is unrealistic and unsustainable. This article explores the reasons behind this, offering a more grounded perspective on achievable returns and strategies to maximize your chances of success.
Key Takeaways:
- 1% daily returns are unattainable: Such returns would lead to unrealistic annual gains and are not consistently achievable due to market fluctuations and the inherent risks involved.
- Focus on realistic goals: Aiming for a more feasible target like 0.15% per day, which translates to an impressive 50% annual return, is a more achievable and sustainable approach.
- Diversify your strategies: Employ multiple trading strategies with different logics to mitigate drawdowns and potentially increase returns.
- Embrace algorithmic trading: Utilize automated trading systems to manage numerous strategies simultaneously and improve efficiency.
- Diversify your portfolio: Invest in a variety of stocks across different sectors to minimize losses and enhance stability.
Understanding the Reality of 1% Daily Returns:
- Compounding effect: 1% daily gains would quickly snowball into unrealistic annual returns exceeding 1000%, far beyond what sensible risk-taking can achieve.
- Market volatility: Daily returns fluctuate, including both winning and losing days. Expecting consistent 1% gains ignores this inherent market variability.
- Excessive risk: Chasing such high returns often leads to excessive risk-taking, increasing the likelihood of substantial losses that could wipe out your entire account.
Setting Realistic Expectations:
- 0.15% daily return: This more achievable target translates to an impressive 50% annual return, doubling your account in less than two years.
- Long-term perspective: Focus on building wealth over time through consistent, sustainable returns rather than chasing unrealistic short-term gains.
Maximizing Your Chances of Success:
- Trade multiple strategies: Diversify your approach by employing various trading strategies with different logics to mitigate drawdowns and potentially increase returns.
- Algorithmic trading: Consider implementing automated trading systems to manage multiple strategies simultaneously and improve efficiency.
- Portfolio diversification: Invest in a range of stocks across different sectors to minimize losses and enhance stability.
While the allure of 1% daily returns is understandable, focusing on realistic goals and implementing effective strategies is crucial for long-term success in the stock market. Aim for achievable targets, diversify your approach, and embrace technology to maximize your chances of generating consistent profits and building sustainable wealth.
Additional Resources:
- The Robust Trader: https://therobusttrader.com/
- YouTube video on making 1% per day: https://m.youtube.com/watch?v=wuN9mu_zUt0
Remember, success in the stock market requires a balanced approach, realistic expectations, and a commitment to continuous learning and improvement.
Day Trading Strategies
A trader must be able to outperform the rest of the market. Day traders employ a variety of tactics, such as arbitrage, swing trading, and trading news. They keep improving these tactics until they consistently turn a profit and minimize their losses.
It’s a good idea to abide by the following fundamental day trading guidelines: Make intelligent trading decisions Make a plan and follow it when determining your entry and departure points. Determine trends in the trading activities of the options you have chosen beforehand.
Day traders use numerous intraday strategies. These strategies include:
- Scalping: The goal of this strategy is to profit in small amounts from fleeting price fluctuations that happen all day long. A kind of scalping called arbitrage aims to make money by fixing alleged mispricings in the market.
- Range/swing trading: This tactic makes buy and sell decisions based on predefined price support and resistance levels.
- News-based trading: This approach takes advantage of the increased volatility that surrounds breaking news stories or headlines to capitalize on trading opportunities. Whether an announced merger or acquisition will proceed or not is one sort of news-based trading.
- High-frequency trading: These tactics take advantage of minute or transient market imperfections using complex algorithms.
| Day Trading Strategy Breakdown | ||
|---|---|---|
| Type | Risk | Reward |
| Swing Trading | High | High |
| Arbitrage | Low | Medium |
| Trading News | Medium | Medium |
| Mergers/Acquisitions | Medium | High |
| HFT | Medium | High |
Why Is Day Trading So Hard?
Because day trading is fast-paced and the financial markets are complex, it can be difficult. It forces traders to make snap decisions based on current information, which can be difficult, particularly when the market is erratic. Technical analysis, pattern recognition, chart interpretation, and the comprehension of how economic events impact market movements are all skills that traders need to possess. Furthermore, emotional restraint is essential for day traders to avoid common mistakes like overtrading and making decisions based solely on their feelings. Success in day trading is difficult due to the steep learning curve, requirement for discipline, constant strategy, and capacity for loss-taking.
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FAQ
Is it possible to earn 1 percent a day trading?
What is the 1% a day trading strategy?
What is the 1% rule for day trading?
Can you make 1 percent a day trading?
No, you cannot make 1 percent a day day trading, due to two reasons. Firstly, 1 percent a day would quickly amass into huge returns that simply aren’t attainable. Secondly, your returns won’t be distributed evenly across all days. Instead, you’ll experience both winning and losing days.
How much money can you make off stocks?
If you were to earn an average annual return rate of 10%, your $1 per day would grow to become about $57,800 after 30 years. That means that by putting just $1 per day in the stock market, your profit on $10,950 would be a whopping $46,850. Can you make a living off stocks?
How much do you make a day in the stock market?
And if we were to translate that into daily returns, we’d need to make around 0.15% per day, provided that one month has 22 trading days. So, in order to achieve the kinds of returns that the stock market only manages to achieve a few times each century, we’d have to make around 0.15% per day.
What is the 1% rule for day traders?
The 1% rule for day traders limits the risk on any given trade to no more than 1% of a trader’s total account value. Traders can risk 1% of their account by trading either large positions with tight stop-losses or small positions with stop-losses placed far away from the entry price. The profit target on these trades should be at least 1.5% or 2%.