HOW CAN I MAKE MONEY DAY TRADING?
How much money can you make day trading? Great question.
Day traders are not required to disclose their trading results to anyone but the IRS and because of this it is tricky to come up with an average of how much you can make. There are many strategies in trading. This, along with how much capitol traders are working with, must be taken into account.
In their 2011 research paper “The Behavior of Individual Investors,” Professors Brad M. Barner and Terrance Odean at University of California, Berkeley discuss how those who traded without diversified portfolios usually saw an average loss of money. There are also fees with transactions, so it is really important to have that proper education before attempting to make money during day trading.
HOW CAN I MAKE MORE THAN I LOSE?
The best way to assure that you are making money day trading and not losing money is to set stop/loss points as well as profit taking points. It’s important to not make too much of a gamble for an individual trade. The goal is to never allow one bad trade to ruin out your account.
Many full time day traders suggest that to make money day trading you should not risk more that 1% per trade.
Therefore, if you are looking at an account with $30,000 in it, the most you should be risking on a single trade would be $300. Using this 1% strategy will lessen your losses. This takes practice and discipline and will help you to make more money day trading.
A QUICK EXAMPLE
Let’s expound on the above example to see what setting stop/loss points looks like.
If we stick with a $30,000 account, We are able to risk a maximum of $300 for a single trade. Let’s say the stop/loss is $0.04 and if the share price below $16 ($120,000 buying power/7,500 shares). With this, we can take 7,500 ($300/$0.04) shares per trade to and stay within our $300 allowed.
Keep in mind this does not include Broker commissions.