How to Day Trade for a Living – A Systematic Approach

November 19, 2007 10:35 PM from

“Is it really possible to make a living as a day trader?” This question is asked over and over and over again by normal, ordinary people. The answer is simple: “Yes, it is DEFINITELY possible! And, better yet, you yourself can do it!” Sometimes people don’t believe me when I say that they can become successful, full-time day traders, but it’s true. And I’m going to prove it to you right now. Before we get started, I need you to ask yourself one very important question: “How much is ‘a living?’” Many people want to be ‘rich,’ but they fail to quantify what ‘rich’ means to them. Are you ‘rich’ if you have one million dollars? Maybe so, but if you told Donald Trump that he had one million dollars in his bank account, he’d wonder what had happened to the rest of it! One million dollars to Donald Trump equals broke! How to Make $150,000 Per Year Since I don’t want to get into a deep discussion about “how much money is a decent living for you,” let’s just assume that you would be pretty happy if you were making $150,000 per year, and let’s say that you are making this money with your trading. Does that sound reasonable? Let’s break it down: $150,000 per year would be $12,500 per month, or, if you prefer, $3,000 per week. This is assuming that you are taking two weeks of vacation per year. So, would you like me to tell you how you can make that imaginary figure of $3,000 per week – that $150,000 per year – into a reality? Because I can. All it takes is smarts and strategies. Start Small – Set a Weekly Goal for Only ONE Contract When day trading planday trading strategies that I use and teach call for a profit target of $300 per contract and a stop loss of $200 per contract. You’ll notice that the profit target is greater than the stop loss. That’s the beauty of it: all you’ll need is one win, and you’ll have achieved your weekly goal of making $300 per contract. ONE WIN! Just as an FYI, this is why “scalping” is so much more difficult. Most scalpers try to make $10 - $20 per trade, so you would need 15 – 30 wins per week to achieve your weekly goal. Which do YOU think is easier? Making one profitable trade or trying to make 15-30 profitable trades? “Sounds Good, But What About Losses?” As everyone in trading knows, losses are a part of the business, and you can’t avoid them. If that’s something you have trouble accepting, then you’re in the wrong industry. However, there’s a huge difference between losing big on a regular basis and losing small in a controlled day trading plan. Our day trading strategies assume a certain amount of loss, and we prepare our students accordingly. You already know that you should keep your losses small; we simply teach you how to keep them smaller that your average wins. Let’s go back to the scenario I mentioned above: you have a day trading strategy that produces $300 in profits for every win and costs you $200 for every loss. Now, if your weekly goal is $300, and if your first trade was a loss of $200, then you need to make two winning trades to achieve that weekly profit goal. Let me take this a little farther and actually break it down for you: you’ve lost $200 on your one losing trade, and then you make $600 on your two wining trades ($300 each). Your net profit = $400. Goal achieved. It’s as simple as that. Of course, you’re not always guaranteed a week with only one loss. Let’s look at a week that started off with three losses. With three losses, you are now down $600 ($200 each). So, how many wins do you need to have before you achieve your weekly profit goal of $300? Three wins. Just three wins will result in $900 ($300 each). Subtract the $600 you lost on the losing trades from the $900 you won on the winning trades, and your resulting net profit is $300. Goal achieved. Again, simple as that. “Wait A Minute – You’re Saying That I Will Achieve My Goals With a Winning Percentage of Only 50%?” YES! That’s exactly what I’m saying! Read the example above again: you lost $600 on three losing trades, made $900 on three winning trades, and came out with a net profit of $300. This means that you could pick a losing trade every other time and STILL achieve your weekly profit goals! It gets even better: let’s just assume for a minute that you do end up achieving an actual winning percentage of only 50%. Now, when you start trading again on Monday morning, what are your chances of having a winning trade? Since we’ve already established that you make $300 per winning trade, and since $300 is your weekly profit goal, your chance of achieving that goal after only the first trade on Monday is also an overwhelming 50%! You have a one in two chance of meeting your weekly profit goal in just one, single trade! So if you DO achieve your weekly profit goal on the first trade Monday morning, what next? Stop trading for that week! Just enjoy life! It doesn’t get better than that! Remember, you need to stick to your day trading plan

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