Can Day Traders make a good living.

Originally posted by peter77
Players with tons of capital have a major handicap.

If you gave me 5 million to trade I would lose 40%+ per year.

But with a 30K account and semi-monthly withdrawals, an average net 1% per day is the norm and it takes an hour, the first hour of the day.
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I really have been trying to avoid using actual numbers in this forum. I have expressed returns as percentage of X, etc. And I don't want to get real specific still. However, let's say that I come from a neighborhood where you would expect to lose 40%. Now obviously, either something I do works in that neighborhood, which keeps me stuck there, or......I should trade a smaller account and get a ten times better return. But knowing that I started smaller and still never could get 1% a day, let me make some assumptions about this situation.

Here is what I know: I have traded in a room with a guy who makes money seemingly every day. But he never holds a position for more than 2 minutes. He scratches on most trades. He has never had a one point gain or loss. He goes home happy to be positive. He has said to me, and this is pretty much verbatim.."where else can I make 30k a year"? And the truth is, he is right. He has exceeded his expectations of himself. He is the Peter Principal personified.

So how come I make and lose more in a normal day than he makes in a year? Am I smarter? He kills me in his winning percentage. Both percentage of trades, and percentage of winning days.
Why then is he not trading in my neighborhood? He trades 500-1500 shares one position at a time. I have often had 40 or more 5000 share positions on at once. He has never taken a position overnight. I have made and lost the big money on overnights.
OK...I will end the suspense right here. The real difference is FEAR.
He is afraid to lose, so he doesn't. I know losing is part of trading, so I do it all the time. (not that I am happy about it).
It has been said here at ET, as well as everywhere else in the world of trading that you HAVE TO LOSE TO LEARN HOW TO WIN.
Sad but true. Also, it has been said that you can't trade scared. Also true.

I have worked with lots of traders for lots of years. Traders need a certain mentality. FEAR is the limiter. And understand that being FEARLESS is different from being RECKLESS!!

Now... lets say I could make 1% a day trading 30k (which I admit I don't think I can). So now I am making over 200% a year, which grosses me 60K. I am stressed out all the time, need to win every day, and still am not paying the bills.
On the other hand, I can make my measily 1/10th of 1 percent per day on the hypothetical 5mm, and get my 20% return. I don't sweat the money every day. I can take lots of losses, and yet.....what is 20% of 5mm? I CAN PAY MY BILLS!!!!!

Certainly I understand that everyone has to start small. It takes TIME to learn to trade. Learn from mistakes.
Why risk big money even if you have it to learn on? No reason whatsoever. Everyone loses when they start. Everyone! Yes, there is such a thing as beginners luck. But believe me, you are actually better off losing early in your career when trading small. If you get lucky and make money off the bat, it is luck, and you haven't learned a thing. So when your luck runs out, you have no real experience to fall back on.

You will know you are a trader when you get to the point that when you lose, you know from experience that it is just a temporary setback, and you will make money in the future just as you have in the past. At this point, you can step it up. You don't have 5mm to trade? Just 30k? Let it grow. Know when to be heavy. Know when to be light. Understand risk. Understand money management. The account will grow. People will give you money to invest. One way or another, you will grow as a trader. Just get past the FEAR! How long does that take? Anyone who says less than 3 or 4 years is a loose cannon or a liar. Trading is an excercise in self education. It takes that long. If you are dedicated, you will find a way to get through that time. It isn't easy. Nothing worth doing ever is. And there are very few careers as financially rewarding.

I wish I had the wisdom to impart to you all on how to make shortcuts. There aren't any I know of. Yes, there are some natural born traders. I know some. I am not lucky enough to have been born with that kind of head. They are a rare breed. Out of all the traders I have met in my time (thousands), there is only one I know of who was just absolutely born to trade. He can remember every trade he ever made. I get up in the morning and I don't remember what positions I am still holding from yesterday. I see stuff trading pre-market on CNBC, and I ask myself "do I have that?" So obviously I am no rocket scientist. Just a guy that put in my time. How many Bobby Fishers are there on the planet? Us mortals have to pay our dues.
 
rs7 is dead right about fear being a limiting factor but it also part of the survival instinct. Fear and greed are the big trader emotions, and if greed is stronger, you're toast.

You have to know when a certain size will change your psychology. I make competely idiotic moves when size get too big, so I'm stuck at 30K.

You also might consider that some traders have different objectives than others. Some are young bucks who want to get rich. Some of us have no pension, maybe got screwed out it (let me count the ways), and are quite happy to make $300-500 per day and control our own destiny. Also its something to do. If I had to make 3K a day, that would be stressful. The penny ante stuff is OK for some of us.
 
"I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain."
-Frank Herbert, Dune, "Litany Against Fear", 1965



The only thing we have to fear is fear itself."
N.B.: "Fear itself." See also H. D. Thoreau.
-Franklin D. Roosevelt, First inaugural address
 
Originally posted by peter77
rs7 is dead right about fear being a limiting factor but it also part of the survival instinct.

You have to know when a certain size will change your psychology. I make competely idiotic moves when size get too big, so I'm stuck at 30K.

The penny ante stuff is OK for some of us.
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Peter....you are right. It is all about psychology. And overcoming the fear is just that.

And don't think that it is "penny ante stuff". It is all relative. I WISH I could have made 3-5 hundred a day my first couple of years trading. What I did say is you can and will grow over time. It just happens. You may think you are "stuck". But like playing a musical instrument, learning a foriegn language, doing a sport, or anything else that takes "practice", you start to exceed old levels. You "break through" so to speak. You have your revelations. You jump to another level. We have all experienced this in some aspect of our lives.
 
My one liner post about my 1.2% per day return sure generated a lot of traffic here. It seems that most members here were reading between the lines (how that was possible from a one line message, I will never know) and made all kinds of assumptions.

I have a small 20K account. I don't have a problem losing it all tomorrow. I do my trading part-time in the morning. Being on the west coast, I can do my trading in the morning, walk the dog, etc. before going to work, to a firm where I'm the President and CEO. I don't need the trading profits to pay my bills. And I don't want to trade with millions. To me, I'm just playing a game that I enjoy.
 
I completely agree that successul trading can be limited by fear, especially fear of losses, which can prevent a trader from increasing their trading size and profits.

Early in my trading career, I remember a trade when I short AMGN near the close, only to have it announce record earnings and a stock split after hours. I lost $11,000 on that trade... Devastating... for a few days. However, within a week or two, I had made up this loss and was trading at new highs in equity levels. For the next year or more, experiencing this loss actually helped my trading. The fear of loss was very manageable. "If I have already suffered an $11k loss and survived, what do I have to worry about???" => Going through these sorts of traumatic events is actually a positive, for the trader. A great philosopher once wrote "That which does not destroy you, makes you stronger."

About two years later, I had the misfortune to loss $40,000 in about 30 minutes, when CNBC made announcements regarding two stocks in which I held relatively large positions. Ouch!! This time, it took about a month to overcome the loss, and hit new equity highs. Again, I think that this experience strengthened my trading ability and resistance to fear.

After taking a break from active trading for about two years, I have recently begun active trading once again this past April. Unfortunately, my resistance to the fear of losses now needs to be re-established! I suffer from some of the limitations of RS7's friend... I don't like losses, and I fear that this is limiting my trading success. In the 2 1/2 months since I've restarted active trading, I have had only 3-4 losing days, but feel that my profits are being held back due. I probably am averaging 0.3% return per day, with my largest daily loss being 0.2% and largest daily gain of 1.5%.

Funny thing is, I feel that a big 2% loss day may be "just what the doctor ordered," to help me break out to the next level in my trading.

Just two cents from my experience.

-Eric
 
Originally posted by EricP
I In the 2 1/2 months since I've restarted active trading, I have had only 3-4 losing days, but feel that my profits are being held back due. I probably am averaging 0.3% return per day, with my largest daily loss being 0.2% and largest daily gain of 1.5%.
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I really wish I knew how you guys do it! I must be about the world's worst trader....I have so many more losing days, and like I have said here, my "average day" (something I don't believe in, but seem to be stuck talking about here) is more like 1/10th of 1 percent. Also, my largest daily losses are a whole lot more than just 15% of my biggest winners. Maybe my stats are horrible because of overnighting?
 
"Humility and the fear of the Lord bring wealth, honor, and life." Proverbs 22:4

"I will fear no evil, for you are with me." Psalm 23:4
 
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