What is the threshold to be considered a successful day trader?

[themickey]

I'm one of those monkeys.

Are you then saying that it's easier to trade/profit on AAPL or stocks in general compared to index futures? If so - care to elaborate on that one?

It's a statement I've heard in the past and the answers been mixed - coming from people who have experience both with futures and stocks.

Here's my take on it.
'Easier' is not a good word to use to describe the situation between stocks and Indexes.
Indexes are less volatile than stocks.
Therefore, in an uptrend, stocks gain more but they also give more frights.

 

[MrMuppet]

I'm one of those monkeys.

Are you then saying that it's easier to trade/profit on AAPL or stocks in general compared to index futures? If so - care to elaborate on that one?

It's a statement I've heard in the past and the answers been mixed - coming from people who have experience both with futures and stocks.

Forget AAPL. It's as competitive as the ES itself.

here is a question for you to think about:

would you rather

a) own a bakery located between 20 other big chain grocery stores and compete over volume and price?

b) be a saddler who focuses on oldtimers, a profession that only a limited amount of people needs but you can charge premium prices?

If you like a), go a head and trade all the liquid products out there. You will be competing against the smartest bunch of people on earth who have superior technology and manpower. You will bleed out because liquidity is very good to manage risks with stops

If you like b), find a market that you can be the shark in. You need to be very good with managing risk and liquidity (diversification or proper hedging) since you're in the top 20% of volume for that asset. But you can grind out an advantage and make money

 

[Fonz]

Regarding my day trades:
I focus on (all sort of) risks and on the direction of markets every day. I day trade futures, financials and indices. My 1st goal is no losing months. My 2nd goal is no losing weeks.
This is how I know how successful I am.

I also have a fixed maximum "authorized" losing day, in $. I listen to my emotions and I watch in real time the PnL of my trades: A lot of so called mentors will tell you not to do that and to be detached as much as possible (auto-trade...). They just don't day trade for a living.

1 point (4 ticks) of the NQ is $20. The day margin could be even lower than $1,000 depending on the broker you choose. Doubling a capital of $10,000. will require an average of 2.5 points + commissions, during 200 trading days (you will need vacation to celebrate). Today, an exceptional great trading day, from 9:30 to 12:30, 200 points could have been pocketed.
Please do the math.

 

[ironchef]

Forget AAPL. It's as competitive as the ES itself.

here is a question for you to think about:

would you rather

a) own a bakery located between 20 other big chain grocery stores and compete over volume and price?

b) be a saddler who focuses on oldtimers, a profession that only a limited amount of people needs but you can charge premium prices?

If you like a), go a head and trade all the liquid products out there. You will be competing against the smartest bunch of people on earth who have superior technology and manpower. You will bleed out because liquidity is very good to manage risks with stops

If you like b), find a market that you can be the shark in. You need to be very good with managing risk and liquidity (diversification or proper hedging) since you're in the top 20% of volume for that asset. But you can grind out an advantage and make money

Very sage and wise comments.

Most of us will never have to worry about size and scaleability, so it is better to be a saddler. Why I traded illiquid options.

 

[10_bagger]

I see the question asked around the Internet about how much a day trader makes or what is the realistic expectation if you make money as a day trader, but I never see what the criteria is to be considered a successful day trader.

In poker the ability is measured by X amount of big bets (BB) per one hundred hands with 3 being considered a profitable player,

3BB/ 100

4 considered extremely good, and 5 unsustainable. It is stated that it takes 100,000 hands to truly know due to variance and probability. 2 people playing 100 hands could potentially have 100 winning hands and 100 losing hands. The 100 hand winner could play -EV (expected value) while the 100 hand loser plays +EV and loses every hand still, both due to variance. However, over the course of 100,000 hands the player playing with the higher probability will come out ahead while the -EV player busts.

So what is the measurement in the world of daytrading? It's about profitability. I could play higher risk/ reward trades with more trades than the lower risk/ reward trader and if we are both good come out the same. So is it X% profitability or what not over the course of X amount of trades to be considered a profitable daytrader? What are the numbers if you were to assign a formula to it? 60% profitable over 10,000 trades? I'm just throwing out numbers as an example. What would you consider an industry standard for pronouncing a trader as being profitable and professional in daytrading?

Thank you in advance.

In online poker, if you get 3bb per 100 hand at say .25/.50 to me that’s not very good. However, if u can get at 3bb per 100 hands at 25/50 to 200/400 at no limit six max on PokerStars a few years back when the game was running you would be a world class player.

In trading it’s all relative to your account size. So here’s my opinion on what I consider to be a successful day trader from what I read, my own experience, and from talking to other traders. I have no data(I’m not sure if there are data on this) on this so take it with grain of salt. These Numbers I’m throwing out are yearly averages and I’m not going To go into drawdown because that would be another discussion.

Account size:

250k and under: Over 100% yearly.

250k-1m: 50-100% yearly.

1-10m: 25-50% yearly.

10m and over: anything that beat spy by 3-5 percent yearly.

 

[deaddog]

anything that beat spy by 3-5 percent yearly.

Is a more realistic metric regardless of account size.

I'm not saying you can't get 100% per year but I don't think it's realistic.

 

[10_bagger]

Is a more realistic metric regardless of account size.

I'm not saying you can't get 100% per year but I don't think it's realistic.

I think many day traders can get 50-100 percent a year if It’s a smaller account size.

if you give me an account with 100k or less and 4 to 1 day trading power like a typical day trading account would have, I should be able to get 100 percent in any given year. Ive done it in my personal account for 3 consecutive years when my account was smaller.

I can’t do it but I’ve seen quiet a few traders here on et who have said they can get 200-500 percent annually with smaller accounts. @MrMuppet talks about a 50k account and getting 20-50% percent monthly, and from reading many of his posts, i wouldn't bet against him.

 

[deaddog]

I think many day traders can get 50-100 percent a year if It’s a smaller account size.

if you give me an account with 100k or less and 4 to 1 day trading power like a typical day trading account would have, I should be able to get 100 percent in any given year. Ive done it in my personal account for 3 consecutive years when my account was smaller.

What is the reason you are not able to scale? Is it the liquidity of what you are trading or a mental thing about taking uncomfortable risks?

 

[10_bagger]

What is the reason you are not able to scale? Is it the liquidity of what you are trading or a mental thing about taking uncomfortable risks?

I can't get too much into my strategy on this public forum but once i push my trading size to a certain level i start to have liquidity issues. I'm not one of those traders who have a list of stocks where they trade daily. I trade whenever something show up on my radar that day and some of them are not liquid. For certain stocks i can't get the number of shares that i want and for others when i own too many shares i give up a good portion of my edge because I pay too much slippage when i want to get out.

As for my risk appetite, I wouldn't put myself in a position where i'm uncomfortable with the daily swings relative to my overall account size. Your tolerance to financial pain is like a muscle and over time you can build it up. As longs the amount won or loss daily is x percent to my overall portfolio i wouldn't feel uncomfortable even thought that daily dollar figure is getting larger each year.

 

[Bad_Badness]

Sure. IMO, this is the number 1 noob trap anyways for people who are just looking at charts.

Trading does not scale indefinitely. It's pretty easy to turn 1k into 10k because you can trade illiquid trash that's really inefficient.
But turning going beyond 1m profit per year is way harder.
5k per day is about 1m per year. Now think about how you need to trade in order to make 5k/day. You cannot trade low floaters or micro caps anymore because the liquidity is not there. You need to get into midcaps with decent float and volume and this is were the sharks are.

Now you mastered these assets, but getting in and out of even AAPL with 50k shares per clip is difficult, so at a certain point there just isn't enough liquidity for exploiting short term moves. The larger you trade, the less trades you get...so you have to lengthen your timeframe or just plateu.

And now the monkeys will chime in saying WhY DonT YuO jUsT tRAdE the ES oR CL? Well good luck competing with the 1%ers...if you're good enough, you probably wont ask questions here on ET.

Day trading every day for a year is a lot of work. Sort of like driving non stop solo for over 14 hours.

Someone asked me what the secret to trading is? For this sort of "get rich quick and easy" person, I replied, " A lot of work!". Then he replied it was not for him.

To me working 60% (40 days per quarter) of the trading days and making 200K-400K pretax is fine. It is plenty of money for the time put in. Plus you can try to avoid the 1%ers.