How Hard Is It To Make Money Day Trading? According To Statistics…Very Hard

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how hard is it to make money day trading

It may seem that earning money from a simple price chart can just be straightforward. You just simply look at the graph for the stock price, the rate of currency, and future stock price. But how hard is it to make money day trading? Like actually make enough money to day trade full-time.

Usually, when people start day trading, they might feel that they have found their calling. They start fixating on their actions and think to themselves, “If I bought this, I could have made a fortune.” Sound familiar?

To have that viewpoint leads people to think that day trading is easy and you can easily earn riches. Don’t get us wrong, it can. Day trading can give you large amounts of income if you do it the right way. But, most people forgo any actual studying or training. They think they can do it by feel and that can be dangerous.

But let’s be honest, day trading of stocks is irresistible: to earn income right at the comfort of your home without a 9-to-5 job. That is THE DREAM. That said, we often forget that without the right information, an investor can lose a lot of money in a matter of seconds.

According to Mark Lyck.

According to the stock platform eToro, they found that a whopping 80% of day traders lose money over the course of a year with the median loss of -36.30%!

It’s no surprise more than 75% of all day traders end up quitting within just two years.

YIKES!

If you are still interested, read on how hard is it to make money day trading.

What Is Day Trading?

In simple terms, day trading is the act of trading stocks in a limited time span, normally a day. The aim of this strategy is to earn a little money on each exchange and then accumulate those gains throughout the duration. Due to the rise of digital stockbrokers — like Public or M1 Finance — with their easy-to-use and free website, day trading has become a viable career for a lot of people. However, it is still a risky way for investors to convert a few fast wins into a significant, long term payout.

With day trading, understanding a chart’s trends and volatility is key. Day traders depend on price swings in stocks and other financial instruments to make money. During the day, volatility is what they like the most, whether stocks unexpectedly fall by a fifth or increases by a fifth, it doesn’t really matter, since they can just buy it again later. Day Traders also prefer highly liquid investments such as cryptocurrency. This allows them to switch in and out of a position with little impact on the stock price.

It’s not unlikely for day traders to exchange the same stock several times in a day. Sell the pops, buy the dips and possibly make thousands of dollars in the process. Who doesn’t want that life?

The Success Rate in Day Trading

how hard is it to make money day trading

It’s a challenge to turn a long term profit through day trading. While every novice trader believes they can make money, most people who attempt day trading end with a net loss. You can increase your chances of successful trading by knowing the risks and limiting your downside on trades. But if you fail to implement an actual strategy, you will ultimately lose. And it is important to get past the misconception that day trading is easy.

So how hard is day trading?

According to a 2010 study University of California, it was found that only 1% of day traders regularly earn money. It examined the trade transactions made in a 14-year period, from 1992 to 2006.

The small 1% of people who make money in Forex seriously dedicate their days to the trading profession. It is, quite literally, work for them. It is not simply a quick-fire trade that can be done between lunch hours. People who do this successfully full time invest hours studying the market and learn from mistakes they have made from previous trade transactions.

Of course anyone can hit a lucky trade and make some quick cash. But that should not be the expectation if you do not know the basic principles of day trading.

Why Is Trading Harder Than Simple Investing?

There are two clear reasons why this happens:

  1. Day trading is a competition against experienced traders. Professionals know the signs and traps. Some use trading software and data services. Perhaps it seems as if they’re almost set to succeed, but they rarely do. High-frequency traders (misleadingly called HFT’s) are some of the pros of this scheme, earning in the system the day traders’ pennies or percentages per transaction. There are a lot of potential investors in the market, so a lot of professionals also join the crowd which helps them gain profit.
  2. Day-trader have psychological biases whenever they are trading, making day trading difficult. It is easy for a trader to get caught up in making “quick money” by buying and selling winners in an effort to close the deal as soon as possible. Also, it’s quick to just do once you have an adrenaline connection to the market and the excitement of closing a lucrative trade. Investors also indulge in myopic loss aversion, which causes them so scared to hold onto a product once it drops in value since they are afraid it will continue falling.

A Need for a Solid Trading Method

how hard is it to make money day trading

One of the key reasons traders may take a loss is that there is no firm trading plan. Charting stocks in retrospect, is not a secure way to construct a successful strategy. If you formulate a detailed strategy, this can also be used in market environments and will warn you whether to keep out of the trade since the situations are not good.

A smart strategy is one that lets you make a decision to act before a lucrative opportunity occurs, not after. Our objective should be to encounter and make contact with patterns in the data that suggest which investment opportunities might possibly offer good returns. If you did not study for this then your performance might be mainly affected by luck.

There is a lot of free information on the Internet on how to formulate and execute the plan that is right for you. We have been following High Strike Trading for quite some time and they release a lot of valuable and educational information for day traders to employ.

Final Thoughts

Day trading takes patience, skill and discipline. Many inexperienced traders lack these attributes and they fail to invest the time into learning how to actually do it.

If you want to dip your toe into day trading, make a budget, open a new investment account (one that is not attached to the money you can’t afford to lose), and give it a whirl. You will have your ups and downs. There is no straight line to success.

The key to winning is to know the variables that come to play in investing and trading. And a trading strategy is an edge to a day trader because it can keep you focused, keep you from being greedy and also help you to control emotions.

Of course, all of this is easier said than done. That’s probably why 80% of day traders lose money.

Author
C. James

C. James is the managing editor at Wealth Gang. He has a degree in finance and a passion for creating passive income streams and wealth management.

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