Many people look at day trading and they think that they can start playing the market and instantaneously double their salary and be able to quit their soul-killing day job. It is just a matter of learning how to pick the right stocks and ride them until they bring you crazy profits. It can’t be that hard, can it?
It is possible to make a whole lot of cash in a short period of time from day trading. It is similar to being an overnight success as an actor or musician. First, you put in years and years of time in anonymous offices, learning lingo, practicing your craft and figuring out workable strategies in a complicated industry.
That is how a day trader goes from putting $500 bucks in a trading account and building that up to $100,000 by the end of 44 trading days, By being an overnight success. Right? Not so much. So, obviously, overnight success means years of being immersed in daily trading markets, developing strategies and techniques for finding the right stocks. But it also means spending those years honing your instincts for when to trade. Basically, when to get into a stock and when to get out.
Lots of people get into day trading, thinking that they are going to escape their drab cubicle life for a non-stop party of cash and yachts. But the reality is that more than 90 percent of day traders lose money. Because they do not appreciate how hard it is to make money in the stock market. Day trading is an incredibly volatile and crazy industry. It takes a calm outlook and superior risk management to make money day in and day out.
But what does that actually mean? How do you develop risk management skills. You need to start with an innate supply of discipline, for sure, but how do you translate that into real world money making ability? In a word: Practice.
How do you practice buying and selling stocks? That is an excellent question.
Many novice traders hoping to become an overnight success just jump right into the stock market, after reading a few books or taking online classes. And then promptly get cleaned out and relegated to the 90% of people that lose money as day traders.
But smarter novices spend some time in a paper trading room. That is a simulated trading environment that mimics the real stock market with Level 2 quotes and everything. That means you can start with a fake $100K and try out your new found strategies and techniques by moving stocks and making trades. You learn how to implement momentum day trading strategies and when to get in and get out of trades.
The getting in and getting out is key to successful risk management. Paper trading allows you to make the classic mistake of holding onto a bad trade too long in order to make back your losses. It inevitably leads to more losses. But the paper trading room allows you to make that mistake and learn from it without killing your bank account.
Every trade needs a stop-loss point. That is a pre-determined level of loss that the trade hits and you need to get out and write that off. If you can do that consistently, while also hitting winners more consistently and getting out of them on time, you can have a positive profit-loss ratio every day. Then every week. Then every month. And so on.
After you make $200 a day in profit, consistently, in the paper market you can graduate to the real market. And then spend a few years learning how to make $200 a day there. After a while you might have the skills, the discipline, the techniques and the instincts to make $100K in 44 days.
Then you can move on to a day trading chat room. It may seem like a cliche, but finding a community of other day traders can be a real bonus in the search for day trading education. Day trading can be a lonely job, so immersing yourself in a community of veteran traders can be a great way to get familiar with the language, nuances and hidden tricks of the day trading world.
And then you will truly be an overnight success. It only took a few years!