Ray Dalio is an amazing man. But I wish I realized his advice didn’t apply to me… yet…
He’s a billionaire. He’s been at the top of his industry for decades. He’s worked with other tycoon investors and large government organizations. He’s an inspiring man, but his advice did not help me.
In fact, it held me back.
Ray Dalio lives in a different world than I do, and many of the people who are reading this. When he shares advice, he does so as a billionaire. He’s speaking to other billionaires or institutional investors in charge of massive hedge funds.
He isn’t speaking to someone just getting started as an investor or day trader.
Or to someone earning under $250,000 per year.
He’s speaking to someone who has a lot of money to invest. And someone who is looking for long-term gains on their wealth throughout the rest of their life. Not to average people who are looking to earn an extra income online in the stock market day trading.
Average Market Returns Won’t Get a Day Trader Rich
So… what is the average return for an institutionalized investor?
Research from Dalbar Inc shows how the S&P 500 Index averaged just 9.85% a year between 1995 and 2015. And the average equity fund investor earned 5.19% during this time.
The best hedge fund managers seem to yield similar results…
- Over the last 3 years, Ray Dalio’s average return was 8.11%
- George Soros comes off with a 6.99% average return
- David Tepper almost meets the market average with 9.40%
When you’re investing billions and billions of dollars and getting these types of returns, they are absolutely amazing because you’re bringing in multiple figures (over hundreds of millions of dollars) a year. However, I stepped back to think about the average return of hedge funds versus what an individual investor or day trader earns.
Most people who start investing into the stock market don’t have a billion dollars to invest, let alone a million. And hedge fund managers use something called OPM, also known as other people’s money.
When we think about individual investors such as ourselves, many investors start with less than $250,000 (with the average starting with a few grand to $25,000). And if we go straight by the percentage of returns, a 10% return isn’t going to create the lifestyle that an individual investor is looking for. Even with $250,000 invested, a return of 10%, or $25,000 a year in profits, won’t be dramatically changing your lifestyle. Instead, you’re going to need to look at other types of investors to learn from.
Now, Ray Dalio offers great advice for some people who are extremely wealthy. But when he writes his books or shares his tips, he likely doesn’t have the beginner or mid-level day trader in mind.
The common experts you see: Ray Dalio, Warren Buffett, Carl Icahn, George Soros… They’re teaching the rich how to be wealthier.
They’re talking to other billionaires, institutional investors and hedge fund managers with billion-dollar portfolios. When you have that sort of money, a 10% annual return means a lot. Because they’re bringing in more money in a year than most of us can even fathom to see in a lifetime.
And they’re making the wealthiest people in the world richer.
What this basically means is that institutionalized investors aren’t good sources to turn to when it comes to building a new day trading portfolio to maximize your returns. So where should you turn instead?
Look for People Who Are One to Two Levels Above Where You Want to Be
If you want to be a successful day trader, most people think it makes sense to go out there and study the likes of Warren Buffett, Ray Dalio and George Soros. But the world doesn’t work that way. Here’s an example to help you understand where I’m coming from.
If you want to be a motivational speaker, most people think it makes sense to go out there and copy what Tony Robbins or Gabbi Bernstein, two powerhouses in this industry are doing. Yet, these people have been doing what they do for the majority of their adult lives. They’re at level 99 on the playing field and you might be starting out at level 1, 5 or 10. And even if you tried to go out there and carry the axe of a level 99 player in the videogame Diablo when you’re at level 5, you wouldn’t be able to equip it because the game won’t allow you to until you level up to be able to yield the weapon.
You’d need to significantly level up before you could even wield such a weapon.
As someone who has spent most of my years playing video games and mastering games like Diablo and Starcraft, I’ve come to find that you can’t just come out of the gates, start a brand new account and try to take on the #1 player in the game. That would be foolish. You also can’t just try to imitate the moves of the best player, because you’re going to end up losing.
Those tactics, moves and strategies that the very best investors use only work when you’re up against the elite. And when you’re a beginner or mid-level investor or day trader, these strategies do not really apply to you.
So that means you have to take your eyes off of the top playing field. Instead, you need to take a closer look, get realistic with yourself, and see where you are on the field. If you’re looking to make a million dollars, you need to find someone who’s already made a million dollars. Not someone who made a billion.
Think of it as a hierarchy: Say you’re looking to make a billion dollars and you only have $25,000 to invest. You need to start by finding someone who’s made a million. Once you’ve made your million, find someone who’s made $10 million. And after that, find someone who’s made $100 million. The key is to continue finding mentors who can guide you to reach your ultimate goal.
You can’t just jump all the way to the end of the game and play with maxed out stats. You need to slowly work your way up there. And while it’s possible for you to go out there and play on the same playing field as Ray Dalio, you’re not going to find his advice useful until you have hundreds of millions of dollars.
So you need to start with smaller mentors first.
There are No Cheat Codes to Hop Ahead
I wish I could say that you could start investing today and make billions of dollars. But I’d probably be sent to prison for making a statement like that. Because in almost every single situation, that statement is completely false.
No one, and I mean no one, jumps out of the gate and gets rich. Most investors actually end up losing half, if not more of their portfolios, within their first year of trading. I actually lost half my portfolio in the first two months I started trading with real money.
I was freaked out and I thought I was going to lose everything. But I saw it as a sign that I needed to go out there and learn more about what I was doing to make more educated trades. Before I even started trading with real money, do you want to know what I did?
I spent years reading about the stock market, grabbing every single book I could. I took every single trader’s course. I set up a paper trade account, which is basically a free account where you use play money, and I set up strategy after strategy to figure out which one would work and which one would fail.
Then, I went back in and I calculated the win and loss rate of every single trade with their average gain.
Now, if you’re reading this and thinking it sounds like a lot of work, I’m going to be the first one to tell you that it is. It’s a ton of work. And there’s no way to really finagle your way towards success. You’re going to have to put in the blood, sweat and tears to get yourself there.
However, it might not take you as much time as it did for me. Because I did the heavy lifting and I’ve been able to put everything I learned into multiple packages that teach you the secrets that I figured out. But before I get into any of that, I need to share with you what you need to realistically look at.
What you could potentially earn.
And what benefits there are from actually going out there and day trading.
What You Can Actually Earn Day Trading
I’m going to use myself as an example here. I started out day trading with $27,000. Like I said prior, I lost half my portfolio when I first started trading. Then I went back to studying the market until I felt confident that I could trade again.
Once I got up to that point… I didn’t feel like I would be able to make enough money with half of the cash I had. So I asked my friend if I could borrow some from them and put my car up as collateral.
So I was back to my same starting point. Yet, this time around, my strategies were time tested through paper trades, and I was confident that I could actually find success with trading.
Within three months, I 10x’d my portfolio and earned $292,000. I didn’t get a 10% return in a year like hedge fund managers. But I also wasn’t playing in the same playing field as them either.
The reason I was earning so much is that I was investing into small and mid-cap stocks.
What Small and Mid Cap Stocks Are
Small and mid-cap stocks are stocks that are under $5. Now, some investors and traders will tell you to invest into the OTCBB or the Pink Sheets, but I can tell you right now that that is a bad idea. When you’re looking at the OTCBB or the Pink Sheets, you’re faced with trades that may not have buyers on the other end (or you’re looking at stocks that trade for different prices than what you actually purchase them at).
This could wipe out your entire portfolio.
The Nasdaq is the most reliable stock trading network for you to invest into. The reason for that is because these companies are required to meet certain criteria to be listed on this exchange. And many of these companies are already at a point financially where they aren’t at risk of going bankrupt overnight.
Small and mid-cap stocks are a lot more volatile than blue-chip stocks. If you’ve seen most stocks that are over $20, they may move by a dollar or two over the course of a year. And while a 5 to 10% return may sound exciting, a stock that is $5 could move up to $10 and you could double your investment.
On the other hand, if you begin to learn how to short stocks, like what I do, you could hedge your risk the other way around. But we’ll get more into how that works some other time…
The good news about these stocks is that institutionalized investors can’t really buy into these companies.
If they do, they might actually end up purchasing and owning the entire company. That’s why they stick with blue-chip stocks, which are companies that have usually been around for dozens of years and consist of the Fortune 500 list.
Why You Need to Stay Away from the Whales
Whales, or large investors like Ray Dalio, have so much money at their control that they could manipulate the markets. That means that these people could wipe out your entire portfolio and goals because they aren’t just trading with armies of people. They also have quants or day traders who specialize in creating algorithms and who go out there and make trades on behalf of their firms.
That means if you even wanted to compete with these investors, you’re going up against computers. And if you’ve seen chess battles between humans and computers, it’s almost impossible to beat the computer.
And what’s the point of even trying to try to beat a computer for a potential return of under 10%?
Instead, you could focus on an entirely different market that the whales aren’t even touching.
That’s why I decided to go and trade in markets that were run by amateurs, who were like my previous self.
How to Maximize Your Returns (Without Losing Big)
Did you know that 94% of day traders actually end up losing almost all of their money?
That’s a big number. The reason that most people fail is that they get emotionally involved in their trades.
They start to think that they could get rich but then slip up. They lose a trade, then panic and start to think about what they need to do to make up for that loss. So they lose again, then again and again.
The next thing you know, their entire investment portfolio is gone!
Trading and winning… That requires discipline. Finding an even keel, then focusing strictly on the numbers means not getting hung up on emotions. Instead, focus on the trades you need to make and anticipate when exactly to get in and out of trades.
I’ve taught over 5,000 students how to go out there and make these types of trades.
Some of my students have even broken the six and seven-figure mark.
But these students didn’t go out of the gates, finish a course or an in-person session and start trading. They took the time to really study and practice with paper trades before they got into their real trades.
What Are Paper Trades?
Paper trades involve using a fake stock account to make trades with fake money. There are a ton of resources on paper trading on Google that can help you find the information that you’re looking for.
The reason why you want to set up paper trades before you do anything is because you’re going to need to practice. More importantly, you’re going to need to find strategies that work, time and time again. You can either try to discover these on your own or learn more about some of the eight strategies I use over and over again. But before using any type of strategy with real money, you need to figure out the exact mathematics of what percentage these strategies work.
Think about it like this. If you went to go play blackjack with your friends, you know that there are 52 cards in a deck. And if you’re at the casino, they’re probably going to be using six to eight decks. If you’ve watched any movies where people count cards, you can see how they mathematically predict how many times they will win or lose, and based on what cards are dealt, what their chances of winning a hand are.
This same principle applies to trading stocks. After you start to see exactly how trades work, you’re able to determine the exact percentage a trade will earn, the number of times it will win and how many times it will lose money.
There is a lot of money lost during trades, but if you find a trade that works 85% of the time and averages a 35% return (and you can repeat that same trade 12 times in a year with an initial investment of $10,000 per trade) the 85% of wins will earn you $35,000, the 15% of losses will lose you $7,000 and with your initial $10,000, you will have a total of $38,000.
Your initial $10,000 investment will provide a profit of $28,000, or 280% return.
Now, if you do that same trade 24 times a year, or 36 times a year, you can see your portfolio significantly increase. Or, if you have more money and you’re able to do multiple strategies, you can see your portfolio grow at a breakneck pace.
This is why I recommend starting with paper trades so that you can get the exact statistics for what is working and what isn’t. That way, when you’re ready to trade with real money, you’ll have eliminated potential surprises and will be able to crush it in the market.
How Much Time Does a Successful Day Trader Trade?
A lot of people believe that in order to be an amazing day trader, what you need to do is go out there and trade for eight hours a day. But the truth is that more time trading doesn’t always yield more money.
In fact, if you’re trading from when the market opens to when it closes, you’re overtrading.
And overtrading is going to crush your entire game. The reason for that is you’re trading way too much and you’re going to get lost in your own head.
The most successful day traders actually only trade for 2-3 hours a day when the market opens.
That means that once you are able to start to turn this into your full-time career, you’re going to be able to spend a lot of time doing what you want to do on the side. Whether that’s spending time with your family, traveling, or playing video games like me.
It opens up the floodgates for what’s really possible with the new business that you’re running.
What is Day Trading?
Many of the same philosophies that guide traditional “buy and hold” investing are true for Day Trading.
The goal is to buy low and sell high.
Your job is to speculate about which trades will lead to profits.
The difference is that all this takes place within a single day.
Whereas with traditional “buy and hold” investing, you may hold a stock for years.
- Day Trading is fast.
- Day Trading provides almost instant feedback.
- Day Trading gives you the power to turn a little money into a lot.
Here’s an interview I did with Ryan Higa for his Off The Pill Podcast (that has 20+ million subscribers). During this interview, I explain more about how Day Trading works (among other things)…
Fundamentally, Day Trading is just like traditional trading. Before the internet came about and created electronic platforms that anyone in the world could use, financial investors and those who worked in banks tended to trade this way.
It’s simply a more open marketplace for people who don’t have millions (or even billions) of dollars to invest. You can start with just a few thousand dollars and double or even triple it in a few months.
Within a year you could potentially turn $20,000 into $100,000+.
You can’t do this when dealing with blue chips or playing in the same market as billionaire hedge fund managers like Ray Dalio. For starters, you need more than $100k to properly enter the market. And as we’ve already talked about, the returns simply do not make sense unless you’re putting A LOT of money on the line.
So when you look at Day Trading, think of it as the Minor Leagues. You’re still playing the same game as those in the Majors. But everyone at this level has less money, experience and leverage. You’re still learning and perfecting your craft.
But if you get good in the Minors, you can soon get called into the big leagues.
And once you’re there… well, you can start to earn that massive contract those at the top do.
It’s an evolution. Unless you’re already vastly wealthy, you cannot play at the same level as Ray Dalio and George Soros. It isn’t a level playing field. Those investors hold too much leverage and power (and use other people’s money).
Whereas with Day Trading… you’re on a level playing field at all times.
Everyone who day trades holds the same amount of power as everyone else.
Do this, and anyone can win big while day trading.
But Wait… Isn’t The Stock Market All Just A BIG Scam?
I hear this a lot. I understand it, too. Before I studied the stock market (and how it actually works), I felt the same. Plus, everyone around me warned me of getting involved. They told me it was a scam. That I’d lose all my money. That I’d regret it and look like an idiot…
Well, let me begin by saying that the Stock Market IS NOT a Scam!
But… a lot of people do get scammed when they first get into day trading. I think this is true for a lot of industries. Yet something like investing is always going to have more scammers because it involves people literally putting their money on the line.
And a lot of people who get involved in trading do so because they need money.
This is the position I was in when I first started. I needed it. I was desperate.
Well, people don’t tend to make good decisions when they’re desperate. You don’t think clearly. So it’s no surprise that day trading attracts these scammers because they know they can manipulate and prey on vulnerable people.
But Day Trading as a form of investment IS NOT a Scam!
It’s legal. There are a lot of people making a lot of money (myself included).
There are some great mentors, coaches and programs for those just getting started.
Legitimate ones from people who have been there and done it!
But… there are a lot of people who are frauds that build themselves up as an expert or guru.
Unfortunately, they’re nothing but online marketers who are great at selling, without any real experience or expertise.
They create a course and push thousands of people through it.
And when one or two students find success, they focus on these.
(forgetting about the thousands who lose money!)
- Their student success rate is terrible.
- They don’t share or verify their trades.
- They create A LOT of content and overwhelm people with it.
There are some bad people in day trading. That’s the truth. Many people do get scammed, and 94% of new traders fail in their first year. A lot of these people fail because they don’t know what they’re doing. It isn’t that they get scammed, but rather following bad advice (or not listening to the good advice).
But some of these 94% of people do get scammed.
And those scammers will come after you, too!
So, how can you avoid the scammers? It’s pretty easy:
- Do they verify their trades on a platform like Profit.Ly?
- Do they show the trades they make or just talk about it?
- Can they prove their track record?
If they do, you can trust their advice. The strategies they share may work for you.
If they can’t… what they say is likely a lie and you will only lose money following their advice.
But again, isn’t this true of most industries?
(especially when money is involved…)
All I can say is that Day Trading saved me and gave me the opportunity to live the life I truly wanted to live, by giving back to others and showing them how to take charge of their lives. Unfortunately, studying Ray Dalio and all those billionaire investors didn’t seem to work at this point in my life. Yet I hope that maybe in five to 10 years, I could apply the principles that Ray Dalio and these other investors promote into my trading portfolio, as they are people that I do look up to and admire.
For me, day trading bought hope, and an opportunity to pursue my dreams. But even so, it wasn’t an easy ride. I got lost in all the advice out there when I first started out, came across scammers and followed way too many people. I read books, watched videos and took courses, and along the way, I lost money, too.
Why YOU Should NOT Become a Day Trader!
Remember earlier when I said how desperate people make poor decisions?
Yeah, this is why a lot of people shouldn’t get into day trading. Maybe you’re one of them!
Because look, Day Trading isn’t a miracle cure. It isn’t some get rich quick scheme. It won’t solve all your problems overnight. It won’t help you live your dream life without putting in any hard work!
So many people get into Day Trading thinking it’s an easy ride. It is not!
The reality is, you may have to work harder than you ever have in your life.
I tell my students to expect a year of constant, hard work before they make any real money.
- A year of studying the markets for 4-6 hours each day.
- A year of paper trades and testing strategies.
- A year of late nights as you watch videos and study new techniques.
- A year of making small trades and learning how to take the right risks.
Once you know what you’re doing, you can make thousands each month in just a few hours each morning. These days, I spend an hour on my laptop and then I’m done for the day!
But this does not just happen.
You have to put in the work.
You need to find a trusted mentor.
If you’re not willing to do this, you’ll likely become part of that 94% who fail.
Once I studied the markets, I realized what I needed. I’ve never looked back since!
How To Get Started with Day Trading So You Too Can Beat The Average Return of Hedge Funds…
When I first began studying Day Trading, I had a reason; a purpose!
I imagine you have a reason for reading this. Maybe you need more money. Maybe, if you don’t start earning more money soon, you’ll be sent down a path you don’t want to go down.
But maybe you don’t need the money.
Maybe you have a good job already, and earning a good income.
Maybe it isn’t money you need, but rather freedom and time.
You want to work less. You want to work on your terms. You want to travel and see the world…
Or maybe you simply want another income stream so you can give your family the life it deserves.
Whatever your reason is, your time and money is precious. Unless you have A LOT of wealth already, following advice from people like Ray Dalio won’t help you. You will learn a lot from him, but nothing that helps you take real action today.
There are many ways to make an extra $100,000 per year these days. For me, Day Trading made the most sense and it’s completely changed my life since. I’ve seen it change other people’s lives, too… students who I’ve worked with 1-1.
I hope this article has helped you realize what Day Trading is and is not (and who it’s for).
I hope my own story has helped show you what’s possible when you put in the hard work.
If you choose to get into Day Trading, make sure you do it the “right” way. Don’t fall into the trap that 94% of new traders do. Find a mentor. Follow a few trusted sources. Have a plan, and make sure you learn the right strategies, techniques and patterns to follow.
If you do all this, you can build a six-figure trading portfolio sooner than you think.
And you too can beat the average return of hedge funds.
(with as little as $3,000 as your initial investment)!
The average return for individual investors will NEVER come close to this. It’s a different world and one that doesn’t provide a level playing field for people like you and me. If you’re ready to dive deeper into Day Trading, I encourage you to subscribe to my Youtube Channel where I share practical lessons and show you real-live trades on a weekly basis.
You may also like these articles:
- Part-Time Day Traders Earn More Money Than Full-Time Day Traders (Because They Don’t Do This)
- 94% Of Day Traders Are Failing While Burning Holes In Their Wallets — And This Is Why
- Want To Win Big When Day Trading? Do The Exact Opposite Of What The 94% Who Lose Are Doing
And if you’d like to fast-track your growth and learn how to use these right strategies, the most effective techniques and how to use proven patterns that yield 25%+ returns in a matter of days (and repeat many times throughout the year)… explore my flagship program: The Freedom Challenge ⇒
I work with Day Traders who want to be part of the 6% of people who succeed.