Why is it some people make millions Day Trading, whereas everyone else seems to only lose their money?
or at best, barely make enough to cover their rent each month…
It’s said that 94% of new day traders fail within the first year. Most of these people lose their money, quit and move onto something else. Only 6% make good, consistent money day trading. And most of these don’t go onto to make 7+ figures each year.
So what sets those at the top apart from everyone else?
Do they have something or know something that nobody else does?
Although they do DO things differently to most.
Which we’ll get to soon…
What’s clear is that some people experience far greater success than others. In 2018, the 26 richest people on the planet had the same wealth as 3.8 billion people. The same is true inside of investing — whether you focus on day trading or not.
94% of people lose their money.
Only 6% build a successful portfolio.
But only a small percentage of this 6% make it to the top.
Why? What do these people have that nobody else does…?
I remember asking this question when I first started to study the markets. Still at college full time, and with the inevitable return to China approaching fast. I needed to come up with a solution quickly!
I knew the risk. I had heard that 94% of new day traders fail. My friends and family had warned me not to try.
But what choice did I have?
I didn’t have to only find a way to make money…
I had to find a way to make A LOT of money!
Once I graduated, I knew that would be it. There were very few options for someone on an F-1 Visa like I was. The chances of getting hired, slim. The likelihood that I’d be sent back to China… HIGH!
Day trading was my way out.
But I had to find a way to be part of the 6%.
Not only that, I had to find a way to be part of the 6% of that 6%!
How To Become Part of The 6% of Day Traders Who WIN…
Making a few grand each month wouldn’t be enough.
I had to become a day trader who made high six-figures, fast!
Yet I was really close to failing and becoming part of that 94%.
I’ve already shared that story here: 94% of Day Traders Are Failing and Burning Holes in Their Wallets — and this is Why
In this piece:
- I share the story about how I bounced back from near failure…
- I debunk 3 Day Trading Myths that cost most people a lot of money and time…
- I talk about the #1 reason why almost all day traders FAIL…
- AND the 4 things you can start doing to avoid being one of those failures…
These two articles are linked. Whereas that first piece focuses more on the mindset you need, this one dives into the actual steps you should take to be part of the 6% of day traders who succeed.
I had to learn all this the hard way…
I pieced it together after-hour-after-after-hour of studying the markets. I invested more than $10,000 in courses, books and seminars. I followed all the experts — both successful day traders and investment tycoons like Warren Buffett, Ray Dalio and George Soros.
I wish I knew this when I started out. If I did I would have saved so much time and money.
I remember how hard it was… I can close my eyes right now and feel those feelings once more…
- Overwhelmed: trying to balance studying the markets with school and my dead-end job, and with my impending return to China approaching fast.
- Terrified: that I would fail, lose all my money and prove those people who doubted me right. I could practically see my father’s disapproving face.
- Unsure who to trust: all those “so-called” experts… who was the real deal, and who was out to scam me?
- Exhausted: I would lay awake at night worrying about all this. I could barely focus during the day in class and felt physically ill the rest of the time.
I don’t know what you’re going through right now, but if you’re reading a piece like this one, maybe you can relate. Back then, this is the information I wish I had. I hope it helps you because the reality is those people at the top DO NOT have something (or know something) that you don’t.
It’s one of the reasons I love Day Trading…
Unlike Blue Chips, the more wealth you have doesn’t give you more power
When Day Trading, everyone plays on a level playing field.
You have as much chance to succeed as anyone else.
Yet the chances of you failing remain high because you follow the wrong advice and focus your time, money and energy on the wrong things. I’ll show you how to avoid this here.
These are the essentials you need to become part of the 6% who succeed.
And toward the end of this article, I’ll show you how to create an unfair advantage.
This advantage is available to anyone who day trades, but almost nobody does it.
I’ll explain why soon, but first I want to be totally honest with you…
You Need Some Money To Make This Work!
I see it far too often… people assuming they can yield $100,000 in 60 days off of $250. The chances of this happening are almost impossible. I never encourage anyone to get started with less than $3,000.
Anything less than this doesn’t give you enough room to work with. The money you make won’t give you the traction you need, and the commissions you have to pay will eat into most of your profits.
Sure, you can start at $1,500… but all you end up doing is wasting your time and money.
And you leave day trading feeling like you’ve been scammed and taken advantage of.
Whereas the reality is you expected miracles!
And they didn’t turn out…
$3,000 is the bare minimum starting point. With this, you set yourself up for potential success from the very beginning. From here, these are the essentials you need to become a profitable, effective day trader who doesn’t have to worry about paying your bills each month.
The Two Big Things You Need Before You Start
Before you get started, there are a couple of things you need to prepare for. The first one is easy and doesn’t require much time. The second one is harder and is something you should think hard about.
The problem is… most new traders spend time on the first step and don’t even consider the second.
This is what leads to so many issues. If you don’t get this part right, the chances of you becoming one of that 94 % who fails are high.
The first thing you need before you start is:
1: Choose Your Broker
Your broker (or brokerage) is the platform you use to make your trades. This may seem important, but the reality is it isn’t nearly as important as most people make it out to be.
There are a few other factors that can come into play…
For example, if you want to hold onto a trade for a couple of days, then you’re looking for a broker that has fewer overnight fees. Whereas if you’re only looking for intraday buying and selling, you should look for the best short hard to borrow availability.
That’s about it.
The platform you use isn’t that important.
So long as you understand how it works and you’re comfortable in using it, you will do fine.
This next thing, on the other hand… yeah, this one is VERY important!
2: Determine Your Risk
Before you start day trading, it’s vital you determine how much risk you want to carry.
This is a very personal choice to make, too.
Some people are more risk-averse than others.
And some people can’t afford to take as many risks as another person can.
If you have a family or prior debt, you likely can’t risk as much as someone who’s single and has minimal overheads. It’s why I’m always resistant to talk about how much risk I take in my own trades.
Because what works for me may not work for you…
I mean, let’s go back to when I first started day trading, still in my dorm room with no real responsibilities. Sure, I faced the very real possibility of having to return to China. But that was my worst-case scenario.
I still had a home to return to.
I didn’t have a family to support.
I had very few bills that I had to pay.
I could take some pretty big risks. Maybe you can, too. Maybe not.
Personally, I go as high as risking 50% of my portfolio. Most people — at least, in the beginning — won’t want to go as high as this. That’s fine. You need to determine the risk YOU can take.
What matters is that you do!
If you go into day trading without thinking about this, you’re in trouble.
I honestly believe a successful day trader only really needs to have four things:
- Statistical Edge
- The Correct Psychology
- Risk Management!
It’s the final one that keeps all the others aligned. If you lose sight of the risks you can and are willing to take, you can quickly make emotional decisions, lose sight of the data and listen to your gut.
It’s not about how risk-averse you are. Those willing to take the biggest risks aren’t always the ones who become the most successful.
What matters is that you determine your risk. What makes sense for you. That’s all you can do.
Once you do this, you can begin to manage your risk better from trade-to-trade.
For instance… If a trade has a 95% winning percentage (ie: the pattern has 100 samples, and 95 of them are wins with only 5 of them losses), you would use a higher risk compared to a normal trade.
So if you determine your risk at between $1,000 and $1,500 per trade, maybe you will go as high $2,000 — because the winning percentage is so high.
Whereas if it’s a really low winning percentage, maybe you drop your investment to $500 or less…
It’s hard to do any of this effectively unless you determine your risk from the very beginning.
Those who do are the ones who join the 6% who succeed.
Once you combine this with the next step, you set yourself up for true success…
Study The Markets and TEST Your Strategies
I go into this in much greater detail in the article that accompanies this one: 94% Of Day Traders Are Failing While Burning Holes In Their Wallets — And This Is Why
You need to study.
You need to learn.
More importantly… you need to want to learn!
This article shows you what to learn and how. As well as sharing my own story (and one of the biggest personal lessons I’ve ever had to learn), it breaks-down the 4 biggest things you need to know:
- Analytics Vs Psychology: What Most People Do Vs. What They Should Do.
- Remove Your Emotions From Your Investments.
- Only Listen To Good Advice.
- You Don’t Need More Strategy — You Need Less.
But the learning doesn’t stop with reading, listening and watching… you need to continue to learn as you TEST each new strategy and pattern.
This is where Paper Trades come in.
If you’re not sure what paper trades are, it’s basically setting up a fake account and running a simulation. You make trades as though you’re using real money, but don’t face the risk of losing it all.
It’s important you run A LOT of paper trades before you move into using your own money.
It’s a step far too many people skip — or they do it a few times and then get impatient.
Those who do tend to regret it, and they often become part of the 94% who quit. Paper Trades are one of the best, most underused tools available to you. I continue to use them today, especially when I find a new pattern or strategy that I’d like to use.
Test, test and test some more.
The more you do the better…
All this brings you to the stage you’re most excited about: Getting Started!
The Different Positions You Can Take
You have your platform…
You’ve determined your risk…
You have studied (A LOT)…
And tested everything with Paper Trades…
You’re ready to make the leap and begin making real trades 🙂
It’s an exciting time. I remember it well. It filled me with adrenaline, as I dreamed about what life would be like moving forward. Yet it was also an overwhelming time. I had insecurities and doubts. That little voice inside me tried to tell me how stupid I was.
That I’d fail…
That I’d lose all my money…
That my father was right…
That I’d soon have to face him…
The truth is, this stage is overwhelming. Nothing I say here will change that. What I can offer is some advice that I wish I could go back and give myself. Because had I used this advice from the beginning, my portfolio would be worth a lot more now.
Well, had I known this from the beginning it would be far greater than this… that is for sure.
But before we get to that unfair advantage that anyone can use but hardly anyone does…
Let’s overview three different positions you can take:
1: Buy and Hold and Go Long
The short answer is… don’t!
If you want to know why read this: Does The Advice Warren Buffett, Ray Dalio And George Soros Work For Someone With Less Than $100,000 In Investment Power?
2: Swing Trade or Day Trade
A swing trade is when you buy and hold onto a stock for a few days (or even as long as a few weeks or a couple of months). I don’t swing trade often, but if a stock is on an active run for say, 10 days, then it can have the potential for a swing trade.
But more often than not I stick with day trades. This is when you buy and sell the stock on the same day (or after a couple of days). I’d say I Day Trade 90% of the time, only Swing Trade 10%.
The reason for this is that the liquidity of a stock has a massive impact on the trade you should make. If a stock has low liquidity, it makes it hard to get out. So holding onto it as part of a swing trade becomes risky. Whereas if the stock has high liquidity, this is less of a risk.
But for the most part, I day trade. I encourage most of my students to focus on day trading, too.
It carries less risk and yields plenty of rewards.
3: Short Selling
Short selling is basically the opposite of how most people trade. In a standard trade, your aim is to buy low and sell high (buy at $1 and sell it at $5). With short selling, you’re going against the grain and betting on the stock going down.
This works by you borrowing a security and selling it in hopes of repaying the loan of the shares by buying back cheaper shares later on. It’s deemed a riskier approach to take, but done properly can yield very profitable results.
And because very few people do it, it creates a massive opportunity for you.
The BIG Reason Why 94% Fail At This Stage
I’ve made a lot of money short selling over the years.
It works, and it works often.
And the reason is… people.
It comes down to human psychology!
Most people do what everyone else does. They get caught in the hype and fear of missing out (FOMO). So when they see a stock that keeps going up, they want to get in on the action before it’s too late.
The thing is, they’re already too late!
Because all stocks that go up will eventually come back down…
Short selling is your way of going against the vast majority of people.
The 94% of those who fail because they follow the hype become YOUR unfair advantage.
You bet against them.
You short sell because you know the stock WILL come back down.
Most people who get into Day Trading aren’t even aware of what short selling is. And those who do don’t understand it and are unwilling to take the risk. This leaves a MASSIVE opportunity for those of us who do understand short selling, and who DO know how to do it effectively!
I specifically talk about this in the video below. I encourage you to watch it to learn more about how short selling works and how to avoid the risks that trip so many people up.
In short… short selling can quickly become the unfair advantage that fast-tracks you to the top.
Whereas everyone else makes a trade with the intention of the stock going up, you know that the same stock will come down. As you know by now, 94% of traders fail. Meaning this is how you bet against them and on the side of the 6% who succeed.
You’ll soon be able to see key areas where there is an upward spike, meaning the chances are it will lead to a downfall as people begin to sell their shares (and while others panic to get out before it’s too late).
This is a golden opportunity for you to get in and out and earn anywhere from 15-35% of that trade — depending on what strategy it is you’re following.
And when these trends happen around 75-85% of the time, if you keep doing them, you keep winning (most of the time). And because these patterns happen upward of 50-60 times a year, you just repeat the exact same action you did the first time around, and this is how you grow a huge portfolio in a relatively short period of time.
Of course, all this comes back to your risk management and knowing what risk you can take on. If you’re not clear on this, short selling is dangerous. But with the right risk management and the right knowledge (the strategies to use and patterns to follow), the possibilities are HUGE.
and because hardly anyone else does this in day trading, you create an unfair advantage that fuels massive growth month-on-month!
This is one of the strategies that those who create a 7+ figure trading portfolio use and is the reason they remain part of the 6% who win big. The 94% of people who fail don’t know about short selling. Or if they do, they’re either unwilling to take the risk, or, worse, don’t know how to implement it.
I didn’t know this in the beginning.
I nearly became part of the 94% of people who fail because I followed too many “fake gurus”, listened to the wrong advice and did what everyone else did. Once I truly learned about the markets and found a few core strategies that worked, I realized what I could do that would set me apart.
This led to me finding patterns that yield big, consistent profits.
Short selling plays a role in all this. It’s an approach I hope you consider.
Of course, it’s important you learn how to do it effectively. Watch the video above to get an insight into how it’s done. And if you’d like to work with me personally to not only learn how to short sell but how to use other day trading strategies that set you up for BIG wins… look at The Freedom Challenge.
It may be what you need to step up into that 6%!