Can You Make A Living Day Trading?

Probably not.  Day trading is extremely hard and computer generated algorithmic trades are making it tougher by the day.  Does that mean it can’t be done?  Absolutely not.  There are day traders today who make a good enough living to support themselves comfortably, and some do much better.  You may even consider some day traders to be rich.

The problem is that most people are not able to attain that level of success through trading.Over 90% of people who try to day trade for a living ultimately fail.  In fact, as the markets have become more electronic, and more computer algorithm driven, fewer traders have been able to trade for a living.  That doesn’t mean that they aren’t profitable, or that they don’t manage to have some big trades along the way.  The simple fact is that to do it for a living, over a long period of time, a trader needs to experience a lot of success month in and month out.

If you know that obstacles, you may be able to overcome them.  Read on to learn the biggest obstacles to day trading successfully enough to live off of, and learn how to give yourself the highest chance to succeed.

Obstacles To Making A Living

  • The lack of discipline applying a strategy.  This is the number one cause of failure in the trading world.  People are often able to develop strategies that are profitable, or would be profitable if they were applied strictly without the trader straying from the system.  Unfortunately for a variety of reasons traders can rarely stick to a strategy.  Probably the biggest reason why traders are unable to adhere to a strategy involves a lack of patience.  Day trading is not as exciting all the time as some people would like it to be.  That doesn’t mean that it isn’t very exciting sometimes, but a lot of trading involves sitting around and looking for the right trade setup.  Depending upon your strategy, the right trade setups may come few and far between.  New traders have a very hard time sitting idle, waiting for the setups to come.  New traders think that to become successful, they need to make money every single day.  This is simply not the case.  Being highly successful on a low number of trades can make a trader rich.
  • Developing a strategy that isn’t successful enough.  It turns out that it isn’t extremely difficult to create a strategy that is slightly profitable, but to create a highly profitable strategy takes some work/know-how.  New and experience traders often fall into a trap where they are making money, so they don’t want to change their strategy, but they are not really making enough money to live on.  A clearly defined successful strategy is the most important tool a trader needs to systematically make money over a long period of time.  Unless you are perfectly disciplined, you need a strategy with a big upside or a high winning percentage (or ideally both).
  • Pressure to make money quickly.  If you want to become a successful day trader who can live off day trading profits alone, the one thing you can’t have enough of before you start trading is money.  This is not because you will necessarily lose a lot of money when you start trading (though you may), but because it can take time to get good enough at trading that you can pay yourself regularly.  If you are under pressure with low savings and lots of bills or a family to support, you will have a hard time trading successfully.  You almost certainly will struggle to maintain any discipline, and you will have a hard time sticking with trading long enough to get any good at it.  You need to be able to survive for quite some time without income if trading is your only source of income.  Even professional day traders go through a month here and there where they don’t make any money.
  • The stock market is extremely competitive.  I would love to be able to tell you that anyone can become a day trader with a little hard work, but that is not reality.  The truth is that the stock market is very, very, very competitive.  Wildly competitive.  As a day trader, you will be fighting investment banks, hedge funds, trading algorithms, and all sorts of very smart people, institutions, and machines for the same profits.  If one person makes money, it means that someone else is losing money or giving up an opportunity to make money (opportunity cost).  People who consistently lose money do not survive for very long in the stock market.  To be successful as a trader you need to develop a niche, and become very good at what you do.  Equity markets are so competitive that they are very efficient at reflecting the “right” prices.  There is still opportunity, but there isn’t any “free money”.  Being profitable takes intelligence and hard work.
  • Being unable or unwilling to adapt.  The stock market is always changing.  A strategy that has worked for a year or longer may suddenly stop being profitable.  Laws are changing, and the market has seen the invention of electronic markets, dark pools, and electronic market makers.  The way that the market moves will continue to change.  For a trader to make a living day trading, an ability to adapt is crucial.  Unless you can make a lifetimes worth of income before the market changes, you will need to adapt with the times.

The Keys To Succeeding At Day Trading

After hearing all the obstacles, you may be scared to try day trading.  Not day trading may even be the best decision you ever make.  Far more traders will lose time, money, and their sanity than than experience riches and success.  Even so, day trading is exciting and potentially very lucrative.  While fewer traders have been able to make a living in today’s fast moving electronic market, those who are able to make a living tend to do do very well.  The odds are against you succeeding at day trading, but if you are able to succeed you will probably be well compensated.

The biggest key to success in day trading is to avoid habits that lead to big losses.  Here are the important points to master if you want to earn your living as a trader.

  • Develop a (winning) strategy in a demo account.  It is very important that you don’t waste money trying to figure out your strategy.  Keep a demo account that simulates real trading as closely as possible and test your strategy as thoroughly as possible there.  Only after you have confidence that it will make money systematically should you move to “live money”.  For help developing a strategy read our article about it.
  • Adhere to your strategy perfectly.  By far, the biggest mistake that new traders make is that they are unable to stick to their strategy.  Trading has narrow enough margins without wasting money on imperfect trades.  Keep yourself profitable by keeping yourself disciplined.  A good way to do this is by tracking and reviewing every trade with a trading journal, and by reviewing your trade blotter every day.
  • Manage your emotions.  Negative emotions lead to reckless trading, an inability to properly manage trade size, and make it easier to miss good trades.  To master trading you need to master your emotions.
  • Adapt.  If your strategy no longer works, you need to go back to your demo account and either tweak it or develop a new strategy that will work.  The market is certain to change, it is up to you to change with it.

Ultimately if you are going to succeed at day trading enough to make a living you are going to have to go through a big learning curve.  Their are many resources, and many people willing to help you.  You will have to learn to develop your strategies, and learn to control your trading so you adhere to them without wavering.  You will need to spot opportunities, and be willing to act quickly and decisively to take advantage while they present themselves.  The best day traders are willing to aggressively pursue any opportunity.  Any day trader will tell you that the trade setup will not last for long, and if you wait, you will lose your chance.

If you want to make a living day trading you need to be aware that you have a long road ahead of you, but the rewards can be very sweet.


Daniel Major

B.S. Degree in Economics and Finance. Professional day trader. Live and work in Manhattan, NY, NY.

Page Updated: February 22, 2015

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