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01. Basic

How Much do Day Traders Make

This is a pretty broad question because a lot of different variables come into play — how much capital you trade with, your skill level, market conditions, etc.

Highly skilled traders can make 7 figures a year while new traders that are profitable can be anywhere from $200-$500 a day.

The markets are open about 253 days per year so if you’re average $200 per day, that’s $50,600 a year. Not bad!

If you’re doing $500 in profits a day, that’s $126,500 for the year!

I turned $500 into over $53,000 in 17 days of Day Trading!

In January of 2017 I began a $500 trading challenge to turn $500 into $100k.  It took me 45 days.  In December of 2019 I decided to try a $500 to $50k challenge, and I did it in just 17 days.

How was I able to grow my account so quickly? First of all, I used an offshore account that allowed me to day trade on margin with just $500. They do not enforce the PDT rule. The broker is called CMEG.

Additionally, CMEG offers 4x leverage up to $2,500, and then 6x leverage above $2,500. That means with a $500 cash balance, you have $500 x 4 = $2,000 in buying power. With a $5,000 cash balance, you have $5000 x 6 = $30,000 in buying power.

Once the brokerage account was setup, I just needed to follow the rules of my strategy. My strategy allowed me to risk up to $50 on each trade I took.

On my first trade I made $158 for a 3:1 profit vs loss ratio. I continued to increase my risk each day, as my account grew.

On four days during my challenge I doubled my account in 1 day. The only way you can double your account in 1 day as a day trader is by focusing on stocks that are volatile!

Keep in mind that you will have commissions, exchanges fees, data fees, software fees and taxes that will dip into your profits.

My total commission fees for the month were about $3,900, and my software fee was $125.00.  My gross profit (before fees) was approximately $57,000 and my net profit was $53,000.

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01. Basic

Day Trading with Cash vs. Margin

Day trading with a cash account means just that. You are only using the cash you have in your account.

With a margin account you have the option to use leverage or margin to increase your buying power by borrowing funds from your broker.

Below are the main differences between a cash account and margin account when it comes to day trading.

Cash Account

  • You can day trade as much as you want as long as your funds are settled (takes two days from trade date to settle, click the cash account link for more info)
  • You can only trade with the amount of cash you have in the account, no margin
  • Placing day trades with unsettled funds could result in the account being suspended

Margin Account

  • Can only place 3 day trades in a 5 business day period if you are under $25k
  • You have 2x the buying power for accounts under $25k and 4x the buying power for accounts over $25k
  • You can buy more shares than cash in your account since you are granted leverage
  • You can lose more than you have in your account since you’re trading on borrowed funds

As you can see there are some major differences but most day traders trade on margin due to ability to leverage their account and trade bigger size.

This makes scalping smaller moves more profitable.

Just take note of the risks involved and manage your trades appropriately!

Click here for more information on the difference between a margin account and cash account.

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01. Basic

How Much Money Do You Need for Day Trading?

The amount of capital you need depends on if you want to make day trading your full-time income or just a side hustle to make a couple extra dollars here and there.

As you probably know, I started a small account with just $500 and turned it into over a million in just two short years.

That’s an extreme example and most traders, even experienced ones, would have a hard time replicating that type of return.

My point is you don’t need a large amount of money to start day trading.

However, there are two questions you need to ask yourself when deciding how much money you need:

  • How much are you looking to make per day?
  • How much do you actually have to start day trading with?

Once we know the answers to those questions, then we just need to do some simple math.

Let’s say you are looking to make $100 a day but you only have $1,000 to put towards your day trading account.

That means if you trade a stock that is at $2.00 per share, you can buy 500 shares, which means you will need the stock to go up 20 cents in your favor to make your $100 goal.

This is a very simplified example, because we didn’t take into account margin which would allow you to have more buying power.

Make sure to watch the video above. I go into great detail about margin, PDT rule and using offshore brokers.

This will help give you a full understanding on how much money you should aim to have when you open your day trading account.

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01. Basic

How to Start Day Trading

Once you’ve learned a strategy and are trading it profitably in a simulator, you can now start to look at trading in a live account.

Here are the steps you will need to take:

  • Open a brokerage account and transfer money in
  • Have a written trading plan you can review every morning
  • Make your watchlist in the morning
  • Trade your plan and stick to it
  • Review your trades at the end of the day

One of the biggest pieces of advice we can offer new traders in a real account, is take it slow.

Don’t dive in head first and trade max size. Ease your way into it until you are comfortable.

Trading in a real account adds a lot more emotion and pressure to your trading, which is something that will subside as you gain more experience.

Besides, you don’t want to blow up your account and lose all your money on day one!

This leads me to our next topic: how much money do you really need for day trading?

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01. Basic

What You Need Before You Start Day Trading

Before you start day trading with real money there are three things you need to do and have:

  • Strong knowledge of day trading terminology and technical analysis
  • A strategy that’s been back tested and proven profitable
  • Proof of profitability in a day trading simulator

#1 – Strong knowledge of Day Trading Terminology and Technical Analysis

With years of day trading under my belt, I can confidently say day trading is an exceedingly difficult skill to become competent at, let alone master.

You can think of day trading like playing a professional sport.

Your ability to make money is based 100% on your ability to perform day in and day out.

Attempting to day trade without any sort of training or education is a recipe for disaster and loss of capital.

The first step to learning day trading terminology and technical analysis is reading books and watching videos! This is the process of gaining knowledge. But remember, just because you read a book on sky diving doesn’t mean you’re ready to jump out of an airplane!

One of the challenges with learning to trade is the overwhelming amount of information out there. Often times the things you learn will be contradictory.

The reason is because the technical analysis or entry and exit requirements that work for one strategy, may not work at all for another strategy.

It’s not helpful to your long term success to learn a little bit of 100 different strategies. It’s much better to learn as much as possible about 1 strategy that is proven profitable.

So while you’re looking at who you’ll learn from, it’s always important to ask yourself, is this person actually profitable?

I take pride in being one of the most transparent traders out there with all my trades verified and even posted on our YouTube channel.

Unfortunately, you’ll find very few people provide proof of profitability. The information they provide should always be taken with skepticism.

Whether you decide to learn more in my premium classes, or learn from somebody else that is proven profitable, the first step to learning how to day trade is studying.

If you’re curious, you can see our courses offer an extensive curriculum that covers everything you’ll need to build your day trading business. You can check out the course syllabus here.

#2 – Developing a profitable day trading strategy or adopting a proven day trading strategy

It took me about 2 years to develop the strategy I trade. As an aspiring trader, you have two choices. You can either adopt a strategy already being actively traded by other traders, or you can create your own.

If you create your own, be prepared to spend months, or even years backtesting and refining before you can trade with real money.

Most beginner traders, rather than trying to reinvent the wheel, decide to master a strategy that’s already been proven profitable. After mastering that strategy, traders may decide to put their own spin on it by making a few changes.

Regardless of your approach, it’s important to have a specific setup, trading system, or methodology that you’re comfortable with when you start trading.

It allows you to develop a competency at something, rather than trying to find opportunities for several setups at once, never really getting good at any one setup.

You can always learn more down the road if the setup/system you choose isn’t ideal for you.

The important thing is consistently sticking to one thing at the beginning and mastering it. If you try to trade 5 different strategies at the same time, how do you know whether or not one of them individually is profitable if one of the others is costing you a lot of money?

#3 – Converting Knowledge to Skill by Practicing in a Day Trading Simulator

You may have taken a few quality trading courses, read a book or two, and have been watching our daily trading breakdowns and feel like you’re ready to trade.

But the reality is you’re probably not ready. Beginner day traders notoriously overestimate their ability, start trading with real money, and lose.

Intellectually understanding day trading and actually being able to react to opportunities and effectively executing them in real time are two different things.

This is where practice comes into play.

You need a trading simulator where you can practice in real time your strategies until you are comfortable with order entries and trade management.

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01. Basic

How Does Day Trading Work?

Day trading works by capitalizing on short-term price movements in a stock through the active buying and selling of shares. 

Day traders seek volatility in the market.  Without short term price movement (volatility) there is no opportunity. The more a stock moves, the more profit a trader can make or lose in a single trade.

That’s why traders must exercise excellent risk management skills in order to keep losers small while letting winners run.

You can think of day traders as being a manager of risk. We put capital at risk in order to try and make more money but if we mismanage our risk, we will have a hard time consistently making money.

Successful traders will often have predetermined entry and exit points before we even enter the trade.

This helps take emotion out of the trade, which in return keeps the trader from over managing their position (proven to have a negative impact in the long run).

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01. Basic

What is Day Trading?

Day Trading is a speculative trading style that involves the opening and closing of a position within the same day.

Quick example: If you open a new position at 10AM and close it by 2PM on the same day, you have completed a day trade. If you were to close that same position the following morning, it would no longer be considered a day trade.

Day traders, or active traders, typically use technical analysis and a trading strategy to try and make profits in a short period of time and will often use margin to increase buying power.

A successful day trader doesn’t just pick any stock and try to trade it. There has to be some kind of strategy involved with rules and money management parameters.