How Much Money Do Day Traders *REALLY* Make? transcript

how much money does the average day trader make the average day trader in the United States makes $116,000 per year at least according to zipia over at the glass door they say the average day trader makes $178,000 a year but they include traders who work at prop firms and at trading desks so that's a little different over at zip recruiter they say the average selfemployed day trader that's me and that may be you as well makes $94,000 per year what none of these three sites which average salaries across this country state is the success rate of becoming a Trader cuz we know the success rate is very low nonetheless in this episode what I want to do is I want to take that number the average salary I want to break down where those profits come from now I'm going to use my own numbers as an example so even though the total profit Prof that I've made is a lot higher and is not typical we're still going to use that just as this is the number and now that's our piie so okay the big circle's a little bit bigger but it doesn't matter we're going to go and break it down based on a number of different factors so what I'm going to do in this episode is start sharing with you where that profit comes from number one time of day the time of day that I trade is predominantly between 8:00 a.m. and 10:00 a.m.

I have found that that is the window where I make the most money there are some Traders out there who trade Power Hour which is from 300 p.m. to 400 p.m. who trade after hours or who trade during the lunch hour I even know some traders who just trade sporadically when they have a few minutes they just sit down at their computer and take a couple trades but for me I have found in my metrics that I make the most money money between the window of 8:00 a.m. and 10: a.m. and so that's where 99% of my profit comes from so that's time of day day of the week my profit predominantly is generated on Wednesdays and Thursdays now I make money on every single day of the week but I make the least on Monday and then it increases from there why is that that's trading psychology for you because I trade for income my goal is to make make money every single week I understand I won't make money every single day but I never want to lose more on a bad day than I could make on a good day perhaps the next day and I don't want to have more than one red day per week so generally speaking I try to be green every single week and I start on Monday Morning Fresh slate new week dipping my toe in the water being a little bit cautious if the Market's hot I lean in I get more aggressive I scale up until I Peak on Wednesday and Thursday and then I slow down on Friday to not risk giving back all my profit from the week so we've got time of day we've got day of the week now in terms of accuracy my accuracy right now is 68.9% which means I'm wrong just a little over 30% of the time I'm wrong all the time you could say I'm wrong a little bit just about every single day and that's okay you do not have to be right on every single trade in order to be a profitable or or a fantastically profitable Trader you just have to know when to cut your losses and walk away and I've gotten really good at that now I got good at that because I learned the hard way that if you hold your losers they get really really really big and then you end up taking one loss that wipes out 10 or 15 winners and it's just not worth it so after doing that a few times I learned you've really got to keep your stops as tight as possible and it's better to just follow the philosophy of breakout or bailout if it doesn't work right away get out and get back in for another shot a little bit later now let's talk a little bit about the specific stocks where my profits come from I have found Far and Away that my profits come from stocks between $5 and $10 a share that for me is kind of the sweet spot where I feel like I'm able to to purchase a fair large position but where we also get good siiz moves and where I feel I can manage my risk I have found on higher PRC stocks number one I can't afford to buy as many shares because even though I've made a lot of money trading I take that money out of my account I don't just leave it all in the account that's not good risk management I take money out and then I keep just enough in there to trade every day so when we see stocks that are 3040 $50 a share I can't trade them with very much SI and even when I do they have such large ranges that I found that I can take outsize losses which really for me is a problem so above $20 not great my sweet spot is 5 to 10 but I do make money on stocks between 2 and five and I make money on stocks between 10 and 20 however above 20 and under $2 not so much and you might think Ross well under $2 you could buy the most because they're so cheap and while that's true when it comes to day trading I have found that those lower price stocks generally don't produce the intraday squeezes that I need they're they're more of grinding stocks that people buy for bigger moves over the course of days they're they're almost a little bit better for swing trading than for just day trading and my metrics speak for themselves it's just not where I make the most money now this probably wouldn't Sur surprise you but I make the most money on the stocks that have the most volume more volume means more liquidity that means I can get in and get out with bigger positions so when I'm looking for stocks to trade based on my own metrics I have a good sense of knowing what I want to look for if I see a stock with very very light volume naturally I'm going to be more conservative when I see a stock with decent volume I'm going to be a little bit more aggressive but when we think about volume there's different ways to look at it one is the total number of shares traded on the day and I make the most on stocks that have more than 25 million shares by the end of the day but there's also something called relative volume and that's the amount of volume today relative to what's normal for a stock and so a stock that has high relative volume means that it has for instance five times higher volume today than its 14-day average and the only reason that would really happen is when a stock has breaking news now now this is something interesting there's a little bit of a curve here where I make a lot of money on stocks that have five times relative volume and I make a good amount of money on stocks that have basically the same volume as the previous day but is still five times higher than the 14-day average this is a little complex so if it's five times higher than the 14-day average but it's the same as yesterday what does that mean the stock has been strong two days in a row this is a continuation setup so continuation it was strong yesterday and it continues today the relative volume is similar to yesterday but both are five times higher than the previous 14-day average so relative volume is a really important metric that I look at in my own trading and I look at when I'm considering whether or not a stock is worth trading at all higher relative volume is better when it comes to continuation stocks sometimes they won't be gapping which means they're opening higher than they closed the previous day but a lot of times they do Gap now the first day of a move is when we see the biggest Gap the news comes out pre-market or after hours and the stock opens significantly higher than the previous day and so if you look at my profitability by the percentage of Gap or the percentage gain you'll see far in a way it's on stocks that are up over 10% I mean that just makes sense for my strategy and for what it's worth I'm trading momentum strategy which is extremely popular this is ultimately the strategy that a lot of Traders use we just all have somewhat different variations of it maybe we trade you know a little bit differently but we're generally doing the same thing now the inverse of trading momentum would be counter Trend trading where you're trading reversals you're buying stocks are really really weak or you're shorting stocks that are really really strong one of the challenges for beginner Traders is that you're getting in front of a a moving train you're getting in front of a lot of momentum trying to predict a reversal and that can be a little risky so the best way to do that is of course to leg in slowly rather than to go all in in case your timing is wrong but for most beginner Traders it's a lot easier to jump on an existing Trend than to try to guess the reversal now the metrics that I'm sharing with you come from taking over 24,000 individual day trades and producing just under $ 12.5 million in gross profit my results are not typical in fact in the 72-month period that began on January 1st 2017 I was averaging $144,000 of profit not per year but per month that's audited that is real money you could check out my audit results if you want I'll put a link in the description but this is just to say my results are not typical but I am just trading the same strategy that so many other people trade but I've Amplified it because I have such a track record that gives me confidence to trade with bigger size that's really what it is a beginner Trader is going to trade way scaled back smaller size more conservative fewer trades as you gain confidence you start scaling up so your question may be how do I become a more confident Trader and the only way you can do it is through experience keep trading keep practicing track your mat and go back to your metrics and try to improve your trading every single week every single month every single year I hope you found this episode helpful and I'll see you for the next one real soon by