The Truth About Day Trading

you've probably heard the statistic that 95 of day traders lose money and you've probably seen a bunch of people online showing off their day trading games so either we're seeing the five percent of successful traders or someone is lying to us so in this video we're gonna dive in to the world of day trading the alert of sitting at home in front of your computer for a few hours a day and making over a hundred thousand dollars a year is pretty undeniable and appeals to a lot of people that's why there's hundreds of courses and seminars and online communities selling you the lifestyle and the information you need to make it happen knowledge or at least that's what they tell you as someone who's day traded quite a bit in the last 12 months or so i've definitely gained some insights into trading the stock market and the ups and downs that go along with it i've had days where i've made over ten thousand dollars and i've had days where i've lost ten thousand dollars i signed up for discord groups i've watched tutorials i've read blog posts even paid for a course the simple fact of the matter is day trading is very challenging to be successful at over a long period of time so let's dive into some of the intricacies and what you need to know if you want to try your hand at it [Music] so i often hear the stats about day trading failures but i don't ever see a correlating study to go along with it so i did some digging to see what i could find a study on individuals that day traded between 2013 and 2015 in the brazilian equity futures market found that 97 of those that traded for over 300 days lost money and only 1.1 percent earned more than the minimum wage here's another study of day traders in taiwan from 1992 to 2006. they found that less than one percent of the day trading population is able to predictably and reliably earn abnormally positive profits so that doesn't paint a rosy picture for those who want to day trade but i also don't really believe that stats mean too much to the individual it's good to know that a particular field is going to be challenging and the likelihood of success is minimal but if it's something that you really want and will work extraordinarily hard at to become the top percentage of traders then i wouldn't let that deter me kind of like how 80 of restaurants fail within the first five years but i know there are plenty of poorly around restaurants that are serving subpar food just like i know there are plenty of traders out there who don't have any clue as to what they're doing if i think i can lease a great location develop amazing recipes and hire great staff well i'm probably not going to care too much about the stats but rather work even harder to ensure success knowing that i'm entering a tough industry one point that i hear a lot of traders make is to think of trading like any other high paying career if you want to become a lawyer you'll probably be in school for seven years and to be a doctor you'll be in school for eight years and then have several years of residency after that trading well you obviously don't need a degree to create a brokerage account and deposit money and have at it but you can't expect to be successful without years of learning studying and practice now with trading this presents many challenges first since there are so many gurus out there trying to sell you courses it may seem like you can't learn what you need to learn without paying for it and while courses may package most the information that you need all together in one place you can likely find everything that you need to build a profitable framework for trading online without paying any money but the bottom line here is it can be hard to delineate between who is providing good valuable information and who was just trying to hook you in to sell you something i'm certainly not against all courses but for trading especially the prices do tend to be high and out of reach for most people if you're ever considering purchasing a course do some research beforehand simply searching the course name on something like reddit can yield some feedback from people who have tried it out also with day trading specifically you need to be able to trade when there's volume which here in the us is usually the first 90 minutes when the stock market is open if you have a day job with normal hours this alone makes trading difficult you can study as much as you want but if you can't put that knowledge into regular practice you won't ever be able to develop as a profitable trader and then you have the money factor when starting off you're going to have plenty of losing trades and you need to have the bankroll in place that allows you to keep getting better you can always pay-per-trade but when the money isn't real the emotions aren't there once real money is on the line your emotions will shift and your discipline may take a hit monkey problems now i'm not having monkey problems beyond courses in education the one thing to keep in mind is that for a lot of day trading strategies here in the us you'll need an account with at least 25 000 why would i have monkey problems this is because there's a pattern day trader rule which prevents an individual from making more than three round-trip trades in a five-day span if they have a margin account with less than twenty five thousand dollars now the work around to this is to use a cash account instead of a margin account most brokerages will let you choose which one you want and with a cash account you can use only settled funds to trade and depending what you're trading and what broker you're using this would probably take one to two days for your funds to settle after a trade so if you have a thousand dollars and you use five hundred dollars to buy shares of apple and sell the same day for 550 you only have 500 left in that account that you can use to trade for the rest of the day otherwise with the margin account you can still do up to three day trades in a five day period but to be honest it's pretty limiting and can be frustrating when you're starting out about a year ago i signed up for one of those courses with those obnoxious ads that get played in front of youtube videos like this my goal was to make a video about my experience but once i got in i realized it was really tailored toward people with at least 25 000 in their account which i didn't have at the time so it kind of felt like a complete waste so just keep that in mind if you've been trying to learn trading and have watched videos of other traders you've probably heard the idea of taking a motion out of trading that to me has been one of the hardest parts about trading in general when you enter a trade and it goes the wrong way and you start seeing red it definitely messes with your head and affects your decision making and conversely when your trade goes well and you start seeing green it can be easy to exit too early for fear of the green turning red traders tend to hold on to losers too long hoping they turn green and they tend to sell winners too soon if you take a motion out of your trading and instead rely on a set strategy for your take profit and stop loss levels you'll bring consistency to your trading and if it's a good strategy you can consistently be profitable another emotional factor that can interfere with profitable trading is this investors are more likely to repurchase a stock that they previously sold for a profit than one previously sold for a loss and that makes sense in a very human way you have a good experience with something you'll be more likely to do it again and vice versa i pretty much sworn off trading amazon because i've rarely profited when i trade it but if the setup is right and the conviction is there a pass loss shouldn't affect how you approach a trade and if you've been burned by a specific ticker you may be tempted to revenge trade it to try a trade again to recoup your losses when you're tilting from a loss you're probably better off getting up from the computer going outside taking a walk then entering a forced trade money management is a huge factor that leads to a lot of traders downfall it can be tempting to see a crazy yolo on wall street beds and want to do something similar for yourself but just one mistake and your account is blown up and your trading dreams are left in shambles to avoid this it's important to know what your risk limit is per trade meaning what percentage of your account are you willing to risk per trade let's say you have a 25 000 account if your risk limit is one percent you need to cut a trade once you hit a 250 loss now if your risk limit is two percent you could take a 500 loss with smaller accounts you'll likely have a higher risk limit but ideally keeping it under two percent will help you preserve your capital you need to be able to take some losses without your account blowing up and having strict rules in place should help keep you in the game and then if you do have some success with trading i would recommend regularly withdrawing money from your brokerage account and sending it over to your bank account to really lock in that profit using money from trading to pay for your bills or improve your living situation is an incredible feeling so we've covered learning the financial barriers emotions and money management all these can affect your overall consistency not to mention market factors stress and your personal life all having an impact on how you trade just because i've had some good trades over the past year and a half doesn't mean i'm a great trader and doesn't mean i've developed a long-term consistently profitable strategy just to really illustrate this let's take a look at my trading from march the first three days in and i was in the whole 17 450 now i had a better day on thursday but another red day on friday the next week was better i made 23 294 dollars and brought me back into the green for the month but the rest of the month we have a lot of red losing days and just a handful of green ones after spending the entire month trading i ended up losing about 47 in march which it could have been way worse but if that's your full-time job that can be hard to handle next is going into each day seeing the trades i made why i made them and what went wrong did i overlook something were my trade sizes too big which rules of mine did i break analyzing your trade sucks but it does help you get better and the question you have to ask yourself is can you handle the emotional swings of going from an amazing trading day where you feel like a genius to a terrible red day where you feel like a complete can you handle a month or two or three where you're unprofitable that's a tough spot to be in when you rely on it for your full-time income this is also why whenever anyone asks if i can mentor them or if i can start a discord trading community i always say no you don't want someone still in med school performing open heart surgery on your grandma and you don't want me telling you how to trade or selling you a course i promise so with all that covered you're still here if you really want to get better at trading here's what i'd recommend first read watch videos study the markets stare at charts and absorb as much information as you can handle figure out what appeals to you the most is it stock options penny stocks large cap tech stocks try to narrow your focus on what you are most interested in next open a paper trading demo account with a broker it's not the same but it's a risk-free way to get started making trades look for strategies online and back test them where would you have entered a buy order on a specific ticker and where would you have exited the trade was it profitable go back in time over weeks looking at price action and seeing where the setups are and how you would have traded then try out the trades for yourself in real time on your paper trading account once you feel confident in what you're doing open a real account with an amount of money that wouldn't financially ruin you if you lost at all i'm never gonna financially recover from this when a trade doesn't work out cut it remember to keep that risk factor percentage in check analyze your trades both winners and losers are most of your winners in the first hour of trading and after that your win percentage drops start to refine your trading by taking a granular look at your trades and habits finally never stop learning find a community of profitable traders to surround yourself with there are a lot of discord groups out there and many of them are free but it's always good to get insights from other traders as they'll often see things that you overlooked and it's always helpful to bounce ideas off of others no matter what anyone tells you trading is hard it doesn't have to be complex but it still is difficult if it wasn't if it was just learning a system or installing that one indicator that person would just keep the information to themselves and print money like j-pal so for me the day trading journey continues i have started to invest more in my long-term portfolio which i covered last week and i'm also rebooting my futures trading experiment that i tried out last year as i continue to improve as a trader i will share more insights here with you for free if you would do me a favor hit the thumbs up button on this video that will help get my channel out to more people and consider subscribing if you haven't already and then i will see in the next one bye [Music] you

Channel: Daniel Inskeep

Views: 312,653

Keywords: personal finance, daniel inskeep, making money online, stock options, robinhood, trading stocks, day trading, trading for beginners, how to day trade, day trading for beginners, truth about day trading, stock market for beginners, learn to trade, stock trading, day trader

Id: IQAeaWC5wlE

Length: 11min 6sec (666 seconds)

Published: Wed May 05 2021