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How to Day Trade for a Living – A Systematic Approach
By: Giuelith Date: October 11, 2018, 11:14 am
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“Is it really possible to make a living as a day trader?”
This question is asked over and over and over again by normal,
ordinary people. The answer is simple: “Yes, it is DEFINITELY
possible! And, better yet, you yourself can do it!” Sometimes
people don’t believe me when I say that they can become
successful, full-time day traders, but it’s true. And I’m going
to prove it to you right now.
Before we get started, I need you to ask yourself one very
important question: “How much is ‘a living?’” Many people want
to be ‘rich,’ but they fail to quantify what ‘rich’ means to
them. Are you ‘rich’ if you have one million dollars? Maybe
so, but if you told Donald Trump that he had one million dollars
in his bank account, he’d wonder what had happened to the rest
of it! One million dollars to Donald Trump equals broke!
How to Make $150,000 Per Year
Since I don’t want to get into a deep discussion about “how much
money is a decent living for you,” let’s just assume that you
would be pretty happy if you were making $150,000 per year, and
let’s say that you are making this money with your trading.
Does that sound reasonable?
Let’s break it down: $150,000 per year would be $12,500 per
month, or, if you prefer, $3,000 per week. This is assuming
that you are taking two weeks of vacation per year.
So, would you like me to tell you how you can make that
imaginary figure of $3,000 per week – that $150,000 per year –
into a reality? Because I can. All it takes is smarts and
strategies.
Start Small – Set a Weekly Goal for Only ONE Contract
When day trading futures, options, or forex, you can use
leverage and trade multiple contracts on a rather small account.
If you are thinking about trading the futures market, then you
can easily find a broker who will enable you to trade one
contract of almost any futures instrument that is our there –
such as e-mini S&P, e-mini Russell, currency futures, interest
rates, commodities, etc. – on a $2,000 account.
I teach my students to set a weekly goal of $300 per contract.
So, if you want to make $3,000 per week, then you need to trade
ten contracts. It’s possible that your broker might agree to
let you trade ten contracts with $20,000 in your trading
account, but if he won’t – or if you don’t have $20,000 in your
account at the moment – don’t worry. Just stick with me, and
I’ll show you how to get there.
How to Achieve Your Weekly Goal
The key element to trading success is having a sound trading
strategy, and it must be one that works effectively in a variety
of markets. You will dramatically increase your chances of
success in trading if you’re able to trade in multiple markets.
Now, understand that when I say “multiple markets,” I do NOT
mean different types of currencies! This is a common
misconception. What I’m talking about is TRUE diversification,
which means watching the two U.S. Stock Index markets, one or
two currency markets, commodities like the grains, interest
rates, and/or a foreign index market, all at the same time.
Here at Rockwell Trading Inc., we teach our students to watch
six different markets every single day.
Another obvious key factor is profits; to achieve your weekly
goal, you’ll ideally have a high average of wins per trade. It
goes without saying that your average win should be at least 50%
higher than your average loss, preferably even twice as high.
The strategies that I use and teach call for a profit target of
$300 per contract and a stop loss of $200 per contract. You’ll
notice that the profit target is greater than the stop loss.
That’s the beauty of it: all you’ll need is one win, and you’ll
have achieved your weekly goal of making $300 per contract. ONE
WIN!
Just as an FYI, this is why “scalping” is so much more
difficult. Most scalpers try to make $10 - $20 per trade, so
you would need 15 – 30 wins per week to achieve your weekly
goal. Which do YOU think is easier? Making one profitable
trade or trying to make 15-30 profitable trades?
“Sounds Good, But What About Losses?”
As everyone in trading knows, losses are a part of the business,
and you can’t avoid them. If that’s something you have trouble
accepting, then you’re in the wrong industry. However, there’s
a huge difference between losing big on a regular basis and
losing small in a controlled trading plan. Our <a
href="
HTML http://www.rockwelltrading.com/daytradingcoach/01_dtc_moreinfo.html#STRATEGIES"><b>trading<br
/>strategies</b></a> assume a certain amount of loss, and we
prepare our students accordingly. You already know that you
should keep your losses small; we simply teach you how to keep
them smaller that your average wins.
Let’s go back to the scenario I mentioned above: you have a
trading strategy that produces $300 in profits for every win and
costs you $200 for every loss. Now, if your weekly goal is
$300, and if your first trade was a loss of $200, then you need
to make two winning trades to achieve that weekly profit goal.
Let me take this a little farther and actually break it down for
you: you’ve lost $200 on your one losing trade, and then you
make $600 on your two wining trades ($300 each). Your net
profit = $400. Goal achieved. It’s as simple as that.
Of course, you’re not always guaranteed a week with only one
loss. Let’s look at a week that started off with three losses.
With three losses, you are now down $600 ($200 each). So, how
many wins do you need to have before you achieve your weekly
profit goal of $300? Three wins. Just three wins will result
in $900 ($300 each). Subtract the $600 you lost on the losing
trades from the $900 you won on the winning trades, and your
resulting net profit is $300. Goal achieved. Again, simple as
that.
“Wait A Minute – You’re Saying That I Will Achieve My Goals
With a Winning Percentage of Only 50%?”
YES! That’s exactly what I’m saying! Read the example above
again: you lost $600 on three losing trades, made $900 on three
winning trades, and came out with a net profit of $300. This
means that you could pick a losing trade every other time and
STILL achieve your weekly profit goals!
It gets even better: let’s just assume for a minute that you do
end up achieving an actual winning percentage of only 50%. Now,
when you start trading again on Monday morning, what are your
chances of having a winning trade? Since we’ve already
established that you make $300 per winning trade, and since $300
is your weekly profit goal, your chance of achieving that goal
after only the first trade on Monday is also an overwhelming
50%! You have a one in two chance of meeting your weekly profit
goal in just one, single trade!
So if you DO achieve your weekly profit goal on the first trade
Monday morning, what next? Stop trading for that week! Just
enjoy life! It doesn’t get better than that! Remember, you
need to stick to your trading plan and your weekly goal. Do NOT
enter into another trade once you’ve already achieved your
weekly goal; the chance that your second trade may be a losing
trade is too great, and you would be giving your money and
profits back to the market. Overtrading and greediness are a
trader’s downfall, so resist them and stick to your strategies.
How to Increase Your Winning Percentage
I’ve just proven to you that you can achieve your weekly profit
goal with a winning percentage of only 50%. But wouldn’t it be
wonderful if it was possible for you to boost your winning
percentage to 60% instead, or even 65%?
Well, it IS possible, and here’s how to do it:
Be picky. Seriously, when it comes to trading, being picky is
actually a VERY good thing. Don’t take the first trade you see
just because it looks decent. Analyze your possible trade.
Make sure that it fits ALL of your entry conditions and
parameters.
As I said previously: you should be watching six different
markets. Let’s assume that you have a trading strategy which
gives you one entry signal in the first two hours of trading.
This would result in up to six entry signals per day, since you
are watching six markets. Six entry signals per day add up to
30 entry signals per week.
Now, of course, there will be some days when you’ll only have
1-2 entry signals in the six markets; however, the chances are
high – especially if you’re watching uncorrelated markets – that
you’ll get at least two entry signals per day, or ten entry
signals per week.
Pay attention to your entry signals, and rely on them. You
already know that you’ll meet your weekly goal with just one
winning trade, so be patient. If there are no good trades on
Monday, then simply wait until Tuesday. The same goes for the
whole week. Don’t push it! Wait until the market is ready to
be traded. It WILL happen.
Waiting for YOUR trades on YOUR terms WILL increase your winning
percentage. By skipping the trades with “so-so” entry signals,
by taking only the best that the market has to offer, you’ll be
on the right path to solid profits and success. That’s how it
works.
Full Circle – How to Make $150,000 Per Year
A quick recap: the first step towards financial success is to
define your weekly profit target. Next, you need to find a
reliable, straightforward trading strategy that will help you
achieve your profit goal. When you enter into a trade and your
trade hits either your profit target OR your stop loss, exit
that trade immediately. Stick to your trading plans and
strategies until you achieve your weekly profit goal, and then
give yourself a rest until next week.
If you’ll think back to the case I gave at the beginning, in
order to make $150,000 per year – assuming a 50-week year and
two weeks of vacation – you’d need to make $3,000 per week. At
a $300 profit per trade, this means that you would need to trade
ten contracts. Of course, this illustration can be applied to
various amounts. If you wanted to make $225,000 per year with a
weekly profit target of $300 per contract, for example, then you
would have to trade 15 contracts, and so on, and so on.
If you don’t have a trading account that let’s you trade the
amount of contracts that I’m talking about yet, then now is the
perfect time to start building it. Remember, be patient with
your trading, be smart, slow, and steady. Trading success
doesn’t happen overnight, but with the right strategies and
structure, you can achieve profitable results in a much shorter
time period than you may have thought possible.
Plan your trades and trade your plan. THAT’S how successful
traders make money.
I rest my case. J
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