One of the mistakes I consistently made in my early years as a trader was to try to make too much money in relation to my trading capital. To make 10000 a day while trading with 100,000 is absurdly ambitious; of course I have done it many times, as would anyone with this intention, but I have also gone bust on more than one occasion. To have the aspiration of taking 10000 out of the market each day, when trading with 100,000 or under is, I think, a quick route to the poor house.
So what is a reasonable objective for a day trader?
I believe that confidence is one of the primary keys to success in trading and that confidence is a by-product of taking money out of the market.So If you want to be a day trader you need to regularly take small amounts of money out of the market, your knowledge, skills and confidence will grow and in time they will become bigger traders. What is critical about this approach is that his traders do not grow in size until they have achieved consistent, regular success on a small scale; and we are talking small, I mean 1000 or 2000 in a day.
Well first let me ask you: what is more important,
1. To make money today, or to
2. Become a consistently profitable trader?
Because if we want to become consistently successful traders we need to take a different tack than if we are just out to make as much money as we can today.
So back to the question, what is a reasonable objective for a day trader? Well let’s look at bringing our daily target right down to 1000, with 100,000 of trading capital, i.e. 1%. Now 1000 a day, trading with Nifty or even Liquid cash stocks seems an achievable target to me. That is a net profit of 10-15 NIFTY points a day.
Can you come up with a system that trades 2 times a day and has an average net profit of 15-20 points?
Is that a yes I hear? Because if you can make an average of 1000 a day you will double your money in 100 trading days i.e. 20 weeks or about 5 months. If you double you position size every time you double your money, your account will grow to 10,000,000 in 140 weeks, which is less than 3 years! Of course this does not take into account the impact of brokerage/tax/losses which trader can do due to indiscipline; but my point is that by taking a low risk, conservative approach to trading objectives, we give ourselves the chance to grow and develop into traders, while also availing ourselves of the possibility of a deceptively good return.
Day trading requires lot of Discipline/quick thinking and flexibility.