In today’s episode, you’ll discover whether you can make money from trading every single day, or not.
So tune in right now…
Hey, hey, what’s up my friend? In today’s episode, I want to discuss this – can you make money every day from trading? So the answer is, “Yes you can, but…”
There’s always a ‘but’ when it comes to trading. Let me share with you 3 scenarios where I believe you can make money every day from trading, or on most days in trading and the considerations that you must take into account.
Scenario 1: You have a wide stop loss relative to your target profit
Let’s say, for example, you trade a market like GBP/USD with a 5 pips target and a 200 pips stop loss. You’ll realize that you would make that 5 pips almost every single day. If you’re trading one lot, that’s about $50 in the bank every single day.
But as this is, it’s too good to be true. Because eventually, you’ll end up getting hit by a 200 pips stop loss. If you’re trading one lot that’s about a $2,000 loss – just like this. You’ll realize that all the little profits that you’ve accumulated along the way maybe over the last few days, weeks, or months, will be gone just like that from that 200 pips stop loss.
Then you might realize that your account is back to where you started, at breakeven or it might even be in the red, or you might have even blown up your trading account depending on how consistent you are with the size of the contracts you’re trading.
Because as you make 5 pips every single day, the size of your trading your contracts that you’re trading will naturally increase as well due to greed.
That’s the first scenario – having a wide stop loss of relative to your target profit. Yes, you’ll make money every day or on most days, but eventually, when the losses come, they’re going to wipe out everything and more.
Scenario 2: You’re a proficient price action trader
How you’re going to make money every day is by coming into the markets and understanding the markets well enough for you to trade them using price action.
Let’s say for example you’re trading EUR/USD today. Over the last few days, it’s in an uptrend. So as a price action trader, you’ll look to buy the dip and sell the rally, buy low and sell high.
Let’s say you’ve got this correct for over the last 5 trading days and you make money. But on next week, this uptrend reverses to become a downtrend. Again, let’s say you’re proficient price action trader, when you buy low and the price heads lower, you’ll cut your loss and move on.
Then you’ll realize that the market is now in a downtrend, so you’ll look for selling opportunities. You’ll look to sell the rallies and stuff like that, and hopefully cover back the previous loss.
So you can see that for a proficient price action trader to make money every day, you got to read market conditions correctly to trade correctly and you’ve got to adjust your trading strategy to new market conditions as they unfold every single day.
For example, yesterday might be an uptrend but today could be a downtrend or even in a range, you’ll never know. And that’s how you make money every day. Is it difficult? Yes, it is. You will be wrong often.
I’ve never seen a discretionary price action trader who reads the market well to be making money every single day. I don’t deny that they could make money on 70% of their trading days. But to make money every day is quite a far-fetched scenario.
Scenario 3: You’re a high-frequency trader
What high-frequency traders or high-frequency trading firms do is that they try to make small little profits across many trades in a single day. They’re no longer using technical analysis, price action trading or support resistance to trade the markets.
The robots are doing trading for them. They’ll write a program and send the robots to the trade and make a profit. And that is how these firms make a profit almost every single day.
Let me give an example. Let’s say you have a coin in your hands. Every time it comes up heads, you make $1.10, every time it comes up tails you lose $1.
You can agree that the coin gives you an edge as you will make money from the coin toss in the long run. Now imagine that for the same coin toss, you can only toss your coin let’s say once a day.
Do you still think you can make money every single day? Probably not because 50% of the time it’s going to come up heads and the other 50% of the time when it comes up tails on a given day, you will lose money that day.
Let me ask you, what if you can toss a coin 1,000 times a day. Now, what are the odds of you making a profit every single day? Well, the odds are much higher now because you have 1,000 tries to toss a coin within a single day.
And this is what high-frequency trading firms are doing. They have small edges in the market and they trade many times a day. That’s how they make a profit every single day.
Don’t focus on making money every day, focus on this instead
For most of you here, you’re probably not going down the HFT firms’ trading approach. So what now for you as a retail trader? If you ask me, as a retail trader your goal shouldn’t be trying to make money every single day.
Because there will be times where market conditions change, and you can’t adapt fast enough to it. If you were to have that goal of making money every day, you will realize that you will develop actions that are detrimental to your trading.
For example, let’s say your goal is to make 10 pips a day and you no matter what, you want to make that 10 pips every day. Well, the market could go against you and instead of taking a loss, you end holding onto your losing trade, hoping for that the slight rally into breakeven or a little profit.
All these detrimental actions, in the long run, will cause you more harm than good. This is why I want to emphasize that you shouldn’t be looking to make money every day from the market.
Instead, is that what you want to do is to trade when the market conditions are favourable to you. This means that if you’re a trend trader, then you want to trade when the market is trending and look to buy low, sell high look and trade in the direction of the trend until market conditions change.
Don’t try and predict when a reversal is going to happen, thinking, “Oh man, the market has been trending over the last five days, it can’t go up any higher. Let me try to go short.”
No, you should trade what you see not what you think. And trade, when market conditions are favourable to you, continue, according to your trading plan.
Then when the market conditions change and become unfavourable to you, manage your risk, cut your loss and move on.
In other words, for trading, make as much money as you can when market conditions are favourable to you. Play good defence when market conditions are not favourable to you. That’s what retail trading is all about.
Let’s do a quick recap…
- Scenario 1: Have a wide stop loss relative to target profit
- Scenario 2: Adapt to market conditions quickly
- Scenario 3: Adopt a high-frequency trading approach
- Make as much money as possible when market conditions are favourable to you and then playing good defence when it’s not
With that said, write I wish you good luck and good trading. I will talk to you soon.