Let’s get real…
You want to make money from trading so you can quit your job and do the things you love (like travelling, spending time with the kids, etc.).
And to replace your full-time job, you need to make a consistent income from trading.
However, consistency in trading is subjective because it could mean making money every day, week, month, or even year.
To be on the same page, let’s focus our attention on making money every day (from trading).
Is this possible or is this just a pipe dream?
That’s what you’re about to find out.
Can your trading strategy work all the time?
If you want to make money every day from trading, then your trading strategy must work all the time.
Is this possible?
First, let’s take a step back and ask ourselves…
“What’s the purpose of a trading strategy?”
Well, a trading strategy is used to exploit a phenomenon (or “pattern”) in the market with the hopes of making a profit from it.
Trend followers attempt to ride trends across different financial markets.
If most markets are trending, trend followers make money.
If most markets are ranging, trend followers lose money.
In other words, every trading strategy out there can only profit from a specific market condition suitable to the strategy.
If the market condition change, then the trading strategy will stop working and go into a drawdown.
Now you might be thinking:
“If no trading strategies work all the time, then it’s impossible to make money every day from trading?”
Well, there are 2 things you can do…
#1: Adopt multiple trading strategies
A trading strategy can only exploit a certain “pattern” in the markets, and when the market changes, the trading strategy goes into a drawdown.
But what if you adopt multiple trading strategies?
Then it means you could profit in different market conditions.
You combine trend following and mean reversion trading.
So when markets are trending, the trend-following strategy makes money. And when markets are ranging, the mean reversion strategy will do well.
Still, the trick is to have your “winning” strategy offset the losses from the “losing strategy”.
Now, there’s no guarantee, but it puts you in a better position than having one strategy only.
#2: Find more suitable markets to trade
The next thing you can do is, trade more markets so you have a greater chance of finding a market condition suitable to your strategy.
Let’s say you’re a trend trader who focuses on the forex markets.
Now, if the forex market isn’t trending then you can move onto other markets like stocks, futures, ETFs, etc.
This way, you can find even more trading opportunities that your trading strategy can excel in.
There’s no guarantee you can make money every day because trends can suddenly reverse at the same time (especially across correlated markets).
If you want to take things a step further, you can look to trade across different timeframes.
Can you make money every day from price action trading?
Now, you might argue a price action trader can adapt to changing market conditions.
So, does it mean a price action trader can profit from the markets every day?
In theory, it sounds plausible.
But in reality, it’s a different thing altogether.
Let me explain…
#1: When the market is in an uptrend, a price action trader will look for buying opportunities.
Still, there’s no guarantee he’ll profit on every trade as the market could make a sharp pullback and hit his stop loss.
#2: Every trend will come to an end—and the way it ends could come in different forms.
- Swift reversal
- Choppy reversal
- Range market before a reversal
Now as a price action trader, are you able to anticipate these types of reversals so you don’t get caught on the wrong side of the move?
So my point is this…
If you can overcome #1 and #2, then you can possibly make money every day from price action trading.
Why it’s impossible to make money every day from trading if you don’t have this one thing…
Let’s play a game…
- If you toss a coin and it comes up heads, you win $2
- If you toss a coin and it comes up tails, you lose $1
- You can only toss the coin once a day
Now let me ask you…
Do you think you can make money every day from this coin toss?
Of course not.
Because on any day, there’s a 50% chance you either get head or tail—and if it comes up tail, you’ll lose $1.
But what if you can toss the coin 1,000 times per day? How would things change?
If you toss a coin 1,000 times, you’ll likely get around 500 heads and 500 tails.
(Every time it comes up heads, you win $2. If it’s tails, you lose $1.)
So if you do the math, you’ll end up with a net gain of $500.
Now let me ask you…
If you had this “special” coin and could toss it 1,000 times per day, do you think you can make money every day from tossing this coin?
So, what’s the lesson here?
The frequency of your coin toss matters.
You might be wondering:
“What has this got to do with trading?”
Because if you want to make money every day from trading, your frequency of trades plays a huge role.
That’s because the more trades you can do within a short period of time, the faster the law of large numbers can work in your favour (think of the coin toss example).
Can a 90% winning rate help you make money every day?
Look at this chart below…
The results of this trading strategy look amazing, right?
Next, look at this…
You’re probably wondering…
“What the f*** happened?”
(And yes, this is the same strategy you saw in chart #1.)
I’ll tell you…
The reason chart #1 had a smooth upward sloping equity curve is because of the way each trade is managed.
It has a small profit target and a huge stop loss.
2 pips profit target and 200 pips stop loss.
Mathematically, you can expect this trading strategy to have a high winning rate (90% or more).
The problem with it?
It isn’t sustainable.
Because it’s a matter of time before you encounter a loss and it’ll erode whatever profits you have incurred (and more)—which explains chart #2.
So back to our question…
Can a 90% winning rate strategy make you money every day?
Yes, it will make you money every day for a while.
But eventually, you’ll suffer a huge loss that wipes out everything (and more).
At this point:
You’ve discovered the truth about making money every day from trading.
And I know you’re probably feeling discouraged.
So, what now?
#1: Manage your expectations
Trading isn’t like a regular job where you get a fixed pay cheque each month.
Instead, there are times where market conditions are favourable to you and you’ll make good money.
And there are times where market conditions aren’t favourable and you’ll go into a drawdown (where you’ll keep losing money).
So the trick isn’t to try and make consistent profits every day because it’s detrimental to your account in the long-run.
Rather, it’s to make as much as possible during good times and play good defence during tough times—so you can live to “fight” another day.
Embrace the uncertainty—don’t fight it.
#2: Think longer-term
As you can see, trying to make money every day from trading is difficult because there are so many factors against you.
But if you have a longer-term outlook (like trying to make money every year), then things become much easier.
- You have enough time for the law of large number to work in your favour
- It’s less likely for a trading strategy to not work for an entire year
- You’ll feel less stress which will improve your trading results
Does it make sense?
#3: Trading is a means to an end
You might be thinking:
“What do you mean by trading is a means to an end?”
Most of you reading this right now, trading is a medium (or tool) to get to your desire.
For example, your desire could be things like:
- Financial freedom
- Spending time with your kids
- To travel around the world
But here’s the thing:
Trading isn’t the only medium out there.
You can do things like setting up an online business, be a YouTube creator, invest in an index fund, etc.
So, my point is this…
Don’t miss the forest for the trees.
If you ever feel trading isn’t for you, then quit—there’s no shame in it.
It doesn’t mean you’re a failure and you have to give up your dreams.
None of it.
Because there are plenty of options out there. Have an open mind and you’ll see the endless possibilities out there.
Now here’s what I’d like to know…
Besides making money, why do you want to be a trader?
Leave a comment below and share your thoughts with me.