Day traders experience varieties of emotions in a trading day. Most day traders are aimed at making consistent profits to make a living off of the markets. They quit their job and try to earn consistent profits. But getting 10% monthly looks like a whopping and seems unachievable. Still, with hard work and regular aligned practices, over 6-12 months, you can become one of the few traders who make their living from intraday trading.
If you are a beginner making around 1-5% monthly i.e. 12- 60% annually in day trading, you are lucky enough and should be satisfied with this profit percentage. Keep learning and aligned practice as a trader.
Following are the factor that affect return percentage:
- Markets you trade: Different markets have different benefits that help to increase returns. For example, stocks are the most capital-intensive securities where you can start trading with less capital than any other security.
- The capital you have: If you start trading with Rs.10,000, your earnings potential is far less than a trader who starts with Rs.100,000.
- Time limit: Profitable trading approaches can take years to develop and make you successful.
As a trader, you need to look for situations where you can achieve mean returns and a high ratio of risk-adjusted returns (RAR). There are two ways to approach a living from intraday trading.
- One can start investing and trading with a large amount of capital and earn a small percentage profit to earn a living. Here the main fundamental principle is more capital but less skill.
- Another way is to invest a smaller capital, say Rs.50,000 to 1,00,000, and produce higher profits as a decent monthly income. Less capital, but enough skills to drive ten percent or more returns monthly.
The question raised here is how to imply the ways mentioned above. Whether you trade stocks, futures, forex, or other financial security, you must align your trading style with the tactics.
Following are the ways to achieve your earnings goal:
- Looking at high returns is not enough. There is a factor also to consider- volatility of returns. Many stocks go up a lot and give you high returns and then they come to a surprise when they crash. They take it all back. It is difficult to time these stocks and sustains these profits.
- Forecast the volatility and the returns. You need to find small caps that will give high returns, even for short periods, without high volatility.
- Find stocks or other instruments with small mean returns and smaller volatility. In this way, you can enjoy the high risk-adjusted return (RAR).
- Diversification will also increase your RAR
- Apply leverage with futures, options, trading margin.
Losing money at intraday trading is easy. Be careful with leverage and diversification. It is not as easy as it sounds. There is a big market and any asset can crash anytime.
General rules for day traders are –
- Be more disciplined.
- Build a trading plan.
- Stick to your weekly trading plan if you are a newbie
- Keep reminding yourself to avoid the mistake of becoming greedy.
If you are going towards investing and trading, open a Demat and trading account with experienced brokers that can help you create a manageable trading strategy because proper risk management is the key. In case you are thinking about how to open Demat account, it’s simple. You can open a Demat account online with a broker registered with a depository body in India.