Techniques For Building A Day Trading Account

One of my day trading students told me he was disappointed. He traded for six weeks with his $10,000, but made only $600 in profit. He told me he was thinking of getting out of day trading because he thought he could make a lot more money. After all, the $600 he earns in six weeks is only $100 per week and only a fraction of the money he has set aside for investment. He wondered why he would go through such an inefficient form of income when he could earn more by working as a fast food salesman. I told him he was absolutely wrong.

In day trading, consistency is more important than the amount of profit you make at any given time. This trader had already made a fortune, but he didn't know it. In fact, he was already a very successful day trader, and I said maybe I could learn something from him. All he had to do was realize that he was consistently profitable, understand where that consistency came from, and apply these sound money management strategies. It was all about achieving great results. We watched his actions, and I actually learned from his actions. So did he. And I would like to share this lesson with all aspiring day traders. The key to success in trading is learning how to identify strategies that produce consistent profits, no matter how small, rather than making profits on one large trade.

Here's what we learned about his plans.

First, $100 per week equates to $5,200 for him over the year. In his account, he received a profit of 52%. That's already great, but it's just a sign that he can turn those gains into bigger wins. The first way to achieve this is to apply sound money management techniques and increase contract size. He traded his e-mini S&P one contract at a time. A wise plan in this case would be a money management system powered by Ryan Jones' Fixed Ratio Money Management Technique. Using this technique, assuming that for each contract he earns a steady $100 per week, the number of contracts will increase every $800, or approximately every 8 weeks.

Using these rules, he could hypothetically grow his account from $10,000 to $26,800 in just one year by continually increasing his position size and reaching "only" $100 per week per contract. Masu. A quick summary of what that looks like is:

If you start on September 1st, have an initial account of $10,000, and earn $100 per contract, you can earn $800 by November 1st. If he then deposits his $800 back into his account, he will be able to trade two contracts, potentially earning $200 per contract for a total of $1,600. You then deposit his $1,600 back into your account, leaving him with $12,400. Therefore, he can start trading his contract on January 1st. This time, each contract will cost him $300, and he expects to have a total profit of $2,400 at the end of the eight weeks. If he followed this pattern every 8 weeks, at the end of the year his account would be worth $26,800, and he could trade 7 contracts each, giving him a profit of $700. . Extending that to two years would increase his account to $27,400. At this point, we are certainly more than just fast food workers.

Most traders believe that such growth is impossible, which is unfortunate. This logic is valid. Even if a trader fails to reach his goal of earning $100 per week and fails to do so for 2-3 weeks in a row, by the time his trading account grows to $27,400, he simply earns 1 It just takes a month longer.

A trader cannot achieve such results by succumbing to his emotions and his desire to achieve success quickly. “Only $600 for 6 weeks” may sound demoralizing. But instead of giving up, he used what he was good at to get more trades and increase the size of his contract. Of course, he's excited now. The problem, however, is that this growth takes time to materialize. Starting your profit goal at $100 feels like dinner for two, not the extra income most of us crave. But as the winning goals gradually increase to washing machines, trips to Las Vegas, etc., things become easier to bear. However, day trading profits are small at first, so you need the toughness to endure a slow start and resist the temptation to take big risks or give up completely.

Slow increases are the way to continually grow your trading account. Gradually increase the position size from 1 card to 2 cards. Make sure you are consistently profitable, even when trading two contracts. And when he's ready, he increases his position size from two to three. Go in stages and never "jump" from 2 to 4. Increasing your position size slowly will help your brain adapt to increasing stop-loss and profit amounts without getting emotional, and it will also help you maintain consistency.

There is one secret to building a trading account, and both my students and I spent time figuring it out. It's patience.

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