Trading with gains. How do successful traders do it

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How Much Can You Make as a Day Trader

It’s the question at the tip of every aspiring day trader’s tongue: How much money can I really earn from day trading?

Since most day traders do not disclose their actual trading results to anyone but the IRS, an exact answer to how much money an average day trader makes is impossible to answer. The results, moreover, will vary widely given the various trading strategies, risk management practices, and the amount of capital individual traders are working with.

To be sure, it is very easy to lose money day trading, which is why we recommend educating yourself as much as possible before you even think about trying it. In their 2020 research paper “The Behavior of Individual Investors,” Professors Brad M. Barner and Terrance Odean at the University of California, Berkeley revealed that individual investors who traded actively and speculatively without diversified portfolios typically lost money over time.   Day traders can also incur high fees from transaction costs, so picking the right broker and creating a manageable trading strategy with proper risk management is very important.

Key Takeaways

  • Day trading is a risky but potentially lucrative activity, where traders try to take advantage of intraday price movements and trends.
  • Several factors will come into play in determining your potential upside from day trading, including starting capital amount, strategies used, the markets you are active in, and a bit of luck.
  • Real day traders take their job seriously and can maintain a nice living if they remain objective and disciplined and stick with their strategy.

What Day Traders Do

Day traders make money by buying stock, commodities, currencies or other trade-able securities and holding them for a short period of time— anywhere from a few minutes to a few hours—before selling them off again. Day traders usually enter and exit trading positions within the day and rarely hold positions overnight, except in the Forex Market. The focus is on profiting from short-term price fluctuations. Day traders can also use leverage to give themselves greater power to buy and sell. This can be extremely risky, so beginners should not attempt this strategy.

One of the key components of locking in your gains and minimizing your losses is setting stop/loss and profit-taking points for your trades and not taking on too much risk per trade. Professional traders like David Green recommend not risking more than 1% per trade based on the size of your portfolio. If your portfolio is $50,000, the most you should risk per trade should be $500. Not letting one bad trade wipe you out is key to managing your risk. If you stick to the 1% risk strategy and set your stop/loss and profit-taking points, you can limit your losses to 1%, and take your gains at 1.5%, but it takes discipline.

How to Get Started in Day Trading

Getting started in day trading is not like dabbling in investing. Any would-be investor with a few hundred dollars can buy some stock in a company they believe in and keep it for months or years. Under FINRA rules, pattern day traders in the equities market must maintain a minimum of $25,000 in their accounts and will be denied access to the markets if the balance drops below that level.   This means day traders must have enough capital on top of that to really make a profit. And because day trading requires a lot of focus, it is not compatible with keeping a day job.

Most day traders must be able to live off their profits from trading and be prepared to risk their own capital every day to make those profits. In addition to the minimum balance required, prospective day traders need to be connected to an online broker or trading platform and have the right software to track their positions, do research, and log their trades. Brokerage commissions and taxes on short-term capital gains can also add up, so day traders need to factor all their costs into their trading activities to determine if they can do it profitably.

Earning Potential and Career Longevity

An important factor that can influence earnings potential and career longevity are whether you day trade independently or for an institution such as a bank or hedge fund. Traders working at an institution have the benefit of not risking their own money. They are also typically far better capitalized and have access to advantageous information and tools. There are also many independent trading firms that allow day traders access to their platforms and software, but require the traders to risk their own capital as well.

Other important factors that contribute to a day trader’s earnings potential include:

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  • Markets you trade: Different markets have different advantages. Stocks are generally the most capital-intensive asset class. However, you can start trading with less capital with other asset classes, such as futures or forex.
  • How much capital you have: If you start with $3,000, your earning potential is much less than someone who starts at $30,000.
  • How much you put into training: To achieve consistent income—where you have a solid trading plan and are able to implement it—it will likely take a year or more if you dedicate yourself to it full time. If you only practice part-time, it may take a number of years to develop real consistency and attain satisfactory returns.

Of course, there are millions of independent day traders worldwide who work for themselves from their home offices and are able to earn a living. Some have even become very wealthy, but there are no guarantees. Practice, developing a strategy, and managing your risk can help get you on your way.

Example of a Day Trading Strategy in Action

Consider a strategy for day trading in which the stop/loss is $0.04 and the target is $0.06. If your account balance is $30,000, the trader decides that his maximum risk per trade is $300. With a $0.04 stop loss, you can take 7,500 ($300/$0.04) shares on each trade and stay within your $300 risk cap (not including commissions).

Remember, to take 7,500 shares, the share price must be below $16 (attained by $120,000 in buying power divided by 7,500 shares). If the per-share price is more than $16, you’ll need to take fewer shares. The stock also needs to have enough volume for you to take such a position.

Here’s how such a trading strategy might play out:

  • 60 trades were winners/profitable: 60 x $0.06 x 7,500 shares = $27,000.
  • 45 trades were losers: 45 x $0.04 x 7500 shares = ($13,500).
  • Your gross profit would be $27,000 – $13,500 = $13,500.
  • Your net profit, which includes the cost of commissions, is $13,500 – commissions ($30 x 100 = $3,000) = $10,500 for the month.

Of course, this is all theoretical. Several factors will reduce your take-home profit. The reward-to-risk ratio of 1.5 is used because it is fairly conservative and reflective of the opportunities that occur all day, every day in the stock market.

The starting capital of $30,000 is also just an approximate balance to start day trading stocks; you’ll need more if you wish to trade higher-priced stocks.

The Bottom Line

Day trading is not a hobby or an activity that you can do every once in a while if you are serious about doing it to make money. While there is no guarantee that you will make money day trading or be able to predict your average rate of return over any period of time, there are strategies you can master that will help you set yourself up to lock in gains while minimizing losses.

It takes discipline, capital, patience, training, and risk management to be a day trader and a successful one at that. If you’re interested in becoming a day trader, review the best stock brokers for day traders as the first step is to choose the right broker for your needs.

9 Things Successful Traders (& People) Do

Verified Profitable Trader

Successful traders and people often do things differently than the rest of the crowd. But what they do is not magical or something unavailable to you. A successful trader mindset is always behind these people, and this is something you can build. There is very little about trading that is easy, and often times I hear of traders applying the wrong mindset to the challenges they face. Here are 9 simple things successful traders (& people) do, which you can adopt to change your compass towards success.

1. Have a Passion For the Process

Around the age of 5, Earl Woods brought his son on to a TV show to demonstrate how good his son’s golf swing was. After the young Tiger showed a glimpse of what he was to become, his dad was asked the following question;

“How many hours do you make him practice every day?”

Earl quickly responded, “Make him…I cannot get him to stop.”

You have to have a passion for trading and the process. Your passion cannot be ‘ outcome dependent ‘, meaning if you make x dollars in y months, then I’ll remain motivated to do the work. You must be willing to do the work, particularly in the moments when things are not working your way. It is easy to do the work when all is going well.

2. You Must Accept a Tedium of Work in Your Learning Process

There will be moments in your learning process which will seem boring, tedious, and difficult. You will often have to work on things you like the least – perhaps money management, filling out your trading journal or reviewing your trades. It is unlikely you will enjoy everything you do equally. In all great things built, there was always a tedium of work in the process – the moments where you sweat, tire and become exhausted. You must accept this tedium of work, and understand those little things build up skills and wire your brain to trade successfully.

3. Frustration Often Times is a Sign of Progress

When the brain gets to something it doesn’t understand, it often gets frustrated not having the answer. Being frustrated by something in your trading process is a communique you are dealing with things more complex than you understand, or can do efficiently now. This is a good thing. It means you are now heading into territory you are not skilled in, but need to be to become a successful trader. Be grateful those things are being pointed out – for when you work on them, growth happens.

4. You and Your Environment Imprint Upon You

The things you say to yourself before, during and after each trade have an impact. They imprint upon you, particularly the emotional quality of them. The same goes for your environment (parents, friends, co-workers). Make sure what is imprinted upon you is positive and directs you towards being successful. Learn to protect your mental capital.

5. Do Not Expect Immediate Results

Nobody who is a successful trader (or successful at anything) got there in a matter of months and expected immediate results. In a great commercial ‘Maybe It’s My Fault‘, amongst saying many brilliant things, Michael Jordan shares the following;

“Maybe I led you to believe that basketball was a god given gift, and not something I worked forevery single day of my life . “

It’s easy for us to see the success of such people. But we often fail to see all the hard work behind it. Michael had to work at his game for years, often filled with failures before he started to notice results. Real change in your trading does not come easily or quickly.

6. Do Not Look For an Easy Way Out

I have never met a successful trader or person who looked for the easy way out. You can pirate all the systems you want, but you will not have the mindset of abundance to be successful. You can try all the robots out there – none will become the ATM machine you think they will.

Do you really think Tom Brady or Peyton Manning got to being elite quarterbacks by not doing the work? Do you really think they skipped steps?

Remember, 84% of all people who win the lottery are broke inside three years. Now ask yourself who you’d rather be;

Person A – who makes $1 million in a lottery

Person B – who built up a business over three years and made $1 million?

Who will be able to repeat that success, use their skills, experience, and be most likely to do it again? Obviously Person B, while Person A by contrast has no skills, information or experience working for them. Food 4 thought, but do not look for an easy way out. There is none.

7. In The Future, I will…

I cannot tell you how many students tell me, or my partner Aruna who does the ERT training program, that they will feel confident, relaxed, or happy when they become a successful trader. Why put your happiness on hold? Why make your mindset held captive to some unknown future? Why not feel confident, relaxed and happy now?

A good friend of mine recently shared this great quote and post which said the following;

Ego says “Once everything falls into place, I will find peace.” Spirit says, “Find Peace and everything will fall into place.”

8. Take Responsibility for Your Behavior

Would you expect to be capable of finishing a marathon without running, stretching, training, proper hydration and diet? Would you expect to build strength and muscles sitting in a chair all day? Of course not. What makes you think trading is different?

Don’t fill out your journal, evaluate your trades, train properly, build your trading skill set, or a successful trading mindset – then do not expect to become a successful trader. Be honest with yourself and take responsibility for your behavior.

9. Failure is a Part of All Successful Ventures

Failure is a part of the process – an element you have to befriend. If you make it mean something about you, then it will consume you and create negative trading habits. However if you learn from failures, you will grow from them. You have overcome challenges like this in the past. When those challenges were happening, at one point you didn’t think you could get around them. This situation is no different.

Remind yourself of the challenges you have overcome to get here, and what strengths you have. They will aid you in difficult times. Peter Vesterbacka – the creator of Angry Birds, had produced 51 games prior to creating Angry Birds, and virtually ended up in Bankruptcy. It has done over $6B in sales over the last few years. Failure is a part of all successful ventures. Real confidence comes in overcoming obstacles, failures and challenges.

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Reading time: 13 minutes

Whether you are completely new to trading Forex, or a seasoned trader on the currency markets, you are likely to share one key aspiration: becoming successful in the Forex markets. This article will delve into the stories of the famous professional FX traders who became highly successful, and it will also provide you with tips on how to become successful yourself!

How Do I Become More Successful at Trading?

One way to improve is to learn by example, and a good starting point is to find out who is the greatest forex trader in the world. But who is the best Forex trader? And how did they become successful? In this article, you’ll learn about what the most successful currency traders have in common, and how those strengths helped them to achieve huge profits.

While you may have heard statistics thrown around suggesting that the ratio of the richest Forex traders to unsuccessful ones is small, there are at least a couple of reasons to be skeptical about such claims. Firstly, hard data is difficult to come by on the subject because of the decentralized, over-the-counter nature of the Forex market. But there is plenty of educational material and working Forex trading strategies available online to help you to improve your trading performance.

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Secondly, we would expect the distribution of successful traders and unsuccessful traders to follow something of a bell curve, meaning that there would be:

  • very few significantly unsuccessful forex traders
  • a great number of small unsuccessful traders
  • a great number of small winners; and
  • very few large winners

The data that is available from Forex and CFD firms (albeit a very small slice of the vast global FX market) suggests that it’s rare for people to become hugely successful traders. Most people stop once they start losing beyond a certain threshold, whereas the big winners continue trading. The number of unsuccessful traders slightly outweighs the number of small winners, mainly because of the effect of market spread. So the percentage of successful Forex traders is not substantially smaller than the unsuccessful ones.

There is little doubt that the most successful traders are an elite few. However, by looking at a select group of famous traders we can see that they have a few things in common:

  • Discipline—the ability to recognise when a trade is wrong and therefore minimise losses
  • Risk control—having a strong understanding of a trade’s risk/reward (You can read more about this in our risk management guide)
  • Courage—the willingness to be different from the rest of the crowd, most of the time
  • Astuteness—judging how perceptions are shaping market trends

The upshot of these characteristics has largely been consistent and large profits. So without further ado, let’s find out which professional traders exhibit these characteristics and more, with our list of successful Forex traders from all around the world!

The World’s Best Forex Traders

George Soros

Let’s begin our review of some of the best Forex success stories by looking at one of the industry’s legendary beacons of good fortune, George Soros. If we were to ask, “Who is the greatest forex trader? ” Soros’ name would certainly always figure high on any list. Mr Soros is known as one of the greatest investors in history. He sealed his reputation as a legendary money manager by reportedly profiting more than £1 billion from his short position in pound sterling. He famously did so ahead of Black Wednesday, 16 September 1992.

At the time, Britain was a part of the Exchange Rate Mechanism (ERM). This mechanism required the government to intervene if the pound weakened beyond a certain level against the Deutsche Mark. Soros successfully predicted that a combination of circumstances—including the then high level of British interest rates, and the unfavourable rate at which Britain had joined the ERM—had left the Bank of England (BoE) vulnerable.

Britain’s commitment to maintaining the pound’s value against the Deutsche Mark involved intervention in the form of either buying sterling or raising interest rates when the pound weakened, or both. The recession meant that higher interest rates were detrimental to the rest of the economy. This hindered investment at a time when encouragement was needed instead. Economists at the BoE recognised that the appropriate level of interest rates were far lower than those required to prop up the pound as part of the ERM.

But the value of sterling was maintained because of the UK’s public commitment to buying sterling.

In the weeks leading up to Black Wednesday, Soros used his Quantum Fund to build a large position short of sterling. But on the eve of Black Wednesday, comments came from the President of the German Bundesbank. These comments suggested certain currencies could come under pressure.

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And this led Soros to increase his position considerably. When the BoE began buying billions of pounds on that Wednesday morning, it was found that the price of the pound had hardly moved. This was due to the flood of selling in the market from other speculators following Soros’ lead.

A last ditch attempt to hike UK rates that had briefly hit 15% proved futile. When the UK announced its exit from the ERM, and a resumption of a free-floating pound, the currency plunged 15% against the Deutsche Mark, and 25% against the US dollar. As a result, the Quantum Fund made billions of dollars and Soros became known as the man who broke the Bank of England. His feat can easily be featured in the list of the greatest forex traders to follow.

Want to know the best part?

Although Soros’ short position in the pound was huge, his downside was always relatively restricted. Leading up to his trade, the market had shown no appetite for sterling strength. This was demonstrated by the repeated need for the British government to intervene in propping up the pound. Even if his trade had gone wrong, and Britain had managed to stay in the ERM, the state of inertia would have more likely prevailed, and have led to a large appreciation in the pound.

Here we see Soros’ strong appreciation of risk/reward – one of the facets that helped carve his reputation as arguably, the best Forex trader in the world. Rather than subscribing to the traditional economic theory that prices will eventually move to a theoretical equilibrium, Soros deemed the theory of reflexivity to be more helpful in judging the financial markets.

This theory suggests there is a feedback mechanism between perception and events. In other words, the perceptions of market participants help to shape market prices, which in turn reinforce perceptions. This was played out in his famous sterling short, where the devaluation of the pound only occurred when enough speculators believed the BoE could no longer defend its currency.

He once told the Wall Street Journal “I’m only rich because I know when I’m wrong”. This quote demonstrates both his willingness to cut a trade that is not working, and the high level of discipline that is shared by the most successful Forex traders. So George Soros is number 1 on our list as probably one of the best known ‘world’s most successful Forex traders’, and certainly one of the globe’s highest earners from a short term trade.

Stanley Druckenmiller

George Soros casts a long shadow. and it shouldn’t come as too much of a surprise that this successful Forex trader has ties to the next trader on our list. Stanley Druckenmiller considers George Soros his mentor. In fact, Mr. Druckenmiller worked alongside him at the Quantum Fund for more than a decade. But Druckenmiller has established a formidable reputation in his own right, successfully managing billions of dollars for his own fund, Duquesne Capital. He can easily be considered as one of the best day traders in the world.

As well as being part of Soros’ famous Black Wednesday trade, Mr Druckenmiller boasted an incredible record of successive years of double-digit gains with Duquesne, before his eventual retirement. Druckenmiller’s net worth is valued at more than $2 billion. Druckenmiller says that his trading philosophy for building long-term returns revolves around preserving capital, and then aggressively pursuing profits when trades are going well. This approach downplays the importance of being right or wrong.

Instead, it emphasizes the value of maximizing the opportunity when you are right and minimizing the damage when you are wrong. As Druckenmiller stated when interviewed for the celebrated book ‘The New Market Wizards’, “there are a lot of shoes on the shelf; wear only the ones that fit.”

Bill Lipschutz

Oddly enough, Bill Lipschutz made profits of hundreds of millions of dollars at the FX department of Salomon Brothers in the 1980s – despite no previous experience of the currency markets. Often called the Sultan of Currencies, Mr Lipschutz describes FX as a very psychological market. And like our other successful Forex traders, the Sultan believes market perceptions help determine price action as much as pure fundamentals.

Lipschutz also agrees with Stanley Druckenmiller’s view that when you are considering how to be a successful trader in Forex, it is not dependant on being right, and it is more often that you are wrong. Instead, he stresses that you need to work out how to make money when being right only 20 to 30 percent of the time.

Here’s some of Lipschutz other key tenets.

  • Any trading idea needs to be well reasoned before you place the trade
  • Build a position as the market goes your way and exit the same way
  • Start to ease up once there are signs that the fundamentals and the price action are beginning to change
  • There is a need to be aware of the market’s focus
  • FX is a 24-hour market, and doesn’t stop moving when you go to bed

Lipschutz also stresses the need to manage risk, saying that your trading size should be chosen to avoid being forced out of your position, if your timing is inexact.

Honourable Mentions

Andrew Kreiger

A list of the best forex traders in the world is incomplete without the mention of Andrew Kreiger. A graduate from the Wharton School of Business, Kreiger joined the Bankers Trust in 1986, after a stint at Salomon Brothers. He was considered one of the most aggressive and famous traders of that time, impressing the top management so much that they granted him a trading limit of $700 million, against the normal limit of $50 million.

In the aftermath of the October 1987 crash, where most markets went spiraling downwards by at least 20%, Kreiger identified the New Zealand dollar to be highly overvalued. He went short on the currency at a leverage of 400:1; exceeding the actual circulating liquidity of the currency. Within a few hours the currency moved 5% against the US dollar, Kreiger ended up making $300 million for his company. Interestingly, he went on to work with George Soros in the future.

Paul Tudor Jones

Easily one of the best forex traders ever is Paul Tudor Jones, who also shorted the October 1987 market crash. He is one of the richest day traders alive today, with a net worth at $4.5 billion as of 2020. Born in 1954, Jones earned a degree in Economics from the University of Virginia, in 1976. He actually started his career as a clerk on the trading floor.

Turning down an opportunity to go to Harvard Business School, Tudor Jones went on to work as a commodities trader in the NYSE. He established his own firm, Tudor Investment Corporation. In October 1987, when the markets were crashing, he managed to make a profit of 62%, just by holding short positions. He went on to earn $100 million that year for his company. Tudor Jones went on to take his firm to new heights. From 1992 to 1995, he was the Chairman of the NYSE.

Michael Marcus

Michael Marcus is amongst the best professional FX traders in the world. He is the founding member of the Commodities Corporation Company. Trained by none other than Ed Seykota, Marcus would later go on to mentor another great trader, Bruce Kovner. During the Ronald Reagan era of presidency, Marcus held positions of almost US$300 million in German marks. It can be said that along with banks, he was the largest currency trader in German marks at that time.

How Successful is a Successful Forex Trader?

We’ve looked at the biggest Forex successful traders, and there are certainly many more successful forex traders to follow But remember, while there might be many professional fx traders out there trading with seemingly foolproof trading strategies, different techniques work for different people. Joining the list of traders who are able to consistently turn a profit each month trading FX is certainly an achievable goal. But you need to develop your own forex trading plan first.

So What’s the Bottom Line?

Well, even the most successful trader had to begin somewhere and if you can regularly generate profits – you can consider yourself a successful Forex trader. Hopefully this article has given you some insights into traits shared by the most successful Forex traders. If you would like to learn more about forex trading and potentially join the growing list of Forex masters in the future, we recommend you to check out our guide on How to Become a Successful Forex Trader, which provides the basics of forex trading, together with, some professional tips and ideas for trading strategies.

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About Admiral Markets
Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world’s most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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