10 Reasons You Can’t Day Trade Successfully

Don’t feel too bad if you come to the realization that you can’t day trade successfully. 95% of all traders fail and 80% of all day traders quit before 2 years is up. Those numbers, as staggering as they are, don’t stop the thousands upon thousands of people who give day trading a shot. We are lured into believing that day trading is easy and there is a wonderful lifestyle that goes along with it if we find day trading success.

We see blog posts or tweets of people who make large amounts of money in a single day. We see fancy cars, wild parties and luxurious yachts that stimulate our visceral senses. All of this success is from quote end quote “day trading profits”. Most people who try day trading want those things and so predators in the market prey on the weak minded.

Whether you like it or not those material things do not mean success and should not be used as inspiration to try to be a successful day trader.

The hard truth is day trading is not easy but sadly people keep getting suckered into a fantasy that it is. Unfortunately, that way of thinking will more than likely end in day trading failure.

So, if you want to be a part of the 5% who can day trade successfully you must, at the very least, know and understand the reasons you most likely will fail. Then once you understand what you are up against, steer very clear from them at all costs or you will pay the ultimate price.

You Have Very Little Money to Start Day Trading

I can’t tell you how many people email me or tell me during a Skype 1on1 session that they have very little money to start day trading. Then they tell me that they have read or seen that certain day traders have turned $1500 into millions.

Really! Who???

You could say Tim Grittani did it and, even though he is a super talented trader, that wouldn’t be true. You could say Ed Martin – Average Joe Trader did it but we debunked that myth too when he gave me the financial facts during our interview earlier this year. You could say Doyle Roberts did it when he said he could teach people “How To Turn $1,000 to $5 Million in 12 Months” but when I went to his website it was completely removed.

I guess he is enjoying his millions.

Let’s be real. It can’t be done… and even if you search high and low and find 1, 2 or 100 people who prove they turned $1500 into millions in the stock market you still have to remember one very important thing. Out of the 7.347 billion people in the world there is a 99.9999986% chance You can’t.

Tip – $5,000 should be the least amount of money you start with however it will be challenging as we will see later.

You Have a 9 to 5 Job

So, you want to day trade successfully with a 9 to 5 job?

Good luck!

The only way you can day trade successfully with a 9 to 5 job is to live in a part of the world where the stock market is open and you are subsequently home after completing your 8 hour shift.

For example, if you live in China you can learn to day trade and have a 9 to 5 job too.

You might be able to do it if you live in California and you focus your trading on the opening… it will be tough but not impossible.

The truth of the matter is if you have a 9 to 5 job then embrace the fact that you have a 9 to 5 job. Don’t throw money away thinking you can day trade successfully and work at the same time. That is foolish.

Day trading takes time and patience with a learning curve that could span a full year of consistent trial and error. How in God’s name will you be able to day trade if you are busy trying to do a real job that is actually paying you real money?

Let me answer that. It can’t be done.

Tip – If you have a 9 to 5 job I would suggest learning to swing trade. Swing trading is a great alternative to day trading.

You Started Day Trading Too Soon

Free Beginner Day Trading Series Investors UndergroundSadly anyone can open up a brokerage account and start day trading on the very first day. You don’t need a license nor a certificate and so the large majority who give day trading a shot start immediately. That sort of thinking is plain stupid. I traded 7 times in 1 year and even though I was up $400 on the year I shouldn’t have traded at all.

The truth of the matter is trading is a like a long term relationship. In the beginning you are totally in love with your new partner and nothing he or she can do is wrong. If you decide to get married during this phase you might find out later that there are a lot of problems and you aren’t as compatible as when the excitement ruled the relationship.

Trading should be looked at in the same way. Don’t get married to day trading during the beginning stage of your day trading relationship. Don’t trade, learn the secrets of the stock market and learn the scams and misrepresentation. Then deeply explore who or what moves the market and why to see how you can profit from it.

Don’t be in a rush to trade… the stock market will be there tomorrow.

Tip – If you are tempted to day trade immediately and can’t fight the urge then trade very small shares. 25 shares of a $10 stock is not a lot of commitment but just enough to make you see if you want to stay in the marriage or get a divorce.

You Are Under the PDT Rule

Do you remember the tip I gave before? Let me refresh your memory.

Tip – $5,000 should be the least amount of money you start with however it will be challenging as we will see later.

The PDT rule is the main reason it is very tough to day trade successfully with little capital.

The pattern day trader rule basically states that you can only trade 3 times in a 5 day rolling period unless you have $25,000 in your margin account.

Day trading is frustrating enough without trading around restrictions and so having to deal with the PDT rule adds a much bigger headache then most people can handle.

How can you practice to day trade when you can only practice placing 3 day trades a week? Imagine trying to become a professional football punter with a restriction of kicking a football 3 times weekly?

How long do you think it will take to become a great punter?

Don’t fret. I uncovered the 10 ways around the rule but if you are being held back because you have no other recourse you most likely will get frustrated by it and walk away from day trading.

Tip – Once again swing trading is a great alternative and will help you build your account without the burden of the PDT rule.

You Are a Sheep

I wish I could say there was one person in this world that you could always follow in the stock market and consistently make money every time.

Arguably, you could say Warren Buffet is the one but he was wrong here and here.

The fact is Mr. Buffett is an investor and not a day trader so, right or wrong, WB isn’t the one.

Honestly, no one is the one. If you want to follow stock market gurus in and out of their positions you will learn one way or the other that following is a recipe for financial disaster. It just can’t be done.

If it could be we would all be doing it and we would all be multi millionaires 100 times over.

So, don’t be a sheep and follow the herd because those who do will get slaughtered.

Tip – Learn to think independently and don’t follow the herd.

You Keep Changing Your Plan

Any professional day trader will tell you that you need to have a plan and you need to stick to it. Changing your plan or second guessing yourself will lead to mistakes. If the plan doesn’t work then get out of your position and analysis what you need to do to make things work the next time.

Then make the next plan and stick to it.

What do I mean by plan?

Let me enlighten you.

I am going to buy 1000 shares of XYZ stock at $3.91. I will sell half at $4.15 and the remainder at $4.25. If I am wrong I will bail on my entire position if stock XYZ goes to $3.75.

Do you see how specific that plan was?

Now it’s possible XYZ goes to $5 and you leave a lot of money on the table but that wasn’t your plan and so you must stick to your plan.

Why?

Well what happens when you change the plan and the stock goes against you? What happens when XYZ breaks below $3.75 but you hope and pray it comes back? Then it goes to $3.50… or worse $3.

People have a tendency to hold their losing positions longer than their winning ones so do yourself a favor and stick to your plan.

Tip – Write your plan down so you can visually see it. If you don’t see your plan your mind will play tricks on you.

You Think Day Trading Means You Have to Trade All Day

If you are trading to trade you are over trading. I have heard people say “they need to trade” or they are “looking for a trade”. That is not how day trading works. When you have a strategy in place you will find that there is a time frame that woks for that strategy. If it’s too early or passed the time frame of that strategy you will see your strategy won’t work.

Here is something interesting. In 2016 I day traded 266 times. Out of the 266 times I traded one time after 2pm. All the other trades were made before 11:30am. My strategy only works in the morning and that is it. If no trades set up for me to trade and the morning ends I do not force a trade.

That is one of the big reasons why I blog and thankfully my blog makes me money where I can continue to blog to deter me from losing money by over trading.

If you are going to day trade successfully you have to recognize when to trade and when not to trade. Some strategies work during the pre market, at the opening or the last hour of trading. Whatever strategy works for you you must stick within that time frame or you will start losing money by over trading.

Tip – Start a day trading blog.

Your Stock Market Guru is Front Running You or Worse

In the stock market you will find stock market gurus who practice some form of front running.

According to Investopedia, “Front running is the unethical practice of a broker trading an equity in his personal account based on advanced knowledge of pending orders from the brokerage firm or from clients, allowing him to profit from the knowledge”.

Sometimes stock market gurus practice a form of this stock market manipulation to appear to be consistently profitable.

For example, let’s say your stock market guru has 1000 subscribers and says they are long stock ABC. Once they state their position their subscribers follow them which drives up the price. Then the stock market guru sells their position and the subscribers (or sheep) exit their position at a lesser price.

Here is an analogy. Imagine you are in a movie theater and someone screams FIRE! Do you know how many people will get stampeded or crushed to death trying to get out? That is what happens to subscribers when their stock market guru alerts that they have exited their position.

As unethical (possibly illegal) as that is front running isn’t the worse a stock market guru has been known to do.

Some stock market gurus don’t actually trade at all and use a simulated account that they claim to be 100% verified. If you ask them if they actually trade or not they emphatically say yes but when you read their disclaimer page it says something entirely and interestingly different. Sadly they make their subscribers believe that they are amazing traders when in actuality the only thing they are amazing at is not trading.

Tip – As boring as it is read your stock market guru’s disclaimer page. Most of them, like the one below, should anger you.

stock market guru disclaimer

You Aren’t Taking Day Trading Seriously Like a Business

Day trading is a business. Period! If you don’t set yourself up like a business you won’t take day trading seriously. It always amazes me how many people want to give day trading a try like it were some sort of sport. If you need to give something a try then try bowling or golf. Those things you try. Day trading you treat like a business.

In fact, if you set up your day trading like a true business you will think professionally and immediately take it much more seriously. You will also be able to take advantage of the tax breaks allotted to that business if you go as far as setting up an LLC or corporation.

Granted you don’t have to be a legal business the first day but start work toward it immediately.

My computer set up has all been written along with other things I can deduct as expenses because I am set up like a business.

It might sound like a pain in the butt to do but it’s fairly easy and it will benefit you more then you can imagine.

Tip – Talk to a tax accountant about day trading before you start trading. You will save yourself financial pain in the long run.

You Are Profitable But Not Making Enough Money

I used to work as a commentator for ESPN. Even though I was making good money I still needed to work to make ends meet.

The truth of the matter is most day traders who are making money in the market are surviving and not living the life of luxury.

Speaking for myself I am not a multi millionaire trader. I admire the heavy hitters who know how to scale in with size and conviction but I am not those people and so I have learned not to try to be like them. I like to think of myself as a multi thousandaire trader. I make a living and use blogging and photography to round out the rest.

Don’t be fooled though. Your day trading guru has another job. Let’s say your stock market guru is up $200,000 on the year. That sounds great. I am sure you want to be just like them but don’t forgot they have 1000 subscribers who pay $100 a month to be with their service.

Looks like your stock market guru is doing better in their second job making $1,200,000.00 a year than in their trading.

Tip – I recommend Investors Underground and their educational trading service. I find their moderators to be excellent with the ability to teach well. I also believe they have a diverse style of traders who fit multiple trading personalities which is important as we are all different.

Final Thoughts

If you want to day trade successfully you need to filter through the bull crap first. There is a lot of bull so your best bet is to believe no one first and work your way toward finding those you trust. Even all of those “on the surface” trust worthy people should be scrutinized greatly. In addition, avoid all the distractions as best as you can and you will have a much better chance at being a successful day trader. Know your limitations, strengths and weakness and don’t fall for the hype, marketing or stimulating photos of success. Be smart, patient and thoroughly educate yourself along the way. The cold truth is it won’t be easy but if you recognize day trading is a marathon and not a sprint you might one day get to the point of being able to start singing I’m on a boat.

Feel free to check out my FAQ or reach out to me for help here.

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Disclosure:

Some of the links in this post are from my sponsors. I thought you should know because honesty is better then sugarcoated bullsh*t.

Important Resources

  • Read my frequently asked questions or if you need personal 1 on 1 guidance from me on how to fully prepare as well as protect yourself from the misrepresentation please click here.
  • Every month I update this post here for my personal "Millionaire Challenge". I suggest you read the entire post and when you reach the bottom you can see my updated progress.
  • I highly recommend the Simple Path to Wealth book to grow Your wealth simply and steadily. It will educate you beyond your financial imagination. This is my review of the book.
  • If you are new to stock trading test your knowledge here with a basic stock market quiz.
  • There are a lot of secrets in trading stocks and I reveal 20 of them in this popular post.
  • If you are confused about short selling stocks then read this simple explanation that will clear it all up.
  • This free stock research tool will give you all the necessary information on any stock you type into the search bar.
  • Do your best to avoid day trading distractions. Especially the 10 I list here.
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