The REAL Path to Trading Success in 5 Steps – Not Some Get-Rich-Quick Nonsense:
This 5-step guide for how to make a living by day trading stocks will be completely honest and legitimately helpful, unlike most other trading guides out there that are deceptive and damaging – promising “easy” and “fast” profits.
The truth is that capturing consistent day trading profits is hard work. As much as some gurus, newsletters, alert services, and other platforms try to make trading seem effortless in order to attract subscribers and make money, there is no easy path.
3 HARSH TRADING TRUTHS
- Trading is not easy. In fact, it will probably be the most challenging endeavor you ever pursue.
- Trading requires you to be process-focused. Obsessing over potential results will only inhibit progress.
- Trading is a skill-based peak performance activity. Be prepared to learn core skills and develop the proper mindset.
Just like any other skill-based endeavor, trading requires training that most people try to avoid. But that avoidance is what ultimately leads to failure. If you genuinely want to achieve success as a day trader, then you have to be committed to learning new skills.
It’s ironic how the seemingly easy path that most people take, which usually involves trying to blindly mirror trade alerts from some self-proclaimed guru, actually ends up being the harder, longer, and more expensive one in the long run.
As you go through your progression as a trader, understand that your ultimate success depends entirely on your commitment to learning, building skills, and developing the proper mindset. An obsessive desire to “make money fast” will only hinder you.
STEP 1: Acquire a Basic Understanding of Trading and the Stock Market
MAIN OBJECTIVE: Gain some general knowledge and decide if you actually want to pursue day trading further.
At this initial stage, you want to simply get a feel for what day trading entails and how the stock market works. This is a great time to go through some free courses, blogs, and various other resources available online.
There’s no need to spend money on anything at this point. This is just a discovery phase to gain some foundational knowledge and confirm your desire to day trade.
Trading vs. Investing:
Trading and investing are two terms that are often used synonymously, but in reality are very different.
Trading is typically short-term and active, while investing is typically long-term and passive. There are times when the two can seemingly morph into each other in the middle, but the two ends of the spectrum are very different.
There are two main types of short-term trading strategies: day trading and swing trading. Day trading involves entering and exiting positions within the same day, while swing trading usually involves hold times of a few days to a few weeks.
Many short-term traders are both day and swing traders. In general, the focus is mainly on trends, patterns, charts, and other forms of technical analysis.
Investors, on the other hand, are mainly focused on growth-potential, value, dividends, and other forms of fundamental analysis. In addition to that, investors are looking to buy-and-hold for at least a few months, years, or even a lifetime.
Free Resources to Get Started:
- Beginners Day Trading Course at Investors Underground
- Introduction to Trading School at 2ndSkies Trading
- Day Trading Encyclopedia at Investors Underground
- Search Any Trading or Investing Term on Investopedia
- My Full List of Free Resources For Stock Trading Beginners
STEP 2: Develop the Proper Mindset For Achieving Peak Performance
MAIN OBJECTIVE: Strengthen the primary foundational component for achieving consistent trading success.
Once you’ve decided that day and/or swing trading is a good fit for you, it’s time to start developing the proper mindset. Even though the psychological component is foundational for achieving consistent success, most traders completely ignore it.
As a result, traders are plagued by all kinds of destructive tendencies and self-sabotaging behaviors. In essence, they have limited or no control over themselves within the market environment. Then wonder why their systems don’t work.
The reality is that entering the market environment requires personal change in order to be successful. Nobody is a natural. It takes a certain level of self-awareness and control to adapt to the dynamic, uncertain, limitless, and impersonal nature of the market.
Please don’t be a trader that is obsessed with finding gurus, foolproof systems, and explosive profits thinking they will solve your trading problems. No system, plan, or set of rules is any good if you don’t have the patience, clarity, and discipline to execute on it.
Best Trading Psychology Courses:
- The Advanced Traders Mindset Course — #1 Recommendation
- The Trading Psychology Mastery Course
- Compass 2.0 Course
I know most traders will skip this crucial step, but I urge you not to for the sake of your own long-term trading success. Unfortunately, most traders don’t take the mindset component seriously until years into their trading journey AFTER they’ve already lost thousands of dollars in the market. Don’t be a trader, like me, that had to learn the hard way.
There’s a tremendously high cost associated with not being consistent and disciplined, so you might as well work on it right from the start. All of the courses mentioned above are a one-time fee of a few hundred dollars for lifetime access. Trust me when I say that you’ll be glad to have at least one of them to refer back to as you continue along on your trading journey.
1 Free Trader Psychology Assessment, 1 Free Course, and 3 Helpful Articles to Get Started:
- Trader Psychology Assessment at Mind Muscles For Traders
- The Psychology of Risk Course at Trading Composure
- What is the Foundation For Stock Trading Success?
- How to For the Stock Market – 5 Steps to Consistent Profits
- Rewire Your Brain For Successful Trading With the Help of Neuroplasticity
STEP 3: Take Your Education to the Next Level and Start Building Skills in a Simulator
MAIN OBJECTIVE: Establish your preferred trading style and enhance core skills with support from experienced traders.
I will say this right at the start: DO NOT join any trading service just to blindly mirror alerts. I see this happen constantly.
The Dangers of Alert Services:
In most cases, people don’t want to put in the actual work required to build their tactical and mental trading abilities. All they want is a shortcut. Some so-called expert to tell them exactly what and when to buy and sell. Taking this copy-cat approach, however, will inevitably result in massive emotional and financial pain – it’s only a matter of time.
Since being told exactly what to do is what most wannabe traders want, there are plenty of newsletters and alert services that are happy to oblige. Unfortunately, the blind mirroring method won’t work like you expect.
Sure, it sounds great in theory, but reality will be different. You most likely won’t be able to get anywhere near the same entry and exit prices as the “leader”, but worst of all, you will immensely undermine your growth as a legitimate trader.
What to Be Cautious About When Looking For a Trading Community:
- Avoid services that claim trading is easy or an opportunity to get-rich-quick
- Be suspect of testimonials that tout beginner’s luck: “Made my subscription fee back on my first trade!”
- When a service brags about explosive profits from alerted trades, understand that those results are most likely distorted
- Most reviews you find online will be positively-skewed since the reviewer probably has a financial stake in you joining
- Avoid services that promote lifestyle (fancy cars, mansions, etc.) instead of education (video lessons, 1-on-1 mentorship, etc.)
The bottom line is that if you are not focused on learning and eventually becoming self-sufficient, then you will ultimately fail as a trader. There’s no other path to making a living day trading stocks other than building the necessary skills and mindset. If you are dependent on alerts from other traders, then you are in big trouble. Focus on the educational content instead – courses, webinars, etc.
Purchasing a legitimate learning program will probably be your biggest expense as a trader, so make sure you go into it committed to achieving success. If a service you join sends out trade alerts, don’t distract yourself trying to chase them. Learn from them instead.
Try to understand how the leaders of these services, as well as other experienced traders within the community, are scanning for setups, generating watch lists, and why they are entering and exiting trades at specific times. Figuring out the answers to these questions is what will provide you with ideas for your own potential systems, and sooner or later, self-sufficiency.
5 Reviews of Top-Rated Trading Programs, Platforms, and Tools:
- Thomas Kralow Review
- 2ndSkies Trading Review
- TradingSim Review
- Trade Ideas Review
- Benzinga Pro Review
STEP 4: Choose a Brokerage Platform to Use For Live Trading
MAIN OBJECTIVE: Choose a brokerage account that fits your personal situation best (trading style, trading community, etc.).
Some of you might be surprised that this step isn’t first or second on the list. After all, you can’t make any trades without a brokerage account. But that’s exactly the point. Far too many individuals jump straight into live trading without building a proper foundation.
The Fear of Missing Out:
You might feel like you are missing out by being on the sidelines. But all you are missing out on are painful mistakes and losses by diving in completely unprepared. So just be patient and follow the right process. The market isn’t going anywhere. But your hard-earned money certainly is if you lack the core skills and mindset to behave with consistency and discipline.
Brokerage platforms are one of those things that novices think are super important, but in comparison to building legitimate tactical and mental trading skills, they really aren’t all that critical. You want the right fit, sure, but the platform is just a vehicle for displaying your trading skills. Without the necessary skills, your brokerage platform doesn’t matter. You will simply lose money.
In addition to that, if you choose to join a trading community for guidance and mentorship, you might want to see what that community as a whole recommends for their particular style of trading. It all depends on your own situation, location, preferences, etc., but it can be much easier to learn and understand a platform if the majority of your trading community is using it.
Most major brokers offer similar capabilities and tools: TD Ameritrade, Fidelity, and Charles Schwab are a few examples. I personally use E*trade for day and swing trading, and Robinhood for longer-term plays. I highly recommend E*trade for day trading, but Robinhood lacks the proper tools for it. With most brokers now offering commission-free stock trading, Robinhood has lost some luster.
Why the Day Trading Success Rate is So Low:
One of the major reasons why the success rate in trading is so low is that there are virtually no barriers to entry. Almost anyone, no matter their trading knowledge or skill level, can open a brokerage account and instantly start making trades. Even if they are foolish, impulsive, and irrational trades, nobody is there to stop them. Trading for thrills, however, is not how you make a living day trading.
Overall, live trading is not something to rush into. Unfortunately, most beginners do rush and it shows in their disastrous results – taking huge, uncontrolled losses and blowing up accounts in relatively short periods of time. This routine plays out over-and-over again. But it can be avoided by following the right process and focusing on building the proper foundation first.
2 Brokerage Platforms I Personally Use Plus 3 Articles to Continue Building Your Foundation:
- E*Trade (See Special Offer For Opening Account)
- Robinhood (Receive a Free Stock For Opening Account)
- Where to Learn How to Trade Stocks – Build Your Foundation Here
- What is the Cheapest Way to Trade Stocks? Avoid Learning the Hard Way
- Learning to Become a Stock Trader? Don’t Make These Mistakes
STEP 5: Execute on Your Statistical Edge With Consistency and Discipline
MAIN OBJECTIVE: Use your tactical and mental skills to execute on your statistical edge with the highest degree of discipline.
This final step is where everything comes together. You have made the commitment to pursue day trading, built the proper tactical and mental foundations, and picked a brokerage platform for live trading. The only thing left to do is execute.
Keep in mind that execution at this point still doesn’t mean you have to use real money if you’re not comfortable with it. There are many market simulators and paper trading platforms to choose from in order to practice risk-free trading.
2 Components of Consistent Profitability:
But whether it’s paper or live trading, it’s your time to execute with patience, consistency, and discipline. It sounds simple, but there are really only 2 components required to be a consistently profitable trader: 1) a statistical edge and 2) the proper mindset.
Having a statistical edge means having a system with a positive expectancy, resulting in equity growth over time. Of course, there will always be drawdowns and streaks of losing trades, but that’s why having the proper mindset is so critically important.
The vast majority of traders ditch their effective strategies after just two or three losing trades in a row, even though that’s a completely normal phenomenon. This often leads to strategy-hopping, as well as impulsive and random trades.
Keep in mind that it doesn’t matter how great your plans are if you don’t have the mental framework to follow them with consistency. As exciting as “foolproof systems” and “explosive profits” sound, mindset is the primary difference between success and failure.
Confidence Comes From Trust in Your System and Your Ability to Follow It:
Many traders lack confidence, and the reasons why always stem from at least one of these two things – they either lack confidence in their system or in their own ability to act in accordance with that system.
So the real “secret” to trading success is to simply have a system that works and follow it. The problem in most cases is that traders don’t stick with their systems long enough to even see if they work. Their impulsive behavior makes results difficult to even track.
The goal is not to win on every single trade. That’s impossible. The uncertainty of the market will never allow for it. The market forces you to deal with uncertainty, loss, and risk continuously. Your ability to handle that will substantially impact your results.
When you have trust in yourself, it’s easier to follow your system. And when you have trust in your system, it’s easier to follow it. As a result, developing your tactical and mental edges in the market, and keeping them strong, are how to make a living day trading.
5 Articles to Explain the Importance of Having a Statistical Edge and Proper Mindset:
- What is the Core of Trading? It Boils Down to a Simple Equation
- A How to Guide For the Stock Market – Achieving Consistent Profitability
- What is a Day Trading System? Establish Structure in Your Approach
- What is Trading Expectancy? The Importance of Having a Statistical Edge
- Have You Failed at Trading? If So, You’re Actually One Step Closer to Success
Conclusion – Making a Living By Day Trading Stocks is Not Easily Accomplished:
In most cases, it takes many months, if not years, for traders to develop core skills and train their minds to a point where they can realistically make a living doing it. You can’t just subscribe to some service and expect automatic success. It requires commitment.
The day trading success rate is low for a reason. It’s easy to open a brokerage account and click buttons. It’s easy to blindly copy trade alerts. But it’s not easy to develop the core tactical and mental skills required to become a consistently profitable, self-sufficient trader.
The majority of trading services, programs, and platforms try to send the message that trading is easy. But it’s not. Understandably, they’re just trying to attract customers, so recognize that you have to keep your own best interests in mind.
Overall, the best way to serve yourself on your day trading journey is to focus on learning and growth. Don’t get distracted by shiny objects like alert services. Instead, concentrate on building your pattern recognition and risk management skills, in addition to developing patience, objectivity, consistency, and discipline. These are some of the components for long-lasting market success.
Please let me know how you are doing on your trading journey and if this guide has helped. I look forward to hearing from you!
Written by Matt Thomas (@MattThomasTP)