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:
- Trading Success Framework Course at Trading Paradigm
- Day Trading Encyclopedia at Investors Underground
- Beginners Day Trading Course at Investors Underground
- Search Any Trading or Investing Term on Investopedia
- View My Full List of Free Resources For Active Traders
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 mentorship 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:
- Trade With Profile Review
- Thomas Kralow Review
- 2ndSkies Trading Review
- TradingSim 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)
- Frequently Asked Questions
- Core Trading Principles
- What is For the Stock Market
- How to For the Stock Market
- Trading Psychology Basics
I have been researching about trading for a while now and I can’t find any platform where I can sign up … because some countries are restricted or because a huge investment is required instead of a smaller one, and the main reason is that I don’t know much about it. I still need to learn. I was thinking more about investing, because I think that trading is too advanced for me. I’m glad, though, that I found this post. Finally something that’s giving me some clear information!
Over the last year it also seems that many inexperienced people signed up for trading and investment platforms to find a way to make money since they lost jobs due to the pandemic. I thought that it would be a good idea to get a passive income through this, but I’ve found that it’s not something you dive into – as you mentioned – and I need to make time to learn this properly.
You listed a few platforms in this article (your reviews of them). Which one of those would you recommend to an absolute beginner with a low investment budget? Are there platforms where you can start with a small amount or do all require big amounts?
Matt Thomas says
Hi Christine – I appreciate you reaching out and I’ll try to provide answers to the best of my ability.
In the first part of your comment about platform restrictions, I believe you’re talking about brokerage platforms. I personally use Etrade for active trading, and Robinhood and Ally for longer term investments, but I’m no expert on the restrictions based on residence/citizenship. What I can say, however, is that Interactive Brokers is a platform that I’ve seen and heard many international traders use and praise – so maybe that could be a potential option. There are so many brokers out there that I’ve yet to have any experiences with, but I hope this helps a bit.
To answer in regard to you leaning toward long-term investing as opposed to active trading – I don’t have a ton of educational content to share on that since this website mainly covers more active forms of trading (day trading, swing trading, position trading, etc.), but the articles in the link below should certainly help. My personal long-term investments mainly include low-cost index funds for diversification and to take advantage of the power of compounding – plus it’s a fairly simple approach that doesn’t require much active account management.
Articles That Cover Core Investing Principles
You also bring up an outstanding point about inexperienced individuals signing up for trading and investment platforms in record numbers following the start of the pandemic. This is definitely concerning to me because I know most of them dove headfirst into the market thinking it would be an easy opportunity to replace or supplement their income after being furloughed/laid off, but I bet this idea ended poorly for many individuals.
Jumping into the world of active trading with limited knowledge and skills and expecting immediate/passive profits would be like someone all of a sudden deciding that they want to be a professional athlete or elite-level musician. These aren’t achievements that automatically happen – they require the acquisition and development of legitimate skills over months and years. The democratization of financial markets is both a blessing and a curse. It allows pretty much anybody to get involved and there are no real qualifications to do so – which provides massive opportunity for everyone. But in most cases, the opportunity is squelched by failing to learn the necessary skills to be consistently profitable. Unfortunately, most traders simply dabble, trade randomly, and essentially gamble instead of developing a statistical edge and consistently executing on it.
As far as the programs and platforms with reviews that you’re referring to in the last part of your comment, they pretty much all offer free trials and courses (Thomas Kralow, 2ndSkies, TradingSim, Benzinga Pro, etc.) – which you can find on this free resources page. Obviously, the trials eventually expire and the free courses aren’t nearly as beneficial as the paid ones, but they can be a great starting point in order to get a feel for different things and decide if any of them are right for you. All new traders should be practicing in a demo/simulated account first in order to build skills and validate their own abilities of being able to produce consistent profits before switching to a live account. So demo is a great risk-free approach to start with.
If you have any follow-up comments or questions, don’t hesitate to reach out. I hope this information helps. Take care!
I like this. I love that you open up with the hard truths about trading and trading vs investing. I think too many trading initiates think they’ll come in, read a book, and make bank trading. I wish you would’ve evaluated the various trading platforms though. Personally, I hope there’s a decent FOREX platform available in the USA with a good user interface, because everyone uses MT4/MT5 and I hate it. This page is an excellent crash course for individuals seriously considering trading as a part-time or full-time endeavor.
Matt Thomas says
I greatly appreciate your feedback!
I think it’s extremely important to differentiate active forms of trading from passive forms of investing right from the start. And in addition to that, make sure prospective traders have the proper expectations going into their trading journey. There are numerous fake gurus who make false promises and exaggerated claims in deceptive advertisements all over the internet – and it makes the vast majority of people think trading is way easier than it actually is. Sure, it’s super easy to randomly pick a ticker, click buttons, and place some trades from virtually any location, but this “easy entry” into the market makes people think achieving consistent success is also fast and easy – when it’s not.
Winning on a few trades by mere chance and winning consistently over long periods of time are two entirely separate things. In many cases, it’s hard for beginners to differentiate between their good and bad habits because they only look at the end result of individual trades. But this focus on the outcome can be tricky because following good habits doesn’t result in good outcomes 100% of the time, and following bad habits doesn’t result in bad outcomes 100% of the time. Trading is a game of probabilities and mindset management that most people aren’t naturally good at. So feeding individuals the proper, realistic expectations might not be what most people want to hear, and unfortunately it might scare them away, but I’d rather that than see them lose a whole bunch of money in the market due to false confidence and misleading promises.
As far as Forex platforms go, I don’t personally have much experience with them. I can only speak specifically about stock and options trading through Etrade Pro and Power Etrade. And I haven’t done many Forex-related reviews or posts up to this point, but I think Chris Capre at 2ndSkies Trading might have some platform suggestions for you if you want to reach out to him. He’s a multi-asset class trader (forex, stocks, options, crypto, etc.) who has traded in multiple countries over the past two decades, so I’m assuming he has a good amount of experience with various platforms. I hope that helps.
Wow, that was laid out in great detail. I always realized that day trading and stocks, in general, were somewhat complicated and required training. But like with so many other things, so many Americans want a get rich quick program. Getting to a place where we can earn money in anything that requires skill and mental execution takes hard work and time. All the more so when it is something as complex and large as the stock market.
Matt Thomas says
Hi Mick – I really appreciate your comments.
Most people don’t realize or seriously accept that becoming a consistently profitable trader requires specific tactical and mental skills. There are so many trading programs, services, and platforms out there that try to make trading seem so easy, and it tricks people into thinking that it won’t take any hard work. As long as they subscribe to some guru, chat room, or alert service, they’ll be successful – but it just doesn’t work like that. If it were that easy, the success rate wouldn’t be so low.
It also doesn’t help that there are virtually no barriers to market entry. Pretty much anybody – without any form of preparation or training – can open up a brokerage account tomorrow with their own money and start placing random trades. On top of that, some of those trades could end up being winners out of sheer luck/coincidence. With absolutely no physical labor required – just clicking a few buttons. But over time – and usually pretty quickly – the market has a funny way of humbling unprepared/untrained individuals with painful emotional and financial lessons.
This is why my top overall recommendation for trading education is 2ndSkies Trading – because they focus so heavily on training to build core tactical and mental trading skills. I’ve used dozens of services in the past and haven’t come across one that approaches trader development so genuinely and effectively. Chris Capre, who runs 2ndSkies, has incredible technical skills and trades multiple markets, instruments, and time frames (stocks, options, forex, day trading, swing trading, position trading, etc.). He’s a true multi-asset class trader with two decades of experience. His mentorship is something I wish I had when I first got started – instead of falling down the treacherous path of stock alert services.
The stock maket can be a battle field especially for beginners, one should be mindful and avoid setting goals that are not realistic. You should not go into trading blindly, get all the necessary trainning requirred. To be successful you have to be consitant and dedicated. Thank you for sharing the truth on how to make a living day trading stocks.
This has been a very useful post. I particularly liked the section where you talk about trading vs. investing. Trading is not for everybody. There is a mental toughness required to be able to keep up with what we plan. And in most cases things don’t come out as we anticipated. But there is where a good plan helps us.
Day trading is not only very scary for me, but could be a very risky way of trading. I prefer being an investor, rather than a trader, most probably because I do it for long term benefits, rather than immediate rewards, which could be losses. I did find this post on how to make a living by trading day stocks to be very educational and helpful. Is there a difference between what you call day stocks, and other stocks?
Matt Thomas says
Both trading and investing can seem scary to a lot of people – that’s completely normal. It’s usually from a lack of understanding of how the market works and being out of alignment with true market characteristics. One unavoidable aspect of the market environment (and also life in general) is uncertainty, meaning there are no guarantees on any individual trades or investments. This is something a lot of people have trouble dealing with. Certainty makes us feel safe – we crave it. Uncertainty makes us feel vulnerable – we fear it.
But the reality is that neither trading nor investing is necessarily “riskier” than the other – it all depends on the specific trades and investments, our plans for making those trades and investments, and how we ultimately execute those trades and investments. Because every individual decision we make to buy or sell a security, and every penny we put in or take out of those positions, is completely up to us. In other words, we all personally have complete control over our own risk – we’re choosing the risk for ourselves. In the end, the trades we take part in should all depend on our own personal availability, preferences, risk tolerances, etc.
It’s an overwhelmingly common way of thinking to enter a trade or investment and then immediately unload all personal responsibility onto that particular stock, company, or even the market itself. We worry about the things we can’t control (the market) and forget about the things we actually can control (our own actions). We don’t have control over the market, but we do have complete control over when we choose to enter and exit positions. As bad as we might want every position to move in our favor, the market just doesn’t work like that. It doesn’t automatically fulfill all of our personal desires.
As market participants, this is why risk management is so important, yet it’s so frequently ignored. Long-term investing has risks just like short-term trading does. It all comes down to the risks we choose. Overall, the most successful traders and investors put the odds in their favor on a consistent basis, and in the long-run, those odds work out for them. There will of course be losers along the way – they’re completely unavoidable. But if we continuously put the odds in our favor, the wins will offset the losses. Unfortunately, many traders succumb to random, impulsive, and revenge trading instead of executing on a statistical edge with consistency and discipline.
To answer your question about “day stocks” and “other stocks” – I’m assuming you’re asking if there’s a difference between stocks that get day traded and stocks that get invested in long-term. The easy answer to that is that lower-priced, small cap stocks have a tendency to get day traded and higher-priced, blue-chip stocks have a tendency to get invested in long-term. But reality isn’t quite that simple.
The truth is that all kinds of stocks get both day traded and invested in. The reason lower-priced, small caps have a tendency to get day traded is because they can potentially be more volatile and produce large intraday swings relative to price. And the reason higher-priced, blue-chip stocks tend to get invested in is because they are usually more stable and have proven fundamental value. With that being said, there are plenty of day traders who trade blue-chip stocks – it just requires a fairly large account, and there are plenty of long-term investors who have a portion of their portfolios dedicated to small caps.
There’s no cut-and-dried answer. Again, it all depends on personal circumstances and preferences. Take care!
There are many trading schemes and probably even a greater number of gurus who promote themselves as great traders and demand to be followed. Most unfortunately are needing the money to cover their losses. Or often they don’t trade at all and just want your money.
Training in Technical Analysis is in some cases a university course, I know of one at the London School of Economics. Psychology of course is a perquisite for trading without the proper mindset you are doomed to fail.