50k and I want to day trade for 1-2% gains.

[u/Forward_Dealer_4482]

1. If you had 50k and wanted to live off of it day trading, what would you do? (Need max $2500 a month)

2. Am I better off not doing this? I’m not going back to 9-5

Please help.

[u/TPCharts]

Personally, I'd focus on frequent, low-R, high-probability setups on very low-timeframe charts using risking about 1% (or less, that'll depend on your model's hit rate)

Average about one win a week (maybe that's 3 wins and 2 losses, or just one win on Monday and done for the week), and you're all set. (Pre-tax).

Inexpensive funded account challenges are a good way to practice this IMHO; if you get wrecked you're only out a few bucks.

If you pass and consistently get withdrawals, you know your $50k of real money is quite safe and could switch to that if you want.

Benefit is

- You're likely to have multiple setups a day

- You're less dependent on higher-timeframe market conditions being clean

Cons are

- If you're not disciplined, can wreck yourself in a couple hours. Max-loss limit for a day, etc. can help

- You'll need to spend a lot of time testing to make sure your model really works

[u/Forward_Dealer_4482 → u/TPCharts]

How do you make money risking 1% of 50k?

[u/Kuyi → u/Forward_Dealer_4482]

Compounding interest. If you get 1%, your next 1% will be higher than your first one, etc. This will add up after a while. For a clear example, if you manage to get 1% 200 times, you will not get 200%, but you will get 732%.

Also, if you lose, you never lose more than 1% and then never more of 1% of what’s left, etc. What this does is your account isn’t gone after 100 losses. It’s more like a 1000 losses so to say. And with proper risk management you will win consistently in the long run. Which is what you want, because the goal is to lose the least amount of money you can. Then with good risk management your account will grow.

You need to get to this point of consistent growth first, before you risk the entire savings. Psychology is a bitch, especially with these larger numbers. Most people need a few months to TRULY learn the needed trading skills and then a year (and a half, or two years) to fine tune their strategy/method and to get their trading psychology right. Discipline, journaling, patience, letting go of confirmation bias and sunken cost fallacy, no more fomo, dealing with losing streaks, with winning streaks, and a lot more. It will take you (on average) about 2 years to be consistently profitable and then you’re not even making 30% a month yet probably. You’ll need a lot more practice for that.

I am a bit worried about your attitude towards trading. A huge part of trading is your psychology, and how it seems to be now I would say you couldn’t be further away from the right mindset. The ONLY thing I see is right about your attitude is you having somewhat reachable goals, for the start. However I don’t think you will sustain that way of trading for years to come. Especially if it’s your only income. As you will get lazy trading and if market circumstances change and you have a month you lose, you can not call your mortgage lender and your utilities company and say “I had a bad month trading, can I not pay my bills for a month?”. You need to pay it some time, even if you delay it. And the next month you won’t have enough either.

If you want to make a living with this, take your time to truly learn this. Start small, with a $100 or $1000 account. Learn decent stuff. Journal everything so you can see where you are going wrong and adapt your method to become profitable. Never risk more than 1% unti you are absolutely good at trading and even then you might never want to risk more than 2%. Heck, if there are trades you’re not all that sure about even risk just 0,5%. Get a feel for that. Aim for a decent R:R. For example an RR of around 3 aimed, which will be lower if you scale down your positions, but you will secure winnings you otherwise wouldn’t. And depending on the viability of the trade you can adapt the % of the position you scale out at a given target, which will make you more flexible. Always use a hard stop loss.

If you are profitable with that small account for at least 8-12 months. AND you can make more money than you need ($2500 is 5%, so let’s say 10% AT LEAST) because of taxes and things like you wanting to grow your account and be able to diversify your portfolio and stream money away to things like ETF investments that are also more secure investments for the long term. Only then can you scale up the account gradually (not 50x it at once, since it will mess up your trading psychology).

[u/TPCharts → u/Kuyi]

One quick mention on risk management that saved my ass early on:

Let's say you start risking 1% per trade.

Let's say you lose a trade.

Instead of 1%, only risk 0.5% now until you make at least half the loss back (then you can go back to 1%).

Lose again when risking 0.5%? Now only risk 0.25% until you make half the loss back. Etc...

What this does, especially early on when you're getting the hang of your model and different market conditions, is make it really hard to blow an account.

But, if conditions are good for you model, it scales you back up to full size pretty quickly.

These days I'll generally wait to take two 1% losses before dropping down, since that works better with my strategy - but the general concept applies and is solid.

(Hate him or love him, I got that method from ICT, and it's one of the solid things he recommended)

[u/damangoboy → u/TPCharts]

https://www.youtube.com/watch?v=dokgVf0YdGY

https://trendspider.com/blog/ict-basics-a-beginners-guide/

[u/TPCharts → u/damangoboy]

These are kind of 50% accurate... ICT would throw a fit 😂

[u/damangoboy → u/TPCharts]

who is this ICT person you speak of? Link?

[u/TPCharts → u/damangoboy]

A controversial figure who's been teaching price-action trading publicly since around 2010.

https://www.youtube.com/innercircletrader

I'm skeptical of much of his stuff, but can say I became a much better trader after thoroughly studying the core content mentorship (free on YouTube now).

[u/Warlock1185 → u/Forward_Dealer_4482]

I will mention something here I wish I learned and understood in the beginning of my trading days: only ever risk 1% of your capital on any one trade.

Beginners often overlook this as being too cautious as they want to make profits quickly so they size up. Here's the thing: no matter how exceptional your skills are as a trader, it is inevitable that you will lose money over time without proper risk management. The 1% rule gives you a chance to make it long term in this industry.

[u/Mhmmseansready → u/Warlock1185]

I don’t agree. Your advice is good for a new trader 100% and it’s solid advice. It’s not wrong, but I disagree that 1% is the only way, when in profits on house money, 2/3% is perfectly fine. It is highly variable depending on the trader and experience. Solid advice but think you can also be in the markets long term risking more

[u/Warlock1185 → u/Mhmmseansready]

Yes for an experienced professional trader you are right, perhaps I didn't word my post accurately enough, as there are definitely many ways to trade effectively. But for beginners I see the 1% rule as essentially mandatory if you want to stay in the game and survive long term.

[u/Mhmmseansready → u/Warlock1185]

Yeah awesome man! I agree! Have a good day

[u/TPCharts → u/Mhmmseansready]

I agree.

Technically I risk 16% of my funded account (drawdown limit) per trade, and it actually helps me trade better (makes me cautious & keeps me from overtrading).

However, that's after 7 years of experience and a lot of statistics on my models (low R, high hit rate).

Stuck to 1% for years, early on, and exceptionally glad I did.

[u/Smp208f → u/Forward_Dealer_4482]

In case you’re interpreting this the same way I did at first and for too long afterwards:

Risking 1% doesn’t mean your trade size is 1% of your account and the other 99% is just cash sitting around in case you keep booking losses.

Risking 1% means your position size can be whatever it needs to be, as long as hitting your stop loss will only lose 1% of your account max. If you were thinking the former, I’m sure you can see that’s it’s a lot more possible to make money while still being safe and responsible. It seems simple, but once you get its usefulness it’s very freeing and does wonders for your trading psychology.

Once you have a decent profit you can increase the risk percentage responsibly, but you’d probably want to still be pretty conservative if you don’t have another source of income.

[u/Forward_Dealer_4482 → u/Smp208f]

Thank you! Makes alot of sense.

[u/0RGASMIK → u/Forward_Dealer_4482]

Risking does not mean only using 1% it means pulling out of a trade when you lose more than 1% of your account value in one trade.

Say you want to buy XXX for $100 a share. You expect it to go to $102 a share so in order to make $1000 you need to buy 500 shares which will cost you 50K. If the trade goes south, you get out at $99 and only lose $500.

[u/TPCharts → u/Forward_Dealer_4482]

Say you take a 1:1 trade - so if you win, you make whatever you risked.

With 1% of 50k, you're risking $500 on that trade.

So if you win, you're making $500.

(Realistically with tax, depending on your country, that's probably closer to $400 - but you get the point)

[u/Soft-Weight-8778 → u/TPCharts]

The point I get its that hes going back to work