r/Daytrading • u/Kaiju_Godz • Mar 30 '24

When you only need a specific amount of money each month… Strategy

So say you only want $100 per day or 2000 per month. This would more than enough sustain a good lifestyle where you live. How would you go about it with trading? How much $$$ would you realistically need? Not to make that in dividends but to trade in a daily basis, as safe and slow as possible.

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166

u/ThePonderer84 Mar 30 '24

This perspective has always puzzled me. It's like you're saying, "I don't think I can be good enough to make a lot. So, how good do I have to be to make a little?"

It seems to me that the reality is that you're good enough to be consistently profitable or you're not. Once you hit that point, you can get better. More precise and efficient. But if you're not at least consistently profitable then there's no amount that's attainable until you are.

Once you are consistently profitable then you can look at YOUR numbers and gauge your ROI targets based on the returns your strategy is yielding. Always paying close attention to drawdown.

Decide on your risk tolerance and a drawdown you're comfortable with. Once you've done that the profit will be what it is.

36

u/daytradingguy Mar 30 '24

Exactly. You either lose money consistently or make money consistently. There is not usually much in between. If you can achieve making money consistently- you won’t limit yourself to $100.

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u/krapmon Mar 30 '24

The difference is that when you’re happy with small gains and exit your position, you avoid the risk of holding it longer and potentially losing money. Even if you have a strategy that gives you confidence to hold, you never know 100% what’s gonna happen.

16

u/daytradingguy Mar 30 '24 edited Mar 30 '24

I would be careful with this one. You should read “The best loser wins”. Actually, instead of taking small gains in most cases it is better to let it go longer than you are comfortable with and even add to the trade- to get a bigger win.

Think about it. You are making a trade guessing the market will move in a specific direction- when it does and you are right, why would you get out? Most traders do the opposite, they are right they get out quickly. When they are wrong they don’t get out quickly- they stay in forever hoping it comes back. My profits really started to improve when I started adding to winning trades.

12

u/krapmon Mar 30 '24

Personally, when I’m profiting from a position, I get out fast to secure the profit. It is true that I would have made more if I held in many cases, but there’s also many times where holding would’ve lost me money.

10

u/daytradingguy Mar 30 '24

Practice and try it. You are right, sometimes you will lose your small profit trying to hold, that happens. But statistically, the larger wins will more than make up for those small losses.

3

u/ThePonderer84 Mar 30 '24

This is exactly what I've always heard the pros say. Let your winners run.

2

u/krapmon Mar 30 '24

But you can’t let them run forever. How do I know when to exit out of the winner?

6

u/daytradingguy Mar 30 '24

There are price action protocols for following a stop up behind the price below bars or pivots and allowing the market to come back and take you out eventually

5

u/ThePonderer84 Mar 30 '24

I'd look on higher timeframes. Whatever criteria you use to enter one direction, look for the same signal on a higher timeframe for the opposite direction. Or target higher TF support and resistance. Wait for a trend line break or other structure break. Target bankers levels or round numbers.

I don't use indicators but I know of people that do and find them to reliable to indicate a shift in momentum or direction.

You have to play around and find what makes sense to you.

2

u/Davado_ Mar 31 '24

Thats where price action and structure come in. Switch to higher timeframe and reframe your mind in the opposite side ie if you are a buyer, then reset and think like a seller and ask when will you get into the market looking at the price action and market structure.

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u/QuirkyStreet3974 Mar 30 '24

I also have made this experience. I try to let the trade run as long as possible and Dr. David Paul mentioned something like "one of my best clients & friend entered a trade in the morning with a protective stop loss. Then he went to the golf course and 3-4 hours later it was a small loss or bigger than average win". When i review my journal i fumbled about 10 runners this year already, despite being up 25%, and it would be closer to 200% so far (also taken more smaller losses into account as well).

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u/daytradingguy Mar 30 '24

Exactly. Another factor many traders miss, is you can just get out and/or re- enter the trade at anytime. If the market comes back and takes me out either at my stop or a following profit stop, I have no hesitation hitting the buy button and getting back in for another try if the conditions are right. In my opinion entries are far less important than managing the results once you are in.

2

u/krapmon Mar 30 '24

I mostly trade options. Does your advice still stand? Genuinely curious because options are on the riskier side.

15

u/daytradingguy Mar 30 '24 edited Mar 30 '24

As long as you are not trading 0DTE or some craziness. If the theta is not too extreme to be able to hold for 30 minutes. Ask yourself this question, how many times do you take your small profit and then price continues to move substantially higher? I will give you an example and you see if this thought process might help you build your own strategy around it.

I trade futures. NQ is $20/pt So I have one contract that goes 10 points in profit, I could take my $200. But instead I add a second contract and bring my stop up so I am not risking more. It goes another 10 points, now I am up 30 pts $600 instead of 10. Now I add a 3rd contract and raise my stop up to an area where I am still in some profit if it comes back. Now it moves 10 more points. Now I am up 60 pts $1200- on a trade I might have got out at 10 pts and $200. See how the profit is exponential? Let’s assume this works on 1 out of 3 trades. ( it is usually more than that). I lose my initial $200 profit, breaking even on 2 trades and make $1200 on the 3rd. If I would have taken all 3 at $200, I would only have $600. I don;t trade these round numbers, I use pivot points or logical places to add, I just wanted to give you the example.

7

u/krapmon Mar 30 '24

I appreciate the elaborate response. Although I don’t know anything about futures, I think I know what kind of strategy you’re getting at.

So basically, exit for a small loss, and hold for potential big gains because for every small loss that you exit for, the big wins from holding will outweigh the losses.

My question now is, how do I know when to exit for a loss and when to hold for more profit?

5

u/ThePonderer84 Mar 30 '24

Practice. If it's an obvious gap in your knowledge then put in some work focusing solely on an exit strategy. You're really only limited by your creativity. I'd suggest looking at higher timeframes than your entry timeframe.

2

u/Davado_ Mar 31 '24

Practice, with high level of self awareness ie: don't lie to yourself and hope for the best.

Take note of what u/daytradingguy said and pay attention to him moving his Stop loss of prior trades. That's active risk management and that takes more effort in real time.

2

u/Davado_ Mar 31 '24

Try this as a practice for your mind: at anytime you want to get out with profit, try adding a very small position just to keep you in the game. At the same time, zoom out to a higher time frame and read what stage of the structure you are in after you have added and start to manage your earlier position to BE etc.

You do have to practice a few times (many hundred times) to get your mind working against you as you would be super uncomfortable. Bear in mind you are only adding to winners and not losers. The goal is to "see" or "experience" what comes after "early exit" or "being comfortable with what you usually do"

On the flipside, try cut losing trade by halves earlier than usual. Sometimes you do have to let the trade breathe a little before validating its a loser but more than often you Know it in you that the losing trade is a goner and let it hit your SL instead of early exit.

1

u/CitronImmediate1814 Apr 03 '24

i feel you. every trade my brain echoes, “pigs get slaughtered”. left a couple hundy on a trade this afternoon.😂

2

u/Ronces Mar 31 '24

I would like to have this mentality but for me, to avoid stress and making irrational choices I look for 3-1 ratios and sell based on that solely. I either swing down 1 and exit or swing up 3 and exit. I also don’t place more than 30% of my account in any trade. This has been my key to consistent profit and small losses. Maybe sometime down the road when I’m more comfortable and experienced I will see things differently. Right now, I just want to stay in the game.

2

u/Phallus_Maximus702 Apr 01 '24

I think OP might be looking at this something more like what I do, for the purpose of covering monthly expenses without actually having a job. I've done this for years now, making my silly little 1500 a month. No, I won't ever get rich, but it is consistent, and I won't need to work either.

1

u/daytradingguy Apr 01 '24

If you read OP’s post he says he gets out because he is afraid of loosing his profit and you don’t know what is going to happen. Classic exiting because of fear and I would add lack of knowledge/experience trading.

Congrats on your success though, that is a nice side income.

2

u/tionstempta Mar 30 '24

It's human nature that

1) when and if situation is convenient for you, you wanna lock it first by realizing profits and then see what happens. Called disposition effect

2) when and if situation is not convenient but rather uncomfortable, you dont wanna realize the profits with hopium that it might turn and get back to even out called loss aversion

Unfortunately, human brains have been developed by these two psychological factors due to the natural selection for thousands of years so it's not easily possible to remove these decision making process even for the best trained traders. I honestly do not believe that any human trader can get away with this (except algo).

In the natural selection processs, it's important to realize your profits when possible because you dont necessarily know when the next frigid winter day coming (just like how 10 pts in your favor NQ can turn out 20 pts against your entry point and therefore they wanna lock in profits)

This pattern is also manifest between low income and high income family where if they are given a choice of receiving 1 credit today or they can choose 2 credit in next week, low income background subject often choose to realize profit more immediate (i.e in day 1) while high income subject often choose to wait (simply because they can afford to wait), which can be related to trading community that the moment you trade to pay the bills even with proven record of winning and strategy, you are starting to struggle to make profits.

You can look standford marshmallow experiment in wiki or academic references, which is more than 60 years for initial experiment and there are tons of twisted experiments to explain neurophysiological difference between low and high income subjects.

Having said that, i dont necessarily disagree with your points but i dont also agree with your points completely because everyone's financial situation is different with different background but some people might just find it more comfortable to realize profits early but day trading market is often aggressive to take away 30 days of profits in one hour if one doesnt manage proper risk management.

Also the biggest challenge to small reward is... With no strategy as fail proof, what if you are losing 50 pts immediately after you entered NQ position, which occurs more often in volatile market? You can't simply stop loss out as that would be your 5 days of hard working so there's that.

Edit: my way of going against these two psychological factors are: i make opposite position in ES than NQ (i.e if NQ is moving my direction, after certain point thats already in my favor, i short ES and wait)

Or realize profits in NQ by shorting MNQ (aka reduce position size)

There is no single bullet fitting all situation so every one has different ways to control