Ninety five percent of all day traders will fail. Without a doubt, ninety five percent of all day traders will fail, period. They will either blow out their account, or will grow so frustrated with not making money that they will simply give up. Some will continue searching for the "Holy Grail" for years, perhaps for their entire trading career, and will never find it and will never succeed.
But do you know who does make money in the business of Day Trading? I'll give you a hint. Think about the gold rush days of the late 1800's. Do you think the men who rushed out to California to dig, blast, and pan for gold made money and got rich? A very, very few did, but the majority failed miserably. There were people who made money, however, and those were the people who sold the picks, shovels, and other supplies. They played on the people's greed, their desire to get rich, and they were all too willing to encourage the dream of striking it big by selling methods, tools, and supplies to the gullible people who only had dollar signs in their eyes. Sound familiar?
So who makes money in Day Trading? Well, I've read close to 100 books covering fundamental analysis; technical analysis; trading psychology; trading systems; economic reports; and, interviews of successful traders. I've had subscriptions to, or frequently purchased, trading magazines such as Stocks and Commodities; SFO; Futures; and, Active Trader. I have attended multiple seminars in Chicago; Las Vegas; and, Denver. I have purchased multiple courses over the years from various trading coaches. I have subscribed to investor newsletters and followed the "guru's" picks and pans...only to see one of my "guru's" charged with being a pumper and a dumper. I used a real time stock scanner for many years. It was a very, very good scanner, which I would highly recommend. What made it so good was that you could configure it a million different ways to search for the perfect set-up....and believe me, I configured it about a million different ways looking for that perfect set-up. Maybe I found it and I just don't know. I have hired trading psychologists to analyze my thought processes before, during, and after a trade. I have purchased indicators that I can add to my charts to provide better analysis and decision making. Some, however, turned out to be pure crap. I still use a couple; but, I have realized that all,and I mean all, indicators are based solely on the price action of the instrument one is trading. And, of course, I have purchase charting software. So,after reading the foregoing paragraph, I guess we know who really makes the money in Day Trading, or at least who has made money from me. If I had been a gold miner during the "Gold Rush" era, I would have been buying the newest type of pick or shovel believing that it was what I needed to get rich. Rich, I tell ya, RICH!
Regarding trading, I have traded 2 to 3 stocks in 6 to 8 sectors that followed their respective sector indices like a glove. I have traded stocks that gap up or down by a certain percentage on increased volume. I have scanned for momentum stocks and stocks that are consolidating. I have traded based on repetitive patterns; indicators; types of candlesticks; and, support and resistance. I have spoken to active traders and retired traders, all of whom have different styles and different assessments of how one should trade. I have watched active traders in trading rooms and have been amazed at the different ways in which they trade. Some will throw on a hundred trades a day while another will trade three times...and both may be using the same time frame on their charts.
After what sometimes seems to have been an awful long time, I have come to the realization that one main problem with why Day Traders fail is that they never stop looking for the "Holy Grail" and settle on one style of trading and stick to it. At least that has been my problem...until now. For the last year I have settled on one style which I am …