From Novice to Pro: How Day Traders Can Go from Earning $1,000 to $100,000

Many day traders, despite the potential to continuously earn $1,000 to $5,000—given their account size—often behave like hobbyist anglers who reel in a fish only to set it free. The experts, however, catch the fish and go on to catch more, establishing a steady flow of income or boosting their account balance. What separates them may boil down to avoiding frequent errors and transitioning from irregular to regular wins.

Key Lessons

For many, it's more beneficial to concentrate on the trade presently underway instead of consistently looking at the broader scenario. Day traders should limit their trading activity to about two hours each day to prevent mental fatigue and errors. During those two hours, traders should direct their attention solely to the task at hand. Indulging in grand fantasies about striking it rich is not advised. Consistency is critical. Regular small wins can be just as rewarding in the long run as an occasional high-stakes windfall.

The Trap of Misplaced Focus

As a trader, you should devote your attention to the task at hand, rather than getting distracted by the size of your account. Your duty in trading is to enter trades as you've practiced, set your stop loss at the correct point, adjust as necessary, and cash out when your plan indicates.

The moment your thoughts drift to money, your emotions come into play. This can result in premature profit-taking or delayed loss cutting. You might skip legitimate trades or enter ones that lack validity. Your attention might drift from the only constant source of profit—the execution of your plan.

The following issues are all connected to focusing on the wrong aspects, though they might appear otherwise.

The Pitfall of Short-Term Vision

Traders can lose their focus when they become fixated on immediate outcomes. Let's consider an example where you aspire to get fit and start hitting the gym. After a few days without seeing a physical transformation, except for the muscle soreness, you quit. A few months later, you repeat the process. This cycle continues until you either give up completely or overcome your short-term thinking.

When your attention is centered on immediate trading outcomes rather than the process, you're likely to lose any money you've earned. If you begin trading with the intention of making a quick buck and succeed, you're still at risk. As stated before, your focus remains misdirected. Whether it's fitness or trading, your attention should be centered on executing and managing your plan with each trade, every day.

If you concentrate on doing the right thing (following your trading plan meticulously), your long-term goals will naturally fall into place.

The Psychological Factors: Fear, Greed, and More

The physical act of opening and managing a trade (setting and adjusting orders as necessary) takes less than five seconds. In two hours, if you make five trades, you have spent approximately 25 seconds in "active work." The remaining time, around 7,200 seconds, is potentially fraught with risk, where a momentary lapse in concentration can spell disaster.

This requirement for intense focus is why we recommend that day traders limit their trading duration to about one to two hours. Trying to maintain that level of focus all day can lead to errors.

During trading, your thoughts should be sharply focused on how to execute your plan under the current market conditions. If your mind begins to wander to your profit/loss status, a dream car, outstanding bills, a past poor trading day, or an ongoing winning streak, you're heading off course. Though this doesn't necessarily mean your next trade will be a loss, it does increase the likelihood of a setback.

Most psychological challenges in trading can be tackled by eliminating extraneous thoughts and focusing solely on the execution of the plan. However, this is no easy feat as the mind tends to wander. The key is to continually bring your mind back to the task at hand. The more you practice this, the more focused you'll become, and the less likely you are to squander your earnings.