Truth Time: Is it Possible to Achieve a Passive Income Through Day Trading?

We have all heard get-rich-quick stories in regards to day trading. Normally, these tales revolved around a “friend of a friend” who suddenly encountered wealth after only a handful of positions. However, is there any truth to such observations? When we consider that some statistics highlight that as many as 80 per cent of all day traders lose money over a six-month period, statistics do indeed appear to be staggering. The penultimate question is whether or not the industry will provide a passive income over time. Let us look at this concept a bit further.

Myth Versus Reality

The very definition of the day trader harkens up images of short-term profits, massive margins and individuals who work a handful of hours each day. This myth needs to be immediately dispelled. The fact of the matter is that those who embrace such a flippant attitude are likely to make poor decisions from the very beginning.

As opposed to fostering delusion, we need to point out that day trading relies upon small and incremental profits as opposed to a one-off windfall. In other words, a “winning” position is often associated with breaking slightly over even and then walking away. Considering that most investors have a limited amount of capital, it becomes clear that the phrase “get rich quick” has no place in today’s world.

Choosing the Right Assets

Strategy alone is not enough to develop a sustainable income. Every day trader needs to carefully choose the assets that he or she wishes to work with. This will require keeping one eye on the news and another on the values of the asset in question. For instance, many analysts feel that oil prices should rise due to an anticipated production cut by OPEC. This commodity could therefore be a wise choice from a medium-term point of view. However, we also need to realise that what rises will once again fall. This is when education and experience come into play.

Short-Term Horizons for Long-Term Goals

Whether you have been hoping to supplement your pension plan, to allocate funds towards the education of a child or simply to enjoy greater amounts of liquidity, your strategy is the most important concern. As many analysts rightly point out, pragmatism needs to be embraced over idealism. Appreciate that fortunes are not made overnight and that losing trades are always a part of the bigger picture. This will enable you to keep a clear head and to make the correct decisions when the time is right. Humility also plays an important role, so never be afraid to think outside of the proverbial box. For example, the CMC Markets day trading guide is an excellent resource which will help you to hone your skills along the way.

Patience and Prudence

The question of whether you will win or lose with day trading depends more upon your mindset and strategies than it involves the state of the markets. While we need to take statistics with a grain of salt, it is just as important to remember that effort breeds results over time. Remaining focused and patient is the best way to properly align yourself for the potential liquidity that may very well be only weeks or months away.

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May 28, 2017