Last Updated on 10 February, 2024 by Rejaul Karim
When you’re new to the financial markets it may be hard to keep your expectations at a realistic level. And considering that it’s not strange how many.
So, can You Make 1 Percent a Day Trading?
No, you cannot make 1 percent a day day trading, due to two reasons. Firstly, 1 percent a day would quickly amass into huge returns that simply aren’t attainable. Secondly, your returns won’t be distributed evenly across all days. Instead, you’ll experience both winning and losing days.
This might come as a disappointment if you had anticipated that such returns indeed were possible.
However, things aren’t as bad as they look. Let’s discover why!
The Reality Behind Making 1 Percent a Day Trading
Before discussing the topic further, let’s just see what 1 percent per day would mean in terms of long term returns.
If we manage to get 1 percent a day for one month, we would be up 34% for the whole month, provided that we reinvest the profits of each day and let the profits compound.
On a yearly basis, the same rate of return would result in a massive 1100% return, provided that the market is open for about 250 days.
There is no way that a trader with any sensible risk-taking can achieve returns of these kinds on a consistent basis.
Of course, there will always be exceptions. Some very few lucky individuals who take on too much risk will indeed end up with some massive returns for a while. However, if they just continue for long enough, there will come a time when their excessive risk-taking results in a loss great enough to make them lose all or most of their account balance.
Remember, trading is a marathon in which you cannot run without your capital. Thus, you should always put capital preservation as the top priority!
How Much Can You Make a Day As a Trader?
Having established that one percent per day isn’t an attainable goal, we wanted to touch on what is reasonable to expect.
The best way of approaching the question is to look at what returns the market has provided historically. And since most traders, unfortunately, won’t succeed to beat the market long term, we might start off by having a look at the yearly returns of the S&P-500.
As you see in the image above, there have been some quite outstanding years with returns of over 40%, while some other years have performed much worse with returns of below -40%.
Let’s now assume that we get one of those best performing years, where the market made more than 40%. For the sake of simplicity, let’s assume that the market made 50% in one year.
If we were to translate that into monthly returns, assuming that compounding is in play, we’d need around 3,5% in monthly returns to get a 50% annual return.
And if we were to translate that into daily returns, we’d need to make around 0.15% per day, provided that one month has 22 trading days.
So, in order to achieve the kinds of returns that the stock market only manages to achieve a few times each century, we’d have to make around 0.15% per day. This renders the belief that we could make 7 times that, which is around 1 percent, very unrealistic.
Can you expect to make 0.15% per day?
Achieving an annual return of 50% is something most people won’t be able to do long term. Of course, everybody will have their outstanding years with high returns, but across several years, it’s hard to achieve these kinds of returns consistently.
Of course, with the right type of trading, like algorithmic trading, returns like these can be accomplished. However, with typical swing trading, provided that you don’t risk too much, you should be happy getting anything from 15-30 percent on average.
So let’s now assume that you can make these 0.15% a day. Does that mean that your account will grow by that amount each and every day?
No, unfortunately, that’s not the case. Returns vary a lot, and it’s first when some time has passed that you may begin to figure out where your average return is going to end. Many times the profits you make come in big chunks during very short time periods. It’s not uncommon to have most of your profits made during as little as two or three months of the year.
Thus, making 0.15% per day on a consistent basis is not something you should strive for. It simply isn’t possible to achieve.
How to Maximize Your Chances of Ending the Year With a Positive Return
So now that you know that it’s impossible to achieve positive results on a daily basis, we wanted to instead look closer at how you could go about to maximize your chances of making money consistently on a yearly basis. After all, most countries charge taxes based on yearly income, which helps to make yearly returns what counts the most.
Here are some tips that we hope you’ll find useful:
Trade many strategies
Despite what many new traders believe, there is nothing such as a perfect trading strategy that will never fail. All trading strategies to fail eventually, and as such, it’s good if you spread your risk across several trading strategies.
In addition, if you base your trading on strategies with varying logics, they will be less likely to have their drawdowns at the same time. This means that you’ll get more evenly distributed returns, and even may increase the position size to achieve higher returns.
If you’re interested in taking your trading to the next level and trade as many as 100 trading strategies at the same time, we recommend that you look into algorithmic trading. That’s the kind of trading we spend most of our time on ourselves and believe that you should too!
This tip might not have that much to do with trading, but we thought it might suit well to include it anyway.
If you’re holding a portfolio of stocks, it pays well to diversify across at least a few stocks, preferably in different market sectors. That way you won’t suffer as hard if one of the stocks in your portfolio has a hard time one year. The losses simply will be compensated by other stocks that perform better.
One thing to keep in mind here is that while diversification is important, you may in fact come to a stage where your portfolio starts to resemble an index fund, to some degree. While this could mean better stability, it also has the impact of making it very hard to beat the market. In effect, you’re basically building a mini index fund yourself!
Related reading: Is It Possible to Day-Trade Successfully?
Making 1% a day in the markets, unfortunately, isn’t a realistic goal. That’s not too strange, considering that returns of that kind easily would add up to yearly returns of 1000% or more.
A more realistic view of what a high performing trader might make per day on average, is somewhere around 0.15% a day. On a yearly basis, this adds up to over 50% which in itself is an excellent return! You’ll be doubling your trading account in less than 2 years, and over longer periods of time, it will quickly add up to even more impressive returns.
Can I make 1 percent a day trading?
No, making 1 percent a day in day trading is not realistic. Such returns quickly compound into unattainable levels, and daily returns vary, including both winning and losing days.
What are the long-term implications of making 1 percent a day?
While 1 percent a day may seem attractive, it leads to massive annual returns, often beyond what sensible risk-taking can achieve. Excessive risk-taking can result in substantial losses.
How much can I realistically make as a day trader?
Realistic daily returns for day traders vary, but aiming for around 0.15% per day, which compounds to over 50% annually, is a more feasible and impressive goal.
How can I maximize my chances of making money consistently in day trading?
Trading many strategies and diversifying your portfolio can enhance your chances of consistent profits. Algorithmic trading, involving numerous strategies, is a recommended approach.