So you want to make $1,000 trading each day? 💰

📈 PASS THE PROP TRADING TIPS

So you want to make $1,000 trading each day? 💰

The question you need to answer is: How do you actually go about making money every day? 🤔

Here are a few things to keep in mind.

Buffer Capital 💼

Functionally, you may need no more than $5000 dollars to make your system work. If you trade only 1 or 2 contracts, that will be enough capital to cover the intra-day margin. But of course, what’s mathematically optimal can often be psychologically destructive. You need both a mental and a financial “cushion” because you will inevitably “veer off” your path by trading a bigger size when you get behind. So you may need as much as $20,000 to get started. Or you may have the opposite view and decide to trade with just $5000, treating it as “burn capital.”

Regardless of the approach, know your buffer capital - it’s actually more important than you think.

Trade One Product Only 📊

Are you a “parallel” or a sequential thinker? If you hate multitasking and are a strictly do-A-then-do-B type of person, you must focus on one product only. The SP 500 (ES in futures) is the perfect middle ground of high liquidity and moderate volatility.

Commissions Will Kill You if You Let Them 💸

It’s astounding how quickly commissions can add up. (If you are trading CFDs or FX you are still paying them via spread - so be under no illusions). A good rule of thumb for what is the maximum tolerable level of expense on a daily basis is to keep commission costs to 25% of the profit target. So if you are trying to make $1000/day, commissions should be no bigger than $250. If they are consistently bigger than that, then you are overtrading. That is actually an excellent metric to gauge if you are trading properly or not.

Define What Day Trading Means to You 📅

Are you comfortable trading up to 20 times/day? That’s basically 4-5 times in Asia, 5-6 times in Europe, and up to 10 times in North America, scalping for 1-3 ES points all day long. You are pecking at the market like a pigeon. 🐦 So your P/L run looks like something like this: 50.00, 62.50, -260.00, 130.00, 125.00, 62.50, 75.00, 37.50, 25.00, 12.50, etc. If that holds no appeal to you, then making $1000 CONSISTENTLY is actually very hard. If you are someone who just wants to lay down 2 or 3 trades per day, then your P/L will look much more like this: 250.00, 250.00, -500.00, and you will have many scratch or negative days.

First, if you trade fewer times, both your stops and targets will need to be bigger. Secondly, as intuitive as it may sound, the less you engage with the market, the less likely you will be able to quickly recoup the losses. (This is pretty much the mechanics of the HFTs, who trade so many times per day that they allow the law of large numbers to tilt the odds their way). So you may still be positive - in fact, you may be a lot more positive than me on a gross profit basis - but you will not be nearly as consistent. Your P/L will look something like this: 250.00, 250.00, -500.00, 250.00, 250.00, -500.00, 250.00, 250.00, 250.00 - and you will need to assess its effectiveness on a weekly or even monthly basis.

Consistency requires failing a lot and then quickly recouping your losses. That’s why trading for income is a very different game than trading for return.