Can You Make 1% a Day Day Trading?

Making 1% per day consistently through day trading is extremely difficult, risky, and not practical.

Achieving a consistent 1% daily return through any trading or investment strategy is extremely challenging and involves a high level of risk.

The idea of consistently making such a high return overlooks the complexities and volatilities of financial markets.

Sustainable trading and investing best practices emphasize strict risk management, limits on position sizing, and diversification.

Key Takeaways – Can You Make 1% a Day Day Trading?

• It’s virtually impossible to make 1% per day trading, especially considering what that is on a compounded basis.
• Day trading has the potential for profit, but it’s a high-risk activity.
• Don’t be misled by promises of quick riches.
• Success in day trading is like any other profession or business model.
  • At the outset, we’re inspired and drawn to it, then we experience the realities and have to iterate our way to better results over time.
  • It requires significant time, dedication, education, and a strong focus on risk management.

Challenges of High Returns

Here are a few key points on the challenges of achieving such returns:

Markets are fairly efficient

Most major markets are quite efficient, meaning that opportunities for consistent profits at that level are rare after accounting for trading costs, slippage, etc.

Competition

You’re competing against professional traders, large institutions, and sophisticated algorithms with:

• faster access to a large volume of data and information
• better and faster analysis
• faster execution, and
• well-developed systems…

…while doing it all with more capital and economies of scale.

High risk

To make 1% per day, you’d need to take on a lot of risk through heavy leverage (exposes you to potentially devastating losses from relatively small market movements), extremely volatile instruments, or highly speculative trades or investments.

Volatility

Financial markets are volatile (some more than others).

Prices of securities, including stocks, bonds, and commodities, can fluctuate widely over short periods.

This can make consistent daily gains challenging.

Costs and Fees

Trading fees, commissions, and spreads can significantly eat into any profits, especially in higher-frequency trading strategies that a trader pursuing a 1% daily goal would likely engage in.

Skill required

Professional day traders with years of experience, strong risk management, and sophisticated strategies struggle to achieve market-beating returns (which are around ~7% annually, give or take, depending on the market index and the timeframe).

Compounding effect

Making 1% per day translates to around 1,127% per year when compounded over 252 annual trading days (accounting for weekends and trading holidays).

Earning such high returns year after year (or in any year) is practically impossible for any retail trader.

Exceptions are perhaps when someone is starting with a small amount and is leveraging their time.

That 1,000%+ figure far surpasses average market returns historically observed in major stock indices or investment vehicles.

Psychological challenges

The emotional toll and discipline required to day trade profitably at a high level isn’t easy.

Sustainability & Risk Management

Long-Term Perspective

Sustainable trading focuses on long-term growth and capital preservation.

Consider diversification.

Diversification

Spreading investments across various asset classes can reduce risk and increase the likelihood of positive returns over time.

Leverage Risks

Strategies aiming for high daily returns often use leverage in a cost-effective way (e.g., options, futures), which can amplify gains but also losses.

Conclusion

The allure of a 1% daily return is understandable, but it’s highly speculative and not aligned with traditional principles focused on diversification, risk management, and understanding economic fundamentals.

Risk-free rates are generally 0-5%, depending on the economic cycle, and various forms of bonds and stocks typically have a 0-4% risk premium above that.

So, total annual returns in the mid-to-high single-digit percentage are fairly normal for a portfolio.

Tactical trading and leveraged trading require careful risk management and skill development.

Traders, even day traders, are encouraged to adopt a long-term perspective, emphasizing sustainable growth and capital preservation.