In case you are have been wondering how you can make $500 a day with day trading, then this article is just for you. With the strategy and tips given below, you will use a few hours a day trading and get off with impressive profits! It is a full-proof strategy that I have tried personally and I can attest to its effectiveness in day trading.
How to make $500 a day with day trading
It is very easy to make $500 a day with day trading. However, just because it is easy, doesn’t mean it’s simple. As a matter of fact, statistics show that a whopping 97% of day traders eventually lose their money and only 1% maintain long-term profitability.
Day traders take advantage of intra-day price movements to enter and exit positions. Day traders make large trades because they make use of margins with high leverage. As you may already know, small price action and big, leveraged positions can lead to massive earnings.
First things first, if you want to make $500 daily day trading, consider doing the following;
- Find a broker
Choosing the right broker will determine your success as a day trader. Remember, we want to keep as much of the money that our trades win. Therefore things such as charges, leverage, and margin are very important.
- Charges: find a broker that charges you based on spreads as opposed to commission. Commission-based brokers usually take a minimum charge for every trade you enter. Choosing a broker that charges based on spread is better since the cost is calculated according to the amount used in a trade and comes as an in-built charge.
- Leverage and margin: To maximize your wins it is best to trade on margin with leverage.
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Read: Choosing a Forex Broker: Tips for Beginners
Let me show you how:
Without leverage, when you invest $50 in a trade, and the odds are 0.2% in your favor then you only get $0.1 profit. With leverage of 50:1, the same trade would amount to $50. However, be sure to have a risk management strategy in place; as much as leverage is used to multiply your earnings, the loss is also multiplied with the amount of leverage in place too.
- Choose the right securities: When aiming to make $500 a day with day trading, trade small amounts of money to get high returns. For this to happen, consider trading securities with high volatility. Use forex pairs such as USD/EUR, GBP/USD, USD/JPY, or AUD/USD; or Synthetic indices such Boom and Crash, Step index and Volatility Indices
- When to trade: The ideal time to day trade is when the market overlaps. For example, the pairs EUR/USD and the GDP/USD are most volatile when London and US markets are Both open.
- Amount per trade: The best way to make $500 per day is to invest large amounts of money per trade. Before going into forex, save up and get a substantial amount to invest. However, with high leverage, you can also make $500 with a $100 account. Successful day traders aim to trade big amounts on a few trades rather than opening many small positions.
My winning day trading strategy
When traders hear day trading, they automatically think about scalping. With scalping, you open many short-term positions and get your small wins that could amount to something big. Personally, I use momentum trading. I have used momentum trading for the last 3 years and I am glad to announce that it has been extremely successful. On good days I make more than $500.
Here are the qualities that I look for in momentum;
- Major price action movement.
- Strong daily charts pattern
- A high relative volume that is at least 2 times above the average. The relative volume is measured as a comparison to the average volume for that time of the day.
Relative strength index (RSI)
RSI is used to tell the direction of the market. I use this indicator to tell whether the market momentum is decreasing or increasing. RSI generates measurements on a scale of 0 to 100. A measurement of above 70 indicates the asset is overbought while below 30 indicates that it is oversold.
Moving averages (SMA and EMA)
The simple moving average is used to identify trends on a price chart by smoothing out past price action movements. I use moving averages as a lagging indicator to help identify entry points.
Average directional index (ADX)
The ADX indicator shows where a trend is gaining or losing momentum. An ADX measurement of over 25 shows a strong trend while a value below 25 shows a weak trend and momentum traders are advised to steer clear. When the ADX is showing higher peaks on a chart, it shows that a trend momentum is increasing and smaller peaks indicate that the momentum is entering a downtrend therefore the momentum trader should exit their position.
Moving average convergence divergence (MACD)
The MACD helps me to tell whether the trend is either bullish or bearish. Convergence between the MACD and the price action is an indication of a strong market and the continuation of the upward trend whereas divergence between the MACD and price action shows a weakened market and the reversal of a trend.
It is easy to make $500 a day with day trading because momentum traders capitalize on short-term bullish or bearish momentum.
It is very important to know when to enter a trade or exit. My ideal entry strategy is when the instrument of choice is showing short-term strength or I wait for a pullback and buy on weakness. Momentum traders buy a stock when it breaks out of its pattern to achieve new highs or lows.
- Analyze the market structure to identify trend (Use higher time frame); mark all the swing low and swing high point.
- Use the ADX indicator to identify the strength of the trend.
- Use the Moving Average (21 (slow) and 9 (fast)) to spot entry/exit point:
Read: How to Grow your Forex Account Using the Moving Average Strategy for more insight on moving averages
- Enter trade based on your analysis with Take Profit and Stop loss
N/B: It is important to first try out these indicators on a demo account before going live. Forex is a skill that is best perfected through experience.
All the best in your trading!