For most newcomers to day trading, the ultimate goal is to break free from traditional jobs and make a living through trading. Here’s a strategy to achieve returns of over 10% per month. Even with an initial capital of just $10,000, this plan can yield at least $1,000 per month, and as your capital and profits grow, so will your income.

However, remember that this comes with a high risk. Whether you're trading stocks, forex, or futures, you must strictly follow the tactical system outlined below. With 6 months to a year of full-time commitment (about 30-40 hours per week for learning, simulation, and practice), you might become one of the few successful traders who live off trading.

How Do Day Traders Make a Living?

There are two paths to trading for a living:

1. Large Capital, Low Return Rate: Using substantial funds to generate significant monthly income with a lower percentage return. This method requires high capital but has a lower technical threshold.

2. Small Capital, High Return Rate: Starting with $10,000 to $30,000 and achieving a living through higher return rates. This method requires less capital but demands highly rigorous trading skills.

Success Rate and Time Cost in Day Trading

Before aspiring to trade for a living, you must face reality: day trading attracts many participants, but most cannot profit, let alone sustain a living. Most will eventually lose all or most of their deposits.

Those who succeed are rare, and those who achieve high income even rarer. For successful traders, it typically requires 6-12 months of full-time dedication (30-40 hours per week for systematic learning, simulation, and live trading) to achieve consistent profitability.

The roadmap provided below will help you join the ranks of successful traders, with the potential to achieve over 10% monthly market returns.

Four Core Metrics That Determine Trading Success

Create or follow a strategy that meets the target range of these metrics to become a consistently profitable trader. Successful trading can be distilled into four elements:

1. Single Trade Risk (Position Control)
2. Win Rate
3. Risk-Reward Ratio
4. Trading Frequency

Understanding the synergistic effect of these four elements is key to achieving the goal of living off trading.

Single Trade Risk Control

To achieve consistent profitability, you must strictly control single trade risk. Each trade should risk no more than 1% of your account funds. For example:

• $10,000 account → Maximum risk per trade: $100

Implement strict risk control through preset stop-loss orders. After determining the entry price and stop-loss level, calculate the position size precisely (number of shares, forex contracts, or futures contracts).

A 1% risk might seem small, but the profit from winning trades should always exceed the losses (typically 1.5%-3%). For example:

•  Risk $100 → Target profit: $150-$300

Risking only 1% means that even if you encounter 5-10 consecutive losses, the account won't suffer severe damage. A few subsequent wins can recover the losses. However, if the risk per trade exceeds 1%, consecutive losses will lead to rapid account depletion.

Risk-Reward Ratio

The risk-reward ratio measures the profit earned from winning trades relative to the loss from losing trades. If you consistently control the risk of each trade at 1% of your account funds, your risk-reward ratio should be at least 1.5:1. This means earning 1.5% or more on winning trades while losing 1% on losing trades.

To achieve this, set the profit target distance greater than the stop-loss distance. For example, if you buy a stock at $10 and set the stop loss at $9.95 (risking about 1% of account funds based on position size), your target price should be around $10.08. If you lose, you lose $0.05 per share; if you win, you earn $0.08 per share. The risk-reward ratio is 0.08:0.05, or 1.6:1. The risk-reward ratio is closely related to the win rate.

Win Rate

The win rate is the percentage of profitable trades out of the total number of trades. If you make 100 trades in a demo account and 53 are profitable, your win rate is 53%. The win rate is interrelated with the risk-reward ratio.

Day traders should strive to maintain a win rate of 50% or higher. This way, if each trade has a risk-reward ratio of 1.5:1 or higher, you can be a profitable trader.

Suppose you maintain a 1.5 risk-reward ratio in 100 trades: winning trades increase the account by 1.5%, while losing trades decrease the account by 1%.

If your win rate is 50%, the results are very favorable:

• 50 × 1.5% = 75% - (50 × 1%) = 25%

In these 100 trades, your account grows by 25%. If the win rate is 40%, you break even.

• 40 × 1.5% - (60 × 1%) = 0%

Do you understand the relationship between the win rate and the risk-reward ratio? If your win rate is only 40%-50%, you can adjust the strategy slightly to improve it to over 50%. Alternatively, you can try to slightly reduce the risk or increase the profit target to improve the risk-reward ratio. Small adjustments can turn a breakeven or losing strategy into a winning one.

Trading Frequency

Based on the data above, your goal is to have a win rate over 50% and earn at least 1.5 times the risk (i.e., earn 1.5% when risking 1%). If you can achieve this, then the more trades you make while maintaining these statistics, the better.

If you trade once a day, you make about 21 trades a month. With a 50% win rate and a 1.5 risk-reward ratio, the monthly return is:

- 11 × 1.5% - (11 × 1%) = 5.5%

If you trade twice a day, with 22 winning and losing trades each, the monthly return will increase to 11%.

If you only trade for two hours (the ultimate goal of trading for a living, but initially, you need to spend several hours a day learning and practicing), you should be able to find 2-6 trades that meet the statistical standards above each day. Note that some days may have no trading opportunities (due to unfavorable market conditions), while other days may have 10 trades. If you average 4 trades per day and maintain the above statistics, the monthly return can reach 22%.

But do not trade for the sake of trading—this will not increase profits. All trades must be based on a strategy that can achieve a win rate of over 50% and a risk-reward ratio of 1.5:1 or higher. If you engage in trades with low win rates or unreasonable risk-reward ratios, it will lower overall statistics, leading to reduced returns or even losses.

The Synergistic Effect of Statistical Data

If any statistical data is off-balance, it will affect the results. The line between profit and loss is thin. Winning 50 trades out of 100 can bring considerable income, while winning 40 may result in breakeven or loss (after deducting fees).

A slight decrease in win rate or risk-reward ratio can turn profits into losses. When the risk per trade is too high, consecutive losses can quickly shrink the account. A 50% win rate does not mean alternating wins and losses—the distribution of wins and losses is random. Some days may be all losses, while others may be all wins. There is no fixed number of trades required each day, but in the long run, to achieve over 10% monthly returns, you need to average at least 2 trades per day or more.

The only way to verify if a strategy meets the standards is to test it in a demo account. If, after hundreds of trades, the strategy results meet (or exceed) the standards above, it may continue to perform in the future (but there is no absolute guarantee). Adjustments may be needed later to maintain data stability. If the strategy meets the standards, only execute that strategy. Do not use unverified strategies, as they often lower the win rate and risk-reward ratio.

Choosing a Market for Day Trading

The statistical data above applies to stocks, forex, or futures (the main day trading markets). As long as the strategy meets the standards, the returns in any market are similar. When choosing a market, it should not be based on potential returns (as they are similar across markets) but on your interests and starting capital.

• Stock Day Trading: Requires at least $25,000. If insufficient, save more capital or choose futures/forex.
• Futures Day Trading: Recommended starting capital of at least $7,500.
• Forex Day Trading: Recommended starting capital of at least $500.

The size of the initial capital directly affects income. For example:

• $25,000 account with 10% monthly return = $2,500 income (before fees).
• $500 account with 10% monthly return = $50 income (before fees).

Choose a market that interests you and meets the capital threshold. The less capital, the longer it takes to accumulate to a sustainable monthly income.

The Larger the Capital, the Harder It Is to Maintain High Returns

Achieving 10%-20% monthly returns is feasible with good win rates, favorable risk-reward ratios, 2-4 trades per day (or more), and 1% risk control per trade. However, the larger the capital, the harder it is to maintain high returns.

When attempting to day trade with millions of dollars, achieving 10% monthly returns is much more challenging than with a $75,000 account. This is because the market's instantaneous trading volume is limited, and the larger the capital, the harder it is to fully utilize positions at ideal times. This is why only individuals or small hedge funds can achieve astonishing annual returns, while large-cap traders or funds can hardly do so.

Summary

The mathematical logic holds, and there are plenty of free strategies in the market that offer more than 2 trades per day, over 50% win rates, and a risk-reward ratio of 1.5:1 or higher. Whatever strategy you use, be sure to control single trade risk at 1% or less.

The core issue is that although the data for 10 or 100 trades may seem reasonable, in actual trading, beginners often struggle to maintain a broad perspective. Most beginners can't handle losses, leading to premature profit-taking (disrupting the risk-reward ratio) or refusing to stop losses, resulting in single trade losses far exceeding 1% (also disrupting the risk-reward ratio, potentially leading to a blow-up).

Beginners must also remember: the distribution of wins and losses is not uniform. You may experience consecutive wins or losses. Consecutive wins don't mean you're a genius trader who can abandon strategy, and consecutive losses don't mean you're incompetent. The only thing that matters is the net result after 100 trades (about a month). If you win over 50 trades with a risk-reward ratio of 1.5:1, even if some days are all losses, you'll still be a highly profitable trader.

Use the same strategy to conduct hundreds of day trades in a demo account to verify its win rate, risk-reward ratio, and average daily trading frequency. Only when the strategy shows profitability over hundreds of trades should you invest real money.