The Real Reasons Why Day Traders Difficult to Become Billionaires

Many of the traders who make steady gains from day trading are not really rich. Although they can make a profit in the long run, they have rarely become billionaires through short-term trading. Depp has also observed this phenomenon in years of trading.

Day traders usually spread most of their money across different markets, such as $30,000 for stocks, $2,000 for foreign exchange, and $3,500 for futures, in order to compare the profit potential of each market. As a result, their profit and loss performance varies widely. However, achieving 10% to 20% monthly returns is not uncommon among skilled traders.

Many people may have the following questions:

● A $50,000 account can double in about four or five months if earnings are 20 per cent a month. So why haven't there been plenty of billionaires?

● Why don't these short-term traders manage other people's money and operate like hedge fund managers? Top hedge funds also earn only 20-30 per cent a year and are unsustainable. If they can earn 10 per cent a month consistently, it seems logical to manage external money, but why don't they do it?

Monthly profit of 10% sounds good, but why is it so rare to hear of people earning 120% annually?

Today we will explore the reasons behind these problems.

Day traders rarely accumulate huge wealth

First, most day traders operate full-time from home and keep a low profile. The "day trading" mentioned in the TV news tends to point to other types of investments or investors rather than the true short-term trading group.

Compared with the world's vast intraday trading population, the number of billionaires born from it is indeed very small. This is a perfectly logical phenomenon: in any industry, the top wealthy are a minority compared with the total number of people employed. Wealth is constantly scattered within the industry, and it is difficult to concentrate on a large number of people. The same is true of the trading industry.

Another reason is that day trading itself is not simple, and mastering this skill requires a lot of time and practical accumulation. Traders like Depp have gradually formed their own system after a long period of exploration.

A trader's personal bottleneck

Everyone wants to earn more money, but in reality most people are satisfied with their existing income and life, and rarely take the initiative to increase their income. This is the so-called personal bottleneck.

This is a hindrance to self-development, and the psychological comfort zone makes people willing to stay in place. Even if you break through a barrier, new bottlenecks will soon appear. Everyone has the potential to increase income, but personal bottlenecks make it difficult for them to achieve breakthroughs.

One trader thinks it's good to make $2,000 a month, while another strives to make $50,000 a month. For them, reaching their goals is enough, reflecting their personal bottlenecks and limiting their willingness to pursue higher returns.

The market ceiling for day trading

Markets are always changing, and no strategy is guaranteed to be profitable forever. Therefore, simply increasing investment does not consistently increase profits.

From personal experience in foreign exchange trading, trading more than five standard lots a day can bring significant stress. The higher the volume, the higher the risk-to-loss ratio. In addition, in the face of different trading opportunities, it may be necessary to adjust strategies and positions, and spend more effort to analyze entry and exit points. Whether this extra investment can be exchanged for corresponding profits, and whether it is worth it, are all issues that traders need to weigh.

In addition, increasing trading investment does not always lead to higher profitability. For example, a $20 million account is much more difficult to achieve a 10% monthly return than a $20,000 account.

Broaden your sources of profit

Aside from day trading, there may be other ways to consider, such as investing or starting a business. Otherwise, it is very difficult to make millions a year on short-term trading alone. Most traders make $500 to $3,000 a day, which is not bad. Making $50,000 to $200,000 a year is what many people expect. To become a billionaire, there is indeed a long way to go.

When I was young, I thought that day trading was enough to make you rich. As you gain experience, you change your mind. Every short-term trader should consider other investments to prepare more for the future, while constantly improving your trading skills. There are almost no ceilings in the investment market. If you have enough money, you can even buy promising companies directly, like Warren Buffett, and wait for their value to grow.

Overall, expanding financial resources is a direction worth considering for all day traders.

Traders and money management

The more money you have, the harder it is to find the right channels for growth. This is one reason why large hedge funds typically offer lower returns than retail traders.

Hedge funds keep taking in more money, but there is no clear benefit to day traders in managing other people's money. Why?

Suppose a short-term trader has $50,000 in a foreign exchange account and earns 10% a month. But adding more money to the account does not increase profitability. Moreover, traders need to distribute some of their profits to others, which may reduce their own income.

Day traders who want to increase their profits may be able to try more strategies, but as mentioned earlier, investing more time and energy will also increase their psychological stress.

conclusion

One interesting thing is that highly profitable day traders often struggle to use extra cash effectively. Those who want to become billionaires through short-term trading may be disappointed. Becoming wealthy is more than just mastering a certain skill. In addition to trading ability, personal self-discipline is also essential.

After years of accumulation, it is indeed possible to achieve wealth growth. But saving alone is still a difficult path. Therefore, day traders may wish to think more about richer ways to increase their wealth. As Depp understands, the road of trading requires continuous learning and expansion.