Intraday trading makes big money, but why so few millionaire intraday traders?

Intraday traders often receive decent payback in trading, which is also the most attractive aspect for them. However, if that is the case, why do we hear such few millionaire intraday traders nowadays, except for those cliched names like Soros?

Most traders trade with their savings at the beginning, therefore the starting number are normally not so big. For stock trading, approximately 30-40 grand, and for forex trading, maybe starting from $2000 or so. Then if we analyze the performances of different traders, it is fair to say a monthly return of 10%-20% is totally possible.

People might have the following questions once they hear this rate of return:

Then where are the millionaire traders? If they start at $50,000, with a monthly return of 20%, they should have doubled the principal within 4-5 months, so where are they?

If they can earn so much every month, why don’t they consider operating like a hedge fund manager who trade with others’ capital?

Top hedge funds can only secure 20%-30% of annual return, and even they cannot guarantee such return is consistent, so does that make 10% of monthly return for intraday traders too good to be true?

Why have I never heard someone who can make 120% every year? Why are these people only in the Chicken Soup essays or ads?

Let’s go one step further to see the answer.

Few intraday millionaire trader

First of all, intraday trades are not often the topic of mass media or social media. Most intraday traders trade at home and they often keep a very low profile. Therefore, when we hear of a renowned investor, most of the cases it is not an intraday trader. However, having not heard of them does not mean they do not exist.

Second, comparing to the giant population of forex traders, the proportion of millionaires at the beginning are not large. Like any other industry, there are different levels of income of forex trading. In other industries, sometimes even if you are very good at one thing, you don’t necessarily become a millionaire on that, and it is the same here.

In addition, trading is not done overnight. It sometimes takes years to be successful, so normally people don’t live on trading.

Even a good trader cannot always become rich. Apart from the above reasons, traders are also limited by other factors, such as the personal and market ceilings.

Personal ceiling for intraday traders

Most people in life look for a comfort zone of income and then stay right there. They might want to have more income, but most of the time they do not act for it. This is the so-called personal ceiling.

This personal ceiling will block people from going forward for more profit. No matter how much money a person makes, most of the traders will meet with their personal ceiling. It’s just a matter of time.

For some traders, a monthly return of $2000 is enough for them to live well, whereas for some other people, maybe $50,000 is enough. But sooner or later, they will find themselves at a place where it takes extra effort to increase the income.

Besides, there are also differences in values and life concepts. For many traders, their goal is not to make a certain number of money, but to win themselves more freedom through making money or stay away from a dull nine-to-five job. Take myself as an example, I am not motivated by trading but by enjoying the freedom. Therefore, I would spend some time trading and some other time taking vacations. For me, I won’t sacrifice the vacation to become a millionaire.

Generally, a trader can earn about $40,000 to $300,000 a year. When they meet with the personal ceilings, normally the progress towards more profits will slow down. To speed up, a person might need to increase their positions, but these approaches very often will make a person lose its objectivity and calmness which might lead to a negative influence on trading performances.

Though personal ceilings sound theoretical, they do exist.

Market ceilings for intraday traders

The market will not wait for the position to increase under one strategy. The market situation will always change. For traders, you either change your strategy, or you trade something else. Yet the result is not always guaranteed.

Within hours of every single day, uncountable trades going back and forth. For a certain period of time, the liquidity is certain. While the major institutions or hedge funds can accumulate or sell position in weeks, normal traders do not have such privileges who are therefore inevitably limited by the market liquidity.

According to my own experiences, I trade maximum 5 standard lots per day. Most people trade less than this number. A large number of trading means an increased risk and fees, which will all influence the profit in the end. Assuming a trader want to increase earnings after s/he reaches the ceiling at $50,000 to $75,000, s/he might change the trading strategy, but that would take a huge deal of research and practice. 

Also, when the ceiling is reached, the rate of return will fall. For example, it is easy for an account with $20,000 to earn 10% per month, but for an account with $2,000,000 the number would be very hard.

Expand your earning potential 

Unless the trader has other things apart from trading, say investment or starting a business, it would be very hard for them to earn a million or more.

For most traders, a daily income of $500 to$3,000 is very lucky. Considering losses and other situations, I would say the goal of an annual income of $50,000 to $200,000 is reasonable, of course on the basis that you are not a bad trader.

In intraday trades, earning several hundreds of dollars per day is usual. If you get lucky, then several tens of thousands are possible too. Unlike daily routine work, trading always give you more surprises than you’d expect.

But investment is different. Intraday trades have their ceilings, whereas investments don’t. In addition to trading, I would recommend you to increase your channels of income, among which investing is definitely one of the best. Whether its buying stock, trust funds or properties, they all can be very good ways to generate profits.

Conclusion

The more capital you have, the harder you will find right places to make use of them. This is also the reason why the rate of return of hedge funds are lower than intraday trades. As they are two completely different things which are hard to compare.

Even though an intraday trader can have a relatively high return, s/he rarely uses capital from other channels. In addition to personal ceilings, market ceilings are also part of the trading. Personally, I think traders should expand their sources of income to more than just trading.