Home > Lessons from the trading floor > day trading and math

day trading and math

Dear Pete, can anybody actually earn money as a trader? Why can’t I make money as a trader? I don’t believe it is possible.

Sincerely,

“John”

Pete: John, how much do you earn on one of your better days?

John: Oh I would say around $500.

Pete: How much do you allow yourself to lose on a bad day?

John: $1,200 one day last week.

Pete: That doesn’t add up John. Set a hard stop loss for the day and stick to it until your trading business can generate more revenue.

Pete: How much does it cost to run your business on a monthly basis? If you go back three months and add up all of your costs associated with running your trading business what do you need to earn per day to break even?

John: I am embarrassed to say I don’t know.

Pete: go and run your numbers John so you can set revenue and profit targets. If it costs you $50 per day to run your trading business you will know that anything over that amount is net profits. When you understand these numbers John you will start to understand how to earn a living as a trader.

The math is simple.

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