How Long It Takes to Become a Successful Trader – The Thorough Answer
When you start out day trading or swing trading, or if you want to get into it, you may wonder how long it takes to become a successful trader. Establishing realistic expectations is important. If you think you’ll get rich in a few weeks you’re setting yourself up for disappointment. Yet, it shouldn’t take years of training before you see some cash flow either.
Below are various scenarios for how long it takes to become a successful trader, based on variables such as how much time you put in, capital investment, whether you are day or swing trading, and whether you choose to learn from your mistakes.
Below you’ll see:
- The failure rate of traders who came to work for a day trading firm I traded at for five years. Can’t talk about success without failure.
- How long it took me, and many of my trading friends, to develop consistency (in various markets). This is the time requirement.
- The capital requirements for being a successful trader (achieving your monthly goal).
- How we did it…through learning and practice.
- Can consistency last?
How Long It Takes to Become a Successful Trader – Odds of Success
Before addressing how long it takes to become a successful trader, first consider the odds of success. This topic was covered in What’s the Day Trading Success Rate? The Thorough Answer. Here’s the quick rundown from that article: the success rate for short-term traders, who are male, is about 3.5%. In other words, about 3 to 4 out of 100 men who attempt it will be able to make a consistent income from it. With a very motivated student and mentor, the odds of success creep up to about 10%. That’s the aggregate percent–the probability of a particular trader being successful varies widely.
Women have a much higher success rate, as fewer women tend to get into trading and the ones that do are quite serious about it. Hopefully, more women start taking up trading, as they naturally seem more suited to it. The primary reason is that women tend to listen more and follow reasonable instructions, whereas most men’s egos get in the way of following sound trading advice. Also, men tend to gamble, whereas women prefer to create plans. Having a plan while trading is very important.
Assuming you’ll be one of the profitable ones, it’ll likely take six months to a year–trading/practicing every day–until you are consistent enough to pull a regular income from the market. If you make money in the first couple months it’s likely pure luck.
When I started day trading stocks in 2005 it took me four months before I had a profitable month (day trading, everyday). I had small losses in the prior three months of full-time day trading.
After that, the profits continued every month for the next 4 years. That’s when I decided to focus on forex. Mainly because I needed a bit of a change. Even though I knew how to day trade stocks it took about 4 to 5 months of hard practice before I become consistent in forex trading (see 5 Step Plan for Forex Trading Success).
In 2013, I started day trading S&P 500 E-minis futures. I learned an entirely new approach to trading, taught by The Day Trading Academy. With their help, I learned that method and practiced it over the course of several months. I traded E-minis for a couple of years, but missed trading stocks and forex.
I have switched markets several times in my career, and each time it has taken me at least several months to adapt and attain consistency in the new market. Switching markets is not something I recommend. Better to stick with one and get good at it. That said, sometimes a bit of change is good. And most trading knowledge is transferable to other markets, so it takes less time to learn a new market once you have mastered one.
My point is that if it takes a successful trader several months to start generating consistent profits in a new market, it will likely take a new trader at least 6 months, and likely 12 months, in order to start generating income.
While after 6 months to a year you may find some consistency, whether you can live off your profits, or replace your income, is a different story. That’s discussed in the next section.
Here are some additional notes on the time investment required by me, and my trading friends, to become successful:
- Expect to put in 6 to 12 months before you develop enough consistency to see a profit for the month. If you reach that point, from what I’ve seen those monthly profits are likely to continue. From all the traders who came to the firm, it took most between 6 months to a year before they saw profitability, which then sustained itself into the future.
- When learning a new market, put in at least several hours a day. If you are only putting in an hour a day, it could take you longer to become profitable. This doesn’t mean you have to trade all day! On the contrary, now I only day trade for two hours (or less), and swing trading only takes about 20 minutes a day. But at the beginning, you need to practice trading. And when you aren’t practicing actually placing trades, you are looking at charts, studying tendencies, testing strategies, and working on your mental game. Working two hours a day is the end result; at the beginning, you need to put in more time than that if you want to be consistently profitable within several months.
- If you take a couple weeks off from trading, it could take a couple days to get your feel for the market again. If you take a few months off, it could take a few days or weeks to regain your edge. If you take a year off, expect to spend a couple weeks to a couple months getting yourself back to where you were before you took the break. The more time off the longer it will likely take to get yourself back to former glory.
To me, being a successful trader simply means you can make an income from trading. The dollar or percentage figure you make each month isn’t really a concern. If you want to make $2000/$5000/$10,000/$50,000 a month–or whatever your goal is–and you do, that’s a successful trader. You’re making a living. Once consistent, trading doesn’t take up much time, so you’re free to do other things…and should!
Whether you can make a living is not only based on consistency but on capital. You can make a great return each month, and do it consistently, but if you only have $100 in a forex account, making 30% a month isn’t going to give you an income, unless you can live off $30 per month. Over time it will grow, and may eventually produce an income, but that will take time and patience.
If you have $500,000 to trade, an income is easier to make since even a smaller percentage return produces a larger dollar return. A 1% monthly return gives you a $5000/month income.
Your trading stats, based on your initial months of demo and live trading will give you an idea of your income potential. If you make 10% per month in your first profitable months, multiply your account size by 0.1 (or 10%) to get your approximate monthly income. As you get better, this may rise, but it is a good starting point. Trading a live market is tougher than demo trading. Most new traders are able to make money in a demo account quite easily, but then lose in the live market. How to Use a Demo Account to Improve Trading Performance provides some tips on how to make a smoother transition from demo to live trading.
Don’t give up your other income source until you can live off trading. I recommend you always have at least 6 months for savings to cover all monthly expenses in the event your trading takes a turn for the worse. Also, consider multiple streams of income. While learning to trade is time-consuming for the first year, once you are consistent you’ll likely only trade a couple hours, or less, a day. With that much free time, have another income stream. This will also take some pressure off your trading.
To day trade stocks you need at least $25,000, and for swing trading stocks you want at least $10,000. For Forex, you can start with as little as $100, but I recommend starting with at least $500 ($2000+ if you want to start building an income). For Futures, start with at least $7,000 for day trading, and $10,000+ if swing trading.
Ultimately, you need to look at what you can reasonably make based on your realistic percentage returns from demo trading. Then, you’ll be able to see how much capital you need to generate the dollar return you want for your income. See How Much Money Can I Make as a Day Trader for profit scenarios.
How to Learn and Practice
Practice doesn’t make perfect. Perfect practice only creates improvement. If you practice the wrong things, or do the same wrong things over and over, you’ll continue to struggle no matter how many hours you are putting in. After more than 13 years of trading I still make mistakes, but I spot them quickly and work on them, which means the number of mistakes tends to decline.
Traders have to be self-reflective and self-reliant. They look at their strategies and objectively note if there is a better way of doing things. If a strategy worked, but no longer is, ask yourself why. Did market conditions change? Is there more or less volatility than before? Are you just barely getting stopped out or are you completely wrong? Such questions help you isolate the problem.
Use a Finviz Elite subscription to see what day trading stocks are moving aggressively in the pre-market and during the day, see stocks that are gapping pre-market, and run technical filters for stocks breaking out of ranges or other chart patterns.
Successful traders want to refine and perfect their methods. It’s what drives them. Once you have developed a method, practice implementing it with precision. Focus on process, not results. Results come from good execution of a plan, so focus on the plan and results take care of themselves. Adapt to market conditions and study how your strategy can be adapted to changing market conditions–do this before market conditions change. Continually be asking yourself…”If the market becomes more or less volatile, or if it shifts from trending to stagnant (or vice versa), how will this affect my strategy? How will I adapt?” The article How to Day Trade the Forex Market in Two Hours Less discusses these concepts.
Anymore can make money by trading a trend…until it ends. True traders survive in all market conditions. That means practicing for all market conditions, and learning when not to trade (just as important as when to trade). Two hours a day practicing where you’re refining methods, adapting to market conditions and precisely executing a specific strategy is much better than spending 5 hours making random trades. Taking “gut instinct” trades all day does nothing to build consistency, and creates the exact opposite. Practice consistency, consistently, to gain profitability consistently!
Many traders have several months of profitability. Unfortunately, that amounts to a random cosmic blip. Maintaining profitability is a tougher challenge. I believe there are 4 stages of a trader’s education. If you become consistent for multiple months you are in stage 2 and/or 3. Stage 4 is reserved for traders who have experienced the turbulent times and managed to get through it.
The tough times will come. My time came about 5 years after I started trading. After that first profitable month, I was profitable every single month after for the next 4.5 years. Then I hit a slump. The market environment had changed, but it wasn’t the market’s fault (it never is), it was self-induced. I was questioning whether I wanted to keep day trading, and was becoming more interested in writing and research. I had lost a bit of my interest, which made me more distracted and thus hurt my trading performance.
No matter the reason, your trading income will likely dry up at some point. You will need to fight through it if decide to keep trading. After some self-reflection, I decided I still loved trading and I recommitted to the process. It took several months to get back on track.
If you are able to trade successfully for at least several years, I believe you have the tools to do it again. Most of the traders I know who have traded for more than five years will continue to be successful. My friends who quit trading, but who were successful for several years, could likely come back and be profitable again within about 6 months. The tools are there, but it’s the mental game of getting back into that “implementing consistency” mind frame.
For more on the psychological pitfalls that affect traders (and everyone else) check out the Trading Psychology tutorials.
Final Word on How Long It Takes to Be a Successful Trader
Whether you come up with your own methods, or use someone else’s, it is likely going to take you 6 months to a year until you develop enough consistency to start seeing recurring monthly profits. That is assuming you are practicing every day for several hours and practicing methodically. For many people it will take longer; a year is not unreasonable. Make sure you’re financially prepared, and don’t give up other income sources until your trading income is enough to live off of. Even then, always opt for having multiple streams of income.
A year or two of profits is good, but that’s just the beginning. At some point, it may be 1, 2, 3, 4, 5…years after you become profitable, you WILL hit a major rough patch. It may be because you become disillusioned with trading, have kids, strategy stops working, market conditions or regulations change dramatically, you get married, you want to do something else, you need a change, you become arrogant…the list goes on, but something is going to negatively affect your trading. At that point, you will need to get back to basics.
Whether your profitability produces an income not only depends on your monthly return, but also your capital. The good thing is: if you’re consistently profitable, even a small account can be grown relatively quickly to start producing an income. It just takes longer with a smaller account.
All this only matters if you end up being one of the profitable ones. Recall, very few people, out of the many who try, who attempt short-term trading will see consistent profits. Time and diligent practice are the key ingredients almost all failed traders lack. To truly call yourself a consistent trader, you’ll need to have several years under belt, and have successfully navigated ALL types of market conditions and some personal conflicts.