Day/swing trading: Making 30 USD per day with 10000 USD capital possible?

Question

Is it possible to make 30 USD per day starting with 10000 USD? How much risk would I have to take to get this return? What knowledge/skills do I need to get this return?

Answer 1

Making even just $30 a day on a $10,000 investment would be 0.3% daily return, or 198% annualized (compounded daily), or 109% annual return without compounding.

You'd have to take some massive risk to get even such a seemingly small daily return, which would basically be doubling (or tripling if you could reinvest) your money every year.

$30 a week is a little more realistic, which would be a 17% (compounded weekly) or 15% uncompounded return.

Answer 2

Averaging a $30 per day gain on $10k generates a 75% annual return. If you are referring to investing, that's rarely going to happen unless you happen to pick a lottery ticket winner. For example, KRTX was up 750% in two days this week ($17.68 to a high of $152) due to the results of a clinical trial). For normal people, expect 8% a year.

My take on your question is that you are implying a $30 return per day from trading. Such a small amount seems like it's a no brainer. A measly $30 per day! Buy 1,000 shares of a $10 stock and all your need is a 3 cent gain on the stock (all done at a no commission broker). That should be easy peasy to achieve. But it's not.

There are going to be days when the stock drops. Many days. For argument's sake, if you assume that your stock is going to rise when the market rises and it's going to drop when the market drops then you had more than 40% of down days in the past year. At 60/40, assuming equal distribution, that means that you now need $150 per winning trade to average $30 a day. So even though the risk target has increased, even $150 per day on a capital base of $10k seems reasonable. That's only 15 cents per share on that 1,000 share trade.

But here's where reality sets in. There are going to be some days when your stock drops more than the market does. Infrequently, there's going to be some really bad news that takes a lot more away from you. Will you be capable of cutting your loss and moving on? Or will you suffer from 'breakevenitis' and become a Buy & Hope investor? How many trading days will you lose, attempting to recover these larger loss?

It seems like a maddeningly simple premise to be able to make only $30 a day but it's far from it. If you want something more tangible than my word, open a paper trading account at a major broker that accurately simulates the market (buying at the ask, selling at the bid and only getting fills when the stock trades actually at those prices). Don't waste your time will a web site simulator which is no more than a game. See if you have that magical ability to pick only winning stocks. If you do, sign me up for your market picks new$letter.

Answer 3

Is it possible to make 30 USD per day starting with 10000 USD? How much risk would I have to take to get this return?

The optimal stock market portfolio yields 8%. The risk-free interest rate is at 0% where I live (Eurozone). But let's say 3% because US conditions are different from Eurozone.

As the other answer calculated, 30 USD daily return is 198% annualized return, compounded daily.

A portfolio of risk-free investment at 3% and stocks at 8% yields (1-p)*0.03 + p*0.08 or in other words 0.03 + 0.05*p.

A portfolio that yields 198% annually or in other words 1.98 gives 0.03 + 0.05*p = 1.98 so p = 39. So, you have all of your money and then some at stocks. The risk-free investments would be shorted. Shorting the risk-free rate is equivalent to borrowing money. In this case, you need to borrow 380 000 USD at a rate of 3%.

What knowledge/skills do I need to get this return?

Neither. You need to find someone willing to lend you 380 000 USD at a rate of 3%. Then you invest the 10 000 USD and the borrowed 380 000 USD into stocks, yielding 31200 USD per year. You pay the interest of 11400 USD per year, leaving you with 19800 USD per year which is 198% annual return.

Now, do I recommend this? Of course not, for most people! Borrowing 380 000 USD to invest into stocks is foolish because if the stock portfolio is down a mere 2.6% you will lose all of your money, until the stock portfolio returns to the level before the 2.6% drop.

Hint: stocks can drop by more than 50% and it may take 30 years for the stock portfolio to return to the level before the drop.

For someone who is very young, has a huge future income potential and a high current salary, borrowing just a little to invest into stocks might make sense. I have done so. Nevertheless, all of my loans are a mere fraction of the 380 000 USD, and about half of the loans are for housing and not for stock investments.

I would never ever borrow 380 000 USD myself.

Hint: if you explain you want to invest 390 000 USD into stocks and borrow 380 000 USD and invest the 10 000 USD of your own, you will find no willing lenders.