Money should never be your ultimate trading goal. Those who are trading for profits only often get discouraged soon as the markets do not always do them favors. But that does not mean you should start trading without any clue how much you can make, especially for day traders.
No one can give you an exact answer but we hope with this blog, you will figure out how much to expect as a day trader. It is always wise to know the average return other day traders get to know if you are doing well. With this blog, you will get to know the day trader’s definition, profits, and tips.
What Does a Day Trader Do?
A day trader is a market operator who indulges in day trading. Within a day, a day trader buys and subsequently sells financial instruments like stocks, currencies, or futures and options, which means all the positions created are closed on the same trading day. A successful day trader must gain the ability to know which stocks to trade in, when to enter a trade and when to exit it.
What a day trader does on a daily basis is to take advantage of small price movements in highly-liquid stocks. A day trader must have good knowledge of the instruments, the tools used, and also the right platform to trade.
A day trader earns a profit by differentiating between the bid price and ask price. A day trader buys or sells a share above or below the bid price or ask price when sensing an imminent movement in either direction.
There are two kinds of day traders: those who work with a financial institution and those who trade individually. An individual day trader often manages other people’s money or uses their own money. However, due to the limited scope of resources, he cannot compete with day traders who work with a company.
Day traders’ trading style is very different from real-time investors as they usually hold their securities for only a single day, which means there is much less risk involved.
How Many Hours a Day Does a Day Trader Work?
Like “How much does a day trader make?“, this is another hard question. Some traders work all day long while others might squeeze it into an hour or two, or maybe even less. Some traders even only pop in for only a few minutes when a news event takes place. Be noted that the longer you trade, the more your performance might drop. Quality over quantity every single day!
Is It Worth Being a Day Trader in 2022?
2022 has been a tough year for traders, especially long-term ones. Day trading has become popular thanks to its short-term nature. Day trading during a market downturn can be the fastest way to grow your account. You can earn huge profits from both the bearish trend as well as the sharp rallies.
However, make sure that you equip yourself with extensive knowledge and the right tools and techniques for day trading as this tough time might also make you go bankrupt as it does to most weak companies.
To minimize risks and maximize profits during this economic downtrend, check out these strategies to trade profitably:
- Focusing on pre-market movers: to identify small and large-cap companies that are experiencing major moves before the market opens.
- Focus on stable and dividend companies: whose dividend yields will keep improving as the share prices retreat.
- Trend-following (shorting and holding): short a stock when its price is falling.
- Price action analysis in a bear market: to determine when to short and buy an asset using several price action strategies.
- Buying the dip: to buy good stocks trading at a significant discount.
How Much Do Day Traders Make Per Month?
How much money you can make day trading depends on many factors, including how much money you start day trading with, how much you know about the market, how the market fluctuates, and so many more. There are many myths about the profit ratio you can expect when you become a day trader.
For example, an article by Cory Mitchell published on the Vantage Point Trading site assumes a beginning trading capital of $30,000: If you average five trades per day and 20 trading days in a month, you make 100 trades monthly. You make $3,750 plus commissions and possibly some other fees. As your cost per trade is $5/contract (round-trip), your total commission costs will be: 100 trades x $5 x 2 contracts = $1000.”
In Mitchell’s example, your net after commissions is $2,750 which equals about 9 percent of your initial capital of $30,000. If you reinvest those profits every month, at the end of one year, you’ll have a profit of $55,944 and change.
However, the reality may be quite different from the myth. According to a study performed in the Brazilian equity futures market, the reality of this business is quite harsh. In the study, 97% of individual traders who persisted in their trading for at least three hundred days lost money, and only 0.4% earned more than 50 dollars a day.
The best trader out of everyone there made an average of 310 US dollars per day. To avoid paying for a whale’s lunch today, you need to refrain from making a really uneducated call in the market.
According to the North American Securities Administrators Association, 9 out of 10 day traders lose money and eventually deplete their trading capital.
But, those who follow strict trading rules can easily make an income of over $100,000 per year or more.
Likewise, for those day traders that work for a company, the national average salary is $122,724 (source: Glassdoor). You can see below that this average varies based on where you work.
- City Equity – $154, 260
- Bank Of America – $275, 000
- Morgan Stanley – $276,000
Day trading is obviously not for the faint of heart, and it is not something you can learn in a short period of time. You can be good at it, but you should never stop learning. The market will always fluctuate and new trading strategies will need to adapt quickly for consistent profits. To earn more knowledge, tips, and techniques to increase your profitability, check out our library of day trading courses.