March 17, 2021

How Much Do Day Traders Make

Who is a good trader and who is not

One question that most beginner day traders ask (even before they learn the basics of trading) is how much do day traders make?
While this a valid question, it is almost impossible to put a figure on how much you can make day trading. It’s not a one-size-fits-all thing, and one can’t put a cap on it because the financial markets are full of opportunities.

There are so many factors that determine (to a reasonable extent) how much you can make as a day trader, but they are not fixed/constant — they vary from one trader to another. Most times, it boils down to having the right trading strategy, your level of risk management, and the depth of your pocket (or the size of your trading account).
As an aspiring day trader, one of the greatest mistakes you will make is to judge other traders by how much they make and use that as a yardstick to gauge your performance/success.
While there are self-acclaimed and supposed day trading gurus who flash profits in 6 digits almost every day, that’s not always the reality.

As you may already know, there are days when the market swing in your favor and all your trades close in green. But, other days, the trend may go the opposite way, and that is normal in trading. How? Like every other facet of human endeavor, some days are up, and others are down. As the famous saying goes, for every impulse, there is a correction. What makes you a better or successful trader is consistency in winning trades and your ability to keep the losses low.

The man on top of the mountain didn’t fall there

One reality that virtually all traders who are new around the block often neglect is that no day trader started off making massive profits. Contrary to popular misconceptions about day trading, it’s not a get-rich-quick scheme, but with the right plan accompanied by patience, you can make decent earnings and live a comfortable life.

What Makes A Day Trader Good?

As we mentioned earlier, what makes a successful trader is how consistent he/she is in making consistent profits. While there is no perfect trading plan or strategy, you should aim to make consistent profits. The last thing you want is to find yourself in a situation where you’re making $100 today and losing $80 the next day.
Speaking of a “good” or successful trader, would you consider a trader who makes $50 every day a good trader? If a trader can make 50 dollars every day, it instantly tells you that such a trader has the experience and valuable lessons on being consistent. And by that standard, one can regard such trader as “good.”
From the above scenario, you can tell that the trader has found a strategy that works. All he/she has to do is master the process and work on becoming more consistent.

Suppose a trader can get to the stage where their trading strategy wins between seven to eight trades per ten trades, putting them in the range of 70% to 80% win rate. And that’s a fantastic start.
Afterward, you can start making plans to scale up your positions. Scaling up your account is another aspect of trading that demands caution and planning. Some people will say it’s a double-edged sword, and it’s read to understand the why.

Scaling up is simple as long as it is done gradually. However, if one were to scale up too quickly, it won’t take long until you find yourself caught in a tug of war with emotions.
And when emotions set in, it takes everything a notch higher and changes everything to a new ball game. For instance, you might risk $20 to make $50, and that is fine. But when you need to risk $200 to make $500, that is when emotions kick in. That would be a huge jump in risk profile, and your emotions might not be able to handle it. So the logical thing to do is go from risking $20 to risking $30 and so forth.

There’s more to being a successful day trader than how much you make

As we pointed out earlier, your trading strategy, risk management practices, and site of your capital are factors to consider when determining how much a trader can make.
Considering the myriad of trading strategies out there and how they vary from one another, you should have an idea of why it’s almost impossible to say outright how much a trader can make from trading.
To be on the same page, let’s quickly mention that it’s easy to lose money at day trading. And it’s even worse if you just dabbled into trading without proper orientation —professional guidance or mentorship.

While day traders can rake in jaw-dropping profits, they are equally prone to losing money. In addition, sometimes traders incur losses on high brokerage fees, which ends up gulping most of their earnings. As such, you must take time to choose the best broker and develop a trading plan or strategy with proper risk management on the front burner.

What do day traders do?

Right from the start of this discussion, we have used the word “day trader” a zillion times. If you are new to trading and are yet to have a strong foothold in the business, you will probably be asking yourself who a day trader is and what makes them different.

What is unique about day traders is that they don’t hold positions for more than one day. Instead, they enter and exit trades multiple times throughout different trade sessions within a day.
A day trader is not limited to one aspect of trading. They participate in trading stocks, options, futures, and commodities and leverage movements in virtually all financial markets.
The primary goal of virtually every day trader is to make the most of slight movements in the markets. While day traders can use the power of leverage to amplify winnings, it could also be their bane if they get overly greedy and let their wins get in their head.

The key to managing risk as a day trader is to ensure that you are not overtrading or taking too much risk. You can’t also afford to let one bad trade wipe out your streak of good trades. It is advised that day traders risk only 1% on every trade and use stop-loss and take-profit points wisely.