Day Trader Salary
What's an Average Day Trader Income?
Can You Make Money Day Trading?
What's the average day trader salary or income? I've had people and visitors to my site ask me this question? I've already mentioned that most aspiring day traders don't make money, at least not until they pay their dues with time, effort and for some -- a lot of money. But, for the beginners here, what I'm referring to on this page is what is reasonably possible for an experienced day trader with a six figure day trading account to make from their own home office.
There's no one answer I can give for the average day trader salary. You can't look it up like you can with say ... a teacher's or fireman's salary. My only intent here is to show beginners how money can be made day trading and how if done well, account size can increase very quickly.
Like any other profession, it depends on the skills of the individual, but in day trading there is no one that can limit your growth as a trader .... except you. Can you say that about your occupation?
It is possible that your methods or techniques could be limited by the market. For instance, if you were making good money trading a certain strategy with thinly traded, low volume stocks, it's very possible that your strategy could run up against a profit ceiling very quickly due to your own trades moving the market and causing significant amounts of slippage. I give some tips on how to avoid having that problem on my Best Day Trading Stocks page.
Basically, higher volume stocks are better to trade as your stock day trading account gets larger. Higher volume usually equals higher liquidity, which means less slippage.
That's why I think if you're looking into becoming a day trader, you should only consider trading methods that have the potential for scaled up growth. If the method can do well with 100's of shares, it should hold up well with 1000's of shares as well. A day trader's salary will only increase significantly with a potential to scale up in size of trades. Of course another way for a trader to increase their income is to trade more than one strategy at the same time, allowing for an account to be spread and diversified across different stocks and methodologies.
SO HOW MUCH INCOME CAN A DAY TRADER MAKE?
AND HOW DO THEY MAKE IT?
The best way for me to explain this to beginners is to give some simple chart examples.
Let's say for example, a novice trader with a small account decides to buy 200 shares of GAS (Nicor) @ 54.50 on the morning breakout of the lateral below. He's not stopped out on the trade and lets the trade run until GAS gives a bar close on the 5 minute chart below his trendline. He then sells 200 shares @ 54.75
How much did he make on this one 200 share day trade? His profit is $54.75 - $54.50 = $0.25/share which equals $50.00. Actually, his profit would be around $46.00 if you take out the broker's commission. Not that much profit, but then he only used less than $11,000 buying power from his account. And that's exactly what a novice should be doing -- keeping trade size low -- and that's after using a simulator.
A day trader's salary or income is of course dependent on both experience and account size. The larger the account size, the larger size you can trade and still be within position size parameters. Position sizing or trading money management is a concept I'll go over with you later, so don't worry about it for now.
Lets take a look at an example (below) of a more experienced trader, making both Long and Short day trades within a larger trading account and making considerably larger trades. She also happens to be a breakout trader and buys 3000 shares @ 29.39 on a breakout. She later sells all shares at @ 29.57.
But it's not even noon yet and she's now sitting in 100% cash. Her trading plan allows her to look for short trades as often as long trades on any given day.
She notices that M (Macy's) is looking weak as it approaches it's support line at 1:45pm for the 2nd time. It's the same area that M broke out of in the morning, except this time she's going short. She has a short entry @ 29.34 and buys to cover @ 28.95 later in the afternoon.
What was her income for the day? She made $540.00 on the long trade and $1,170.00 on the short trade for a total of $1,710.00. Very nice, but maybe Macy's wasn't the only stock she traded. Maybe her account is big enough to trade five to ten other stocks that day as well using different strategies. I think you can see that her potential income for the day is very high compared to other occupations, but read further.
Maybe she had all winners that day or maybe she had some bad losers that more than wiped out all the profit she made on Macy's and then some. The point is a day trader salary can be huge for those that know what they're doing, but losses can be substantial for those that don't, especially if you allow your ego to trade with ridiculous position size that is far to high for your account size.
This one mistake can bring your dream of having financial freedom and a hefty day trader salary to an end very quickly.
Don't let any big winning trades in the future go to your head. If you get into this game and start to do well, trade according to your plan within position size parameters. After a few winning streaks you will definitely be tempted to do otherwise.
The key to a good day trader salary is trading with consistency and protection of your account. Stay in the game long enough to enable yourself to grow your account and trade larger size with low risk. Only trade size that your account can handle or less. More on that later.