Day Trader Salary - Learn How Much Top Traders Earn
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You’ve heard the stories; you’ve heard of the growing popularity of forex; you’ve done your research and are now ready to become a forex trader.
What appealed to you in the first place are probably the many advantages of forex trading, including:
- No commissions/exchange fees or government fees
- Low transaction costs
- Works 24-hours, 5 days a week
- You can use leverage to enhance profits
- High liquidity
- Not controlled by government/banks
Those sure are some attractive aspects of forex trading and have drawn a large number of new traders over the past years. All of the above-mentioned characteristics and more contributed to the forex market becoming the largest and most liquid market in the world with an average daily volume of trading exceeding $5 trillion.
The size and depth of the forex exchange market is what makes it an ideal trading market.
Today, we want to specifically talk about day traders and try to answer essential day trading questions including what day traders do, how to get started with day trading and, of course, the most important question of them all - How much money can I earn from day trading?
Every trader is in it for the money. The question is how do you become an efficient day trader? And how can you benefit from the market?
The answer to these questions is simple: get a proper trading education!
We can help with that.
Before talking about day trading, how to become a day trader and what is a day trader’s salary, we want to talk about Trading Education and how we help beginner traders on their new and thrilling trading adventure.
Trading Education offers a beginner’s guide to forex trading to the traders of tomorrow. Our course is absolutely free and is easily accessible once you apply on our official website: “The Ultimate Guide To Forex Trading”.
Why is it free?
It is sponsored by our partner brokers who want to make sure there are more well-educated traders out there. Traders who easily quit after the first run, ending in an inevitable loss, are usually those who lack preparation or those who think that forex is just a quick-buck-scheme. Well, it’s not. It requires effort, knowledge and the right mindset.
We want to make sure traders stick around for the long run and enjoy the many benefits of the forex market. For them to do so, they need to be well-educated.
Thus, it becomes a win-win situation for both sides.
Let’s go back to day-trading and talking a little bit more about the income of a day trader.
What is Day Trading?
First thing you have to know about day traders is that they make money by buying commodities, stock or in our case currencies (or any other tradable securities) and hold them for a short period of time (from a few minutes to several hours) before once again selling them off.
The goal is to make a profit from short-term price fluctuations. To do so, day traders enter and exit positions throughout the day, rarely holding positions overnight.
Basically, forex day trading is buying/selling instruments only within the same trading day.
To be a successful forex day trader, you need to have a solid amount of capital and a great deal of knowledge. That’s not news, though. It’s something you should be very well aware of if you are interested in becoming an efficient trader.
One more thing you should always keep in mind is the risk.
Having a decent amount of capital and a good amount of knowledge doesn’t necessarily mean that you will succeed. Sometimes prices fluctuate enormously during the day and you might end up losing a lot, especially if you forget to use a stop-loss.
One of the best professional traders, David Green, for instance, always advises against risking more than 1% on a trade, depending on the size of your portfolio. If you stick to the 1% risk strategy, set up your stop-loss and profit taking points, you have the key to managing your risk and limiting your losses.
Day traders use leverage to get more financial power and larger profit possibilities. Forex day traders leverage their capital in order to obtain an asset and then sell it when the price of the asset changes in a positive direction.
Day traders are usually looking for a day trading currency that is highly liquid.
Some of the major currency pairs that traders consider the best choice (since they have the highest trading volume) are EUR/USD currency pair. The reason why it’s so advisable to focus on this particular currency pair is that its price fluctuates a lot and it usually has the best trading conditions, especially for beginners.
Though, as we already know, using leverage is very risky and beginners should be very cautious of using it or, in fact, not attempt this strategy at all.
You might also like: Forex Trading For Beginners: Everything You Must Know To Succeed Made Simple
How to start Day Trading?
The first thing we want to say is that day trading is definitely not a get-rich-quick scheme and if you are in it for a quick buck you better step back.
Everyone agrees that day trading is a very risky activity and should be approached only if one has the knowledge and a clear understanding of all those risks.
Let’s talk about what are the necessary qualities a successful day trader should have:
Capital is the most important thing to a trader. The way a trader operates it (how much you have, how you distribute it, etc.) will basically determine his final income.
Forex day trading doesn’t have a legal minimum, meaning you can start with as much as $500. However, if your goal is to produce a good monthly income, it’s advisable to start with $5,000.
Day traders are looking for more return, in comparison to the regular sizes that traders usually achieve. Therefore, a large amount of capital with a suitable risk/reward ratio is definitely what day traders need.
Market knowledge and experience
We’ve already mentioned it but let’s talk about it again. If you want to become a successful day trader, you must have a complete knowledge and understanding of how the market works and be able to keep an eye on and quickly analyse both fundamental and technical indicators.
Ultimately, practice is key to day trading. Practice your strategy.
Some experts or websites will probably advise you to start with a demo account before risking your money. We, at Trading Education, however, think that this might not be the best idea. A demo account can’t possibly emulate the true emotions and pressure you will feel if trading with your real money. Thus, it will you will never be trulyprepared for the high-risk forex trading environment.
Read more about it here: Why a Demo Account in Trading is a Big Mistake
Discipline and a Well-Formulated Strategy
In day trading, discipline is everything.
You have to be aware of all price movements and not make any hasty trading decisions. Monitoring prices requires a lot of discipline.
In addition to discipline, you have to adopt one (or more) strategies that work for you and will maximise your profits (and naturally minimise your losses.)
Market conditions change every day. Therefore, a day trader needs to adjust their techniques and strategies accordingly. A creative mind is also something a day trader should have in order to succeed in trading forex.
Important to remember:
Day traders risk their own capital every single day to make the profits they strive for. Day traders need to be focused, flexible and knowledgeable. In addition, they need to be using the right broker, do a lot of research and last but not least, log their trades and keep a trading journal.
Traders need to weigh in all these aspects and decide for themselves if they are up for the task. Day trading surely is no joke or a way for them to get rich overnight.
Let’s talk about salaries and how much can a day trader make.
Most day traders are not particularly keen on disclosing their trading results to everyone out there (except the maybe tax authorities if outside the UK), therefore an exact answer to how much money an average day trader makes is kind of difficult to answer.
It’s impossible to give an exact answer because the results vary depending on the strategies a day trader uses, the risk management techniques and, of course, mostly on the starting capital each individual trader works with.
For example, if you start day trading with $500, your earning potential would be much less than someone else who will start day trading with $50,000.
An article by forex day trader Cory Mitchell says that if on average, you make around 100 trades per month (that’s approximately 5 trades per day/20 days per month) and your starting capital is $30,000, you can make around $3,750. Of course, you do have to pay commissions and other fees.
In this example, you are likely to end up with a net profit of $2,750 once you deduct your commission costs.
In the end, since you started with $30,000, your monthly return will be over 9%. Reinvesting in those profits will bring you even higher yearly profits.
The best thing about everything - you don’t even have to get suited up for work.
However, keep in mind that as good as those results sound, everything is too subjective and depending on the current market conditions. We can’t simply come up with a list of things you have to do and the amount of money you have to start with or how many trades per day/week you have to make to win a certain amount of money.
Keep in mind that forex is a dynamic marketplace and things can change in a blink of an eye. Nothing and absolutely no one can guarantee that you will be the trading millionaire you strive to be.
There are myths and then there is the reality.
Some studies point out that only around 1% of day traders actually make a profit at the end of the year.
Ultimately, this is not news to us. The percentage of traders who lose money is higher than the percentage of those who make money. The whole idea is to make more profits than losses, not to completely eliminate losses.
It is quite easy to lose money day trading (the reason why we have been talking about the importance of trading education throughout this whole article.)
How much time you put into trading is also important. If you want your income to be consistent (meaning you have a good trading plan and the resources, such as time and capital, to implement it), it will take you around one year or so, if you are willing to dedicate yourself full-time to day trading. If you plan on practising day trading only part-time, it might take you a number of years to develop a consistent strategy and end up with satisfying and steady returns.
Ultimately, how often you trade is determined by your trading strategy. If your strategy is making, let’s say, 70% winning trades. Skipping day trading many times will result in skipping winning trades (70%) than the losing trades (30%). Try to find the balance.
One more thing that we should consider is that day traders can also incur relatively high fees from the transaction costs.
Last but not least, another important factor that can certainly influence your earnings potential, as well as your future career is whether you choose to trade independently or for an institution/band or a hedge fund. Of course, if you work for an institution, you are not technically risking your own money and they are way better capitalised. Not just that but big financial institutions have access to beneficial information and various tools.
Day traders have to pick the right broker, utilise a successful strategy and a good risk management plan. All these things can affect the final income results.
Future career opportunities and Bottom Line
You have to think about career longevity and how determined you are to turn day trading into your future career.
However, it would be somehow wrong to think of day trading as a hobby or activity that you can just do every once in a while.
If you want to succeed, you have to be serious about it.
Yes, predicting your average rate of return over a specific period of time maybe somehow difficult; there are also no guarantees that you will make money.
However, there are strategies and techniques you can study that will minimise your losses and help you progress.
We want to yet again emphasise on how important it is to learn discipline, patience and risk management techniques if you want to become a successful day trader.
Many people say that forex day trading is for those who have great experience and who should consider doing it only full-time.
Others claim that day trading is one of the best ways to make money in no time and it prevails over any other type of trading.
We are not saying one is right and the other one is wrong.
Whatever the case may be, day trading has its pros and cons and there’s one thing we can agree on - it’s only effective for those who are eager to learn and commit a lot in order to end up succeeding.
Day trading will put to test your stress, emotional intelligence, discipline, willingness to improve, confidence and skills.
If you are ready and understand the risks, we at Trading Education can help you achieve your goals.
“The Ultimate Guide to Forex Trading” course application is now open and we welcome future forex traders aboard.
For more information, take a look at our official website.