This is a difficult question to answer outright because the amount you make depends on several variables. A few factors that might influence your day trading profits can be found below:
- Starting capital: Starting with more money means your earning potential is much greater than someone who starts with less.
- Type of markets you trade in: Not all markets are created equally and some are more lucrative.
- Time: You likely won’t make much in your first few weeks or days because good trading strategies can take years to mature.
The average salary of a stock trader is around $89,000 and the top earners can make upwards of $500,000. However, these numbers don’t tell you the whole story. You need a lot more than just the desire to be a stock trader to be successful.
How Do I Become a Stock Trader?
Want to learn how to become a day trader? Read the steps below.
Step 1: Develop Discipline and Focus
Like any other career, skill, or hobby, being successful involves discipline. Instead of the “set it and forget it” model of investing which relies on holding a security to let it grow over the long term, day trading is centered around short-term selling and buying.
Some people might thrive without a traditional boss’s supervision, but others may flounder. You’ll need to be your own boss if you become a day trader. It’s critical to stick to your plan and make decisions based on your trading strategy instead of emotions.
For example, if you reach your profit target on a certain trade, it’s important to close the position — instead of holding onto hope that you’ll gain even more money on it. By the same token, if a trade goes south, it’s important to be able to cut your losses.
Step 2: Become an Expert through Research
Before you turn in your two-weeks notice at your regular job and say goodbye to a traditional employer, it’s critical to put in the work to educate yourself on day trading. You’ll need to know the differences between the types of trading, the types of markets, and most importantly, you’ll need to become comfortable with various short-term trading strategies.
If you need places to start, check out resources available through the Internal Revenue Service (IRS), the Financial Industry Regulatory Authority (FINRA), and the Securities and Exchange Commission (SEC).
After you’ve accumulated adequate knowledge covering the basics and theories at play in the markets, you can spend time testing your knowledge in various simulations.
Once you have gained the ability to maintain profits using a day trading simulator, you’re ready to jump into day trading as your full-time job. Need even more help? You may want to consider hiring a trading coach.
Step 3: Set Up a Real Office
As many office workers have learned in the age of COVID, a stay-at-home office is crucial for working from home. This is no different for workers who are working for themselves rather than an outside company. In order to stay productive and focused on your job, consider creating an office composed of the basics below:
- Minimal desk: A desk with too many drawers and cubbies is likely to get filled with clutter. Keep your desk minimal with a few essential accessories so you can stay focused on the task at hand.
- Ergonomic office chair: Day trading might involve long hours at work, so it’s important to invest in a comfortable desk chair that properly supports your body.
- Fast internet: When you’re working with short-term investments, timing is everything. A slow internet connection or a connection that cuts out can mean you lose thousands of dollars in profits by the time your internet is back up.
- A good computer: Whether you opt for a desktop or a laptop, it’s important to choose a reliable machine that can keep up with your day trading. Aim for a mid-range to high-end processor and plentiful memory and storage space.
- Privacy screen: If you don’t have a room that you can dedicate to your office, consider investing in a room divider to enclose your desk.
Step 4: Settle on Your Strategy
When you’re day trading, your main focus will be on trading for maximum profits and managing risk. Again, the best way to test out different strategies is by practicing with a trading simulator first. This will keep your real money safe until you feel comfortable with your trading practices and strategy.
Step 5: Put Money Aside for Trading
The old adage of “you need money to make money” rings true for day trading. You’ll likely need a significant amount of money to start out as a professional day trader. Some experts recommend starting with at least one year of income. This year of income won’t be used for trading, but rather day-to-day living expenses like rent, insurance, and groceries. This money acts as a kind of cushion to give you peace-of-mind.
On top of your financial cushion, you’ll need money to trade with as well. Each brokerage requires a different amount, but you can expect to need tens of thousands.
Takeaways: Making Money from Day Trading
Day trading for a living isn’t for everyone. You’ll need a ton of capital to start and you’ll need to be able to separate your emotions from your strategy. Losses are inevitable, so it’s important to keep an even temperament if you want to make day trading your career. With strategy, research, and consistency, you can make a living being a stock trader. Use these tips as the foundation for where to start and consider practicing on a trading simulator before making the transition to full-time trading.
Samantha Rupp holds a Bachelor of Science in Business Administration and is the managing editor for 365businesstips.com. She lives in San Diego, California and enjoys spending time on the beach, reading up on current industry trends, and traveling.