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What’s the Average Day Trader Salary?

I f you’re interested in becoming a day trader, understanding how much income you stand to earn can provide you with the motivation you need to succeed. While some sources claim you can get a clear estimate with plenty of research, others conclude that there’s a slim chance of earning any money at all as a day trader. Use this guide to learn more about the average day trader salary and consider the list of tips to help you increase your own profit potential.

Takeaways:

  • Because a day trader’s salary depends on too many factors, an accurate figure is nearly impossible to determine. Some of the factors that affect a day trader’s salary include the use of different trading strategies, how much capital you start with, the markets you actively trade in, and various methods for risk management.
  • The more capital you have, the greater your earning potential will be. For example, if you start with $5,000, you’ll earn far less than you would if you started at $40,000.
  • Although the chances of making money as a day trader may seem bleak, there’s still a chance for you to make a decent earning potential with hard work and plenty of focus.

What Is a Day Trader?

Day traders buy and sell securities such as stock, options, or futures in an attempt to make money from short-term price fluctuations. Essentially, they enter and exit trades with an aim to capitalize on intraday market prices.

What’s the Average Day Trader Salary?

Image via Unsplash by spanic

Because a day trader’s salary depends on several factors, an accurate figure is nearly impossible to determine. Some of the factors that affect a day trader’s salary include the use of different trading strategies, how much capital you start with, the markets you actively trade in, and various methods for risk management. In addition, few day traders share their trading results and profits to anyone apart from the Internal Revenue Service. While there’s always a chance that you can earn money as a day trader, many studies put a damper on any hopes.

In fact, losing money is much more likely as a day trader. According to the 2011 research paper, ‘The Behavior of Individual Investors,’ active, individual investors without diversified portfolios tended to lose money as time passed. Further adding to their losses are the high transaction costs they faced.

If you’re looking for a solid figure when it comes to a day trader’s salary, it tends to vary by source. For example, some sources state that a base stock trader salary can range anywhere from $50,000 to $70,000 when you trade for a company, while a middle-of-the-road trader may make anywhere from $100,000 to $175,000.

Another online source states that profitable traders average 20-30% in annual returns on capital. So if you have a $100,000 account, you may get $20,000 to $30,000 annually in profits. On the other hand, you may receive 50% back in annual returns. With a $100,000 account, this means you’d get $50,000 in yearly profits.

According to Glassdoor, the average base pay for a day trader is $57,248. If you’re looking at specific capital markets, this figure changes. For example, the average base pay for a Citibank trader is listed as $148,146, while the average base pay is $150,810 for a Bank of America trader, and $97,890 for a Morgan Stanley trader.

Despite these salaries, it’s important to stress that these figures are hypotheticals that greatly change on a number of factors.

While these average salaries may motivate you to want to become a day trader, remember that it takes time and plenty of determination to turn a decent profit.

What Influences a Day Trader’s Salary?

Though there are several risks that come with day trading, you stand to earn a good amount of money if you find success. Here are some of the main factors that influence your earning potential as a day trader:

  • Starting capital amount: The more capital you have, the greater your earning potential will be. For example, if you start with $5,000, you’ll earn far less than you would if you had started at $40,000.
  • Strategies used: Different trading strategies present different outcomes when it comes to your average salary. As to be expected, the more successful your strategy, the greater profit you’ll earn. Make sure that your strategy is not only profitable but also efficient and easy for you to keep up with.
  • Markets you trade: The markets you’re active in greatly influence your salary because they present you with different advantages. Since all markets offer profit potential, it all comes down to how much capital you need to start trading. For example, with the foreign exchange market, you can start with $50, whereas day trading stocks requires a minimum of $25,000.
  • How you trade: Another salary-influencing factor is whether you trade independently or for an institution like a bank or hedge fund. When you work for an institution, you don’t have to risk your own money and you have more access to helpful tools and information during the trading process. On the other hand, independent trading firms give you access to their resources but have you risk your own capital.
  • Time: It’s rare for traders to succeed in a matter of days or weeks. This is because profit-yielding strategies and approaches can take time to develop.
  • Luck: Oftentimes, all it takes to become a successful day trader is a great deal of luck. While some traders may find success with some strategies, others may not.

Tips for Making Money As a Day Trader

Although the chances of making money as a day trader may seem bleak, there’s still a chance for you to make a decent earning potential. While you can always consult with a financial advisor, there are several things you can do to boost your day trader income on your own. Consider the following tips to help you earn money as a day trader:

  • Choose the right broker. In exchange for facilitating your trades, brokers charge you a commission fee. When you’re a day trader, look for low-fee brokers that don’t derail your day trading strategy’s profitability.
  • Create a solid trading strategy. When you’re a day trader, it’s important to have a set plan on how and when you want to execute your trades. Remember to refine your strategy over time and be sure to consider risk management.
  • Control your risk. Finance experts suggest you aim to risk 1% or less of your capital with each trade. They also suggest that you set a daily loss limit and stop trading once you hit your daily cap. Overall, risk management can help keep your losses small.
  • Take it seriously. If you’re interested in day trading, don’t treat it as a hobby. Stay disciplined and put the effort into day trading if you really want to make money out of it.
  • Be patient. Few day traders make money right away. Because of this, it’s important to stay focused and determined. Don’t give up if a solid income is what you’re really after.

Keep in mind that if you want to be a trader who doubles their account each year, you’ll need to take high risks and have both a profitable and efficient strategy to get you there. While there’s no guarantee that you’ll make money as a day trader, utilizing the right strategies can help you retain gains and minimize your overall losses.