Is online day trading profitable
I might as was well be talking to one of my kids about Yo Gabba Gabba it was one of their favorite shows on Nickelodeon. Now, for all you corporate people that can go to sites like vault. Reason being, there is a host of external factors that play into how much money you can make. In this article, I am going to rip through all the fluff on the web and get down to hard cold facts.
Sit back, relax and enjoy the show. Next, we are going to break down what it would mean for you if you decide to day trade for someone else. You should not take this decision lightly, and you will have to weigh the pros and cons of course. For starters, trading for someone else will allow you the opportunity to utilize the tools and strategies of an outfit that is hopefully profitable. Some of the positives of trading for someone else is removing the pressures of having to identify both a winning system and a mentor that can help you along the way.
However, if you are not profitable "enough", be prepared to have more rules thrown at you than when you were in 6th grade. This level of governance over your trading activity is due to the fact you are using someone else's money, so make money or get used to someone telling you how to breathe. If you decide to work for the firm and are trading client's money or potentially interfacing with customers, you will need your Series 7 and possibly your Series 63 license.
The Series 7 will give you the license to trade. The Series 63 is the next exam you will need to take after the Series 7. This exam permits you to solicit orders for a stock within a perspective state.
A simple way of thinking about this is the 7 gives you the right to trade on a federal level, and the 63 allows you to work within the boundaries of state laws. I don't plan on covering the topic of day trading for someone at length because I haven't lived it. From what I do know, you are required to complete some in-house training program for the firm you represent.
For investment houses, you will receive a decent base salary; enough to keep you at the lower middle-class range for New York. Your base stock trader salary could range from 50, - 70, dollars US, which is just enough for you to pay your cable bill, feed yourself and maybe take a taxi or two. But this in no way covers dinners, cars, vacations, private schools , etc. So, I guess you can quickly see that for you to be successful , you're going to need to make your bonus.
There is just one catch; you have to make money day trading. Based on these numbers, you would need to make about k in trading profits just to break a k in salary. The benefit of trading with a company is over time your buying power will increase, and you have none of the downside risks since it's the company's money. The key is making sure you have a significant amount of money under management. As you can see in the infographic above, the key to making serious money is to start managing multiple funds.
You somehow pull that off, and you will make on average k a year. I know the k looks appealing, but remember it is nothing short of blood, sweat, and tears to get to the top of the mountain. The other point to call out from the infographic is that the average bonus is starting to trend higher and if things go as forecast will exceed the recession peak in the not too distant future. On average, I would say a trader in New York working for an investment house can make between k and k day trading if they are above average.
Lastly, if you are below average, expect to get a pink slip. Well, check out this screenshot from glassdoor of over 1, trading salaries. The infographic data has 2 additional salaries recorded, but the average salary is still coming in at 89k. Let's brighten things up a bit and take a look at some of the big boys in the capital markets space. Remember, these are individual trading salaries. One of the additional points of consideration is that you can rise through the ranks and become a fund manager or even a hedge fund manager.
Now, you will no longer be making day-to-day trading decisions, but your earning potential is through the roof if you can prove yourself as a great individual trader first. Good luck trying to get accurate data for the elite world of private equity traders. What you will find is often the top traders from the Chase and Bank of America's venture out to hedge funds, because of the freedom in their trading decisions and the higher pay potential. The beauty of the hedge fund world is while there are still company goals, you have the opportunity to eat more of what you kill.
It's nothing for a top trader to out earn his or her boss if they bring enough value to the firm. Similar to trading for a company, you will receive some training before the prop firm allows you to trade with their money and have access to their systems. After that, all similarities between trading for a prop firm and a company differ. Don't expect any health care of paid time off. You will not have a base salary or annual reviews.
The prop firms will require you to deposit money to start using their platform. The downsides are again no salary, and you bear some of the pain when it comes to losses. On average, I would say an above average trader for a prop firm can make about k to k a year.
The reason prop firm traders make less than those for the investment houses is access to capital. Since you are likely trading the proprietary firm owner's money, the pool of fundsyou have access to is limited. The level of uncertainty can be unbearable if you have never gone without a steady paycheck. In sales, you can have a rough month and just commit yourself to knocking on more doors or calling more people until you land the much-needed deal.
In day trading more effort does not equal greater results. In day trading, more effort does not equal better results. Your earning potential is in direct proportion to your starting capital and monthly expenses. I talked about the requirements for how much money you need, funny enough in the article titled ' How much money do I need to start Day Trading for a Living?
So let's break down the numbers in layman terms. Instead of calling out how much money you can make, we're going to give you a range of how much you can earn based on your starting trading capital. If you are attempting to day trade with less than 50k dollars and you have any monthly expenses, you will be out of money within 6 - 24 months. Our friendly SEC requires that you have a minimum of 25k to day trade.
This leaves you with only 25k dollars that you can risk before you run into a road block for your trading career. This is what I love about trading and money management; the numbers don't lie. So just to be clear you will not make any salary from day trading if you have less than 50k dollars, life will simply eat you alive. If I'm a betting man most of you reading this article will fall in this bucket. This is likely the bulk of your life savings, and you are somewhere between 30 to 55 years of age.
I still say if you have monthly expenses, this isn't enough money to start trading for a living. But since you have landed on a site looking for day trading salary information, let me give you some numbers.
Here we go, you all read the last three bullets, and the majority of you have placed yourself in the "At the Very Top" bucket. Assuming I have pegged you in the right age bracket, how do you think making 50k for an entire year sounds when you likely have a mortgage, young children or maybe kids heading off to college?
Doesn't sound like much fun if you ask me. If you do not have any supplemental income and want to have a decent existence in this place we call planet earth; please do yourself a favor and pool together a substantial amount of trading capital.
You probably are reading this and saying to yourself, why did this guy just crush my dream of becoming a day trader. Trust me, I'm not a mean guy but the again the numbers don't lie. For scenarios 1 - 3 above, you can use the golden ratio of 50 to 1; 50 times your monthly expenses in trading capital. If you fall outside of the three scenarios listed above, you will need a half a million dollars to make it.
Let's break down why you need k to make it in day trading. Your income will be taxed as if you worked a regular job. You will not enjoy the same low tax rates of long-term investors like Mitt Romney. Now, if you live south of North Carolina or out west in Idaho, this may be enough to take care of a family of 4; however, if you live in DC where I'm from, you are right on the edge.
Odds are it is going to take you a few years to get to this point. Just remember that until a Republican makes good on the no capital gain taxes, you will be paying the same taxes you did as an employee. The trader can either elect to pay a per share transaction or a flat fee. Assuming you are trading with k, this will give you margin of up to 2M. In other words, you will be trading a lot of shares depending on your strategy. Therefore, you will want to use the flat fee commission approach to reduce your trading costs.
As your account value increases, the commissions paid as a percentage of your profits will decrease. Lastly, most brokerage firms will offer lower commissions to clients depending on their account value. This sort of unique offering begins at k, so you would easily qualify. Imagine how that will make you feel as you approach each trading day. Think about the raw emotions that will pierce through your body as you drop your kids off at school.
Remember you are trading to be an above average or at the very top relative to all day traders in the world. For argument's sake, let's assume you are spending 50 hours a week trading and researching your strategy and only take off two weeks per year. The market goes against him. And then he loses all his money and goes crazy. The market is never crazy. The world is never crazy.
And I will go so far as to say that your girlfriend who just lied to you about where she spent the night is not crazy. I only care about you. Good and bad days happen. But life is about a billion little moments that add up to all the things around you.
If you let one of those moments have too much control then you are bound to be mostly miserable. I was mostly miserable during the period I was day trading. I let that aspect of my life take control.
So I stopped focusing on being a good husband, a good father, a good friend, a good anything. I would have nightmares. I would lose sleep. I would wake up many mornings and go to the church across the street so I could be by myself and pray. What would I pray? So what makes anyone think they will have an edge? How many people listen to me? Because people are sick of their lives, their relationships, their jobs, and all the lies that have been told to them ever since they learned how to walk.
Day trading is the dream. You can make enough money to not care. To do it from anywhere. Most people think they have that one special something that will make it work for them. You can skip right to the being happy part. You can skip right to being free. But we never learned that. We were taught we had to do something first to earn freedom.
We were taught that suffering was the currency to buy happiness. Okay, go do it. Then cry about it. Then curse the craziness. None of that will make you happy. Then read this blog post again. Not because it will make you happy. But because I like when people read my posts. I was a day trader for many years, and it almost killed me. I did it for years, though, because I was unemployable in every other way. Everyone thinks they can. B Hope is not a strategy. I hope that every day my life goes perfectly.
C Uncertainty is your best friend. D Taking risks versus reducing risk. You have to decide every moment if this is the situation you want to be in. All of my other constituencies went to hell.