Salary of a Day Trader
The business of buying and selling stocks and other investments throughout the day can be exciting, risky and rewarding. Day trading offers unlimited potential profits, but it also exposes one to high amounts of risk. The salary a day trader makes will depend on how well he manages the emotion and the risk involved.
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How Much Do Day Traders Make?
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To get an idea what kind of salary is feasible and what is unreasonable, a smart approach might be to make a comparison with professional money managers. A mutual fund manager who earns forty percent returns per year is honored with rock star-like status in the investment world. Now consider the fact that professional fund managers typically have better access to research and other information than the average day trader. There are day traders who do very well, but it is highly unlikely an inexperienced day trader can expect to outperform a professional money manager in her first year of business.
If you have a $25,000 trading account, you can most likely expect to earn less than $10,000 your first year, since it is unlikely you will outperform professional investment managers. In fact, the harsh reality of this profession, is you are likely to lose money your first year.
Personal Freedom
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While day trading may not provide the kind of high returns many first-year traders might hope for, it does offer some advantages. Day traders work for themselves and they are free to work anywhere there is a reliable Internet connection. There are no bosses to report to, no dress codes and no corporate politics to concern one's self with. Day traders are even free to set their own hours since there are potential markets open for trading 24-hours a day.
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No Overnight Risk Exposure
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Investors who hold their positions open overnight give up some control of their investments. Companies can sometimes receive bad news when the market is closed and stocks can open at a price significantly lower than the previous closing price. Likewise, markets can react to events such as bad earnings reports, terrorism and a whole host of other issues that can cause stocks and bonds to open higher or lower than their previous close. Day traders close all positions before the market closes so they have the luxury of sleeping well at night.
Hard Work
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Successful day traders are on the ball. They make sure to stay abreast of any potential market-moving news events, and they are continually on the lookout for opportunities and pitfalls. Good day traders are up early and have a prepared plan of action for the day before the market opens. Since there is no boss, it is possible to set one's own hours, but those who do best choose to work long, hard hours.
High Risk
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While day traders are not exposed to overnight risk, they are exposed to other, sometimes more limiting types of risk. Investors and long term traders do not have to be perfect. If they buy in the wrong place, they do not always have to pay for their mistakes since they have time to wait for prices to turn back in their favor. Day traders, on the other hand, have to be very precise, and if they are wrong, they have to take a loss before the market closes.
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