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Let me first start off by saying anyone that tells you a definitive range for a day trading salary you might as well assume they are telling you a bed time story. I might as was well be talking to one of my kids about Yo Gabba Gabba.  For all you corporate people that can go to sites like vault.com or talk to your friends to gauge how much you can make in a particular job, dont expect such finite numbers when discussing potential income from day trading.  Reason being, there are host of external factors that play into how much money you actually can make.   In this article I am going to tear down all the fluff that you will find on the web and get down to hard cold numbers.  Sit back, relax and enjoy the show.

Day Trading for Someone Else

Day Trading for a Company

I dont plan on covering the topic of day trading for someone at length because I havent lived it.  From what I do know you are required to complete some sort of in-house training program for the firm you represent.  For investment houses you will receive a decent base salary, basically enough to keep you at the lower middle class range for New York.  This may be about 50,000 70,000 dollars US.  This 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, Im guessing you can quickly see that for you to be successful youre going to need to make your bonus.  There is just one catch, you have to make money day trading.   On the surface this sounds reasonable because you lower your risk profile by having another income stream of a base salary; however, you have to constantly perform to stay employed and you will only get about 10-30%% of the profits you bring in from your trading activity. Based on these numbers, you would need to make about 300k in trading profits just to break a 100k in salary.  The benefit of trading with a company is over time the amount of money you can use will increase and you have none of the downside risk since its the companys money.  The key is making sure you have a significant amount of money under management.

Average Income Trading for a Company

On average I would say a trader in New York working for an investment house can make between 250k and 500k day trading if they are above average.  The middle of the road trader can expect to make between 100k and 175k.  Lastly if you are below average expect to get a pink slip. Oh, and let me not forget to mention the top hedge fund traders that make millions and even billions annually.  I hate even mentioning that because Im so sick of people glorifying trading since its my passion and I dont take it lightly.   How much do you think you could make?

Day Trading for a Prop Firm

Benefits

• Generally split profits with Prop Firm
• Low commission rates
• No Boss
• Increase Margin

Negatives

• Use your own capital to start
• Loss of personal wealth
• Limited training
• No Health Benefits or paid time off
• No career progression
• Only make money off of what you bring in

Day Trading For Yourself Income Potential

Let me guess, you are thinking millions right now.  As I was writing this I literally almost typed out hahahahah, oh wait I just did.  As traders we have this innate part of us that only sees the limitless possibilities   I need to bring you down to earth a little.  First of,f trading is honestly worst than a sales job or entrepreneurship when it comes to steady income.  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 sale.  In day trading more effort does not equal greater 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?  Odds are the majority of people reading this article fall into this bucket, myself included.  So lets break down the numbers into layman terms.  Instead of calling out how much money you can make, were going to give you a range of how much you can earn based on your starting trading capital.

Starting Capital of Less Than 50k

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.  You are probably thinking, ouch that is harsh;  its the truth.  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 dont 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.

Starting Capital of 100k 250k

If im 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 bills this isnt 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.

• Average Day Trader = 20% annual return.  This breaks down to 20k to 50k for an annual salary.
• Above Day Trader = 50% annual return.  This breaks down to 50k to 125k.
• At the Very Top = 100%+.  This breaks down to 100k to 250k and beyond

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?  Doesnt sound like much fun if you ask me.

Starting Capital of 500k

If you do not have any supplemental income and want to have a decent existence on 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, Im not a mean guy but the again the numbers dont lie.

Just to be clear please read the below benchmarks

1. If you have another form of income you can start with less than 500k
2. If you have no bills you can start out with less than 500k
3. If your spouse is going to carry the load while you tackle your new profession, you can start out with less than 500k

For scenarios 1 3 above you can use the golden ratio of 50 to 1.  For those of you unfamiliar with the blog, you will need 50 times your monthly expenses in trading capital to make it in this business.  For example, if your monthly bills are 2k US dollars, you will need 100k trading capital.

If you fall outside of the 3 scenarios listed above you will need a half a million dollars to make it.  Lets breakdown why you actually need 500k to make it in day trading.

You will Occupy a Higher Tax Bracket

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.  If you live in the US, are married with a few kids, and make 20% on your 100k, youll be lucky if you bring home 70k after taxes.  Take the 70k and divide that across 12 months, that leaves you with about $5,800 dollars per month.  Now, if you live south of North Carolina or out west in Idaho, this maybe enough to take care of a family of 4; however, if you live in DC where Im from you are right on the edge.  If you are an above average or at the very top day trader than you will do just fine.  Odds are though 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 whatsoever, you will be paying the same taxes you did as an employee.

You Pay Less Commissions

Most brokerage firms offer a two-tier commission structure.  The trader can either elect to pay a per share transaction or a flat fee.  Assuming you are trading with 500k 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.  So, as your account value increases the commissions paid as a percentage of your profits will also decrease.  Lastly, most brokerage firms will offer lower commissions to clients depending on their account value.  This sort of special offering generally begins at 250k, so you would easily qualify.

Less Stress on You and Your Family

Im telling you this from experience, it will feel much better if you have a losing month and have to draw a few thousand to cover bills, but still see an account balance of $687,585.90.  Imagine having a losing month and needing to withdraw $3,000 only to see an account balance of $45,675.87.  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 to school.  Save yourself the headache and figure out a way to supplement your income or continue to find ways to accumulate the necessary funds to get started.

Time is Not on Your Side

I strongly believe you need a minimum of 10k hours as described in the book outliers  to master day trading.  Remember you are trading to be an above average or at the very top relative to all day traders in the world.  For arguments sake, lets assume you are spending 50 hours a week trading and researching your strategy and only take off 2 weeks per year.  This means you will work 50 hrs a week for 50 weeks for a total of 2,500 hours.  Now lets say you are super smart (clearly because you want to take on day trading as a profession) and only need 5,000 hours to master trading.  At a minimum we are still talking about 2 full years of practice in order to hone your skills.  What do you think your odds of success are if you only have 80k in an account for you to survive this two to three year learning period?  Now is it clear why 90% of day traders fail within the first few years.  Most of it has very little to do with the type of profession we have chosen or how good we are at this game.  It just comes down to do you have enough cash on hand in order to make it to the promise land of the at the very top category of day traders who beat the other 90% on a daily basis.

How Much is Enough?

For you deciding to trade may mean a pay cut.  However, you will be doing what you love which will make you a much happier person to be around for your family and friends.  No one can put a price tag on happiness.  Just so we are clear, below are the hard salary numbers.  Assuming you make anywhere between 20% and 50% a year you can expect the following as a range for your day trading salary:

1. Less than 50k in capital 0 after living expenses
2. 250k in capital $50k to $125k
3. 500k in capital $100k to $250k+

I hope you have found this article helpful as you continue along your path of becoming a professional day trader.  Beyond the wealth of content we have on Tradingsim, our flagship product is a trading simulator which you can use to reach your 10,000 hours of practice in order to decrease the time it takes to get in the top 10% of traders.  You can also use the application to simulate how you would have done over the last year so you can get a hard number of a true range for a day trading salary.

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