The question of how much money day traders make is difficult to answer not only because the answer will vary from trader to trader, but also because the vast majority of traders don’t publicly disclose their incomes in the same way that other professions do (although I disclose my verified trading results because transparency is very important to me). Thus, while most people have a general idea of the salary range for a lawyer or a teacher, the income level of a professional day trader remains shrouded in mystery. Before I tackle the question of how much a professional trader makes, it’s important to note that this article is not meant to be conclusive and is based just on my own experience. Your results as a day trader will depend on your skill, your account size, the instruments you trade, and a host of other factors. Let’s first start with the main problem when estimating the average income of a day trader: survivorship bias.
The Problem Of Survivorship Basis
Survivorship bias refers to the skewing of results incurred when focusing only on the people who have survived the day trading learning curve. While the exact numbers differ from study to study, the vast majority of traders fail before becoming profitable. Thus, an examination of the average incomes of current day traders can’t account for the people who failed at day trading and are now pursuing other careers. With that said, I’m going to give you an idea of possible income ranges for professional day traders by separating traders into different skill levels, akin to how major league baseball operates.
The first level of traders are like amateur baseball players in that they currently don’t make enough money as a trader to fully support their lifestyle. I characterize any trader making less than $50,000 a year as an amateur. While every trader has to start at this stage, being an amateur is typically transitory; if a trader is stuck too long at this stage, he’ll probably get a job at some point.
These traders have shown promise and have the talent to enter the major leagues of trading. Any day trader making between $50,000 and $100,000 a year can be thought of as a minor leaguer. Traders in this category will typically have solid fundamental skills and a strategy they are confident in. Getting to the next level will require adding more size to trades and adding more strategies to diversify their trading.
These traders have beaten the odds and are consistently making six figures a year, placing them in the major leagues. Any day trader making between $100,000 and $500,000 falls into this category. These traders are trading larger size than those in the minor leagues and are typically more experienced as well.
The all-stars in day trading consistently make between $500,000-$1,0000,000 a year. These traders have excellent fundamental skills and utilize a variety of trading strategies, and also typically possess some creativity and market intuition not found in other traders.
Hall Of Famers
Quite simply, these are the best day traders in the world and they consistently make over $1 million dollars a year. These traders will typically have at least five years of experience and are trading very large positions compared to other traders. Very few day traders reach this level.
While the income of a professional day trader can obviously vary greatly, the above categories should give you a general ballpark of how much a day trader can make at a given skill level. It’s important to remember that just as every baseball player started off in the minors to hone their skills, so too must traders work on their skills before becoming the cream of the crop. As you can see, the financial rewards for becoming an elite day trader are impressive.