How successful a day trader is depends on numerous factors, including the trading tactics employed, the trader’s attitude towards risk, and the trader’s starting capital. As of March 2023, a day trader’s annual salary typically ranged from $34,000 to $96,500.
Day traders have a high failure rate because they trade speculatively and aggressively without diversifying their investments.
The step-by-step guide to day trading
Day trading requires more than just a passing interest to get started. Day traders execute four or more deals in a single trading account within a five-day workweek.
Those that trade frequently and rely on borrowed funds must maintain a minimum balance of around $25,000. Likewise, they are unable to transact if their balance falls below that level.4
Therefore, the minimum starting capital for successful day trading is far higher than $25,000. In addition, day trading requires undivided focus. You must quit your day job if you want to do this. Day traders should expect to lose some of their capital regularly.
These day traders require more than just a tiny nest egg. They also need a reliable online broker or trading tool and software to manage their accounts, analyze the market, and track their trades. Additional costs include broker fees and taxes on short-term capital gains.
If you’re a day trader wanting to make a profit, you need to consider all the costs associated with your trades.
Limitations of day trading
Day trading is a high-risk trading strategy because of the convenience with which capital can be lost when using leverage. This is in addition to the commissions and fees paid by the day trader when entering and exiting positions.
Day traders are human and might be influenced by their feelings when working under pressure. Some common cognitive biases are FOMO (the fear of missing out), Confirmation Bias, Overconfidence Bias, Loss-Aversion Bias, and Anchoring Bias.
Day traders can’t participate in low-volume marketplaces either. This makes it challenging for them to assume and abandon roles.
How many transactions day traders typically complete?
Day traders typically make 10–100 deals every day, give or take, depending on their strategy. Other day traders can utilize computers, algorithms, and high-frequency trading (HFT) systems to make thousands of trades per minute.
However, according to the rules, brokers might label you a pattern trader if you make four trades in a five-day workweek.
What is the success rate of day traders?
In reality, day trading could be a better method of financial gain. Only approximately 5-20% of day traders consistently profit, depending on where you look. That suggests that as many as 95% of traders lose money when engaging in day trading.
Bottom line
Day trading is yet not a hobby or a side hustles if you’re serious about making money. You can’t guarantee profits or anticipate your average rate of return over any particular period. But you can discover strategies that will help you protect your gains and mitigate your losses.
