Your life, like anyone else’s, may have some ups and downs. Highs and lows are a part and parcel of life. Life is very reminiscent of the stock market. It can be very appealing for a newcomer to dive into the world of stocks and benefit financially from it. Here, let’s know about Day Trader Salary.
Day traders are often portrayed as extremely rich and charismatic people in the movies, they are constantly using generic Wall Street jargon that is very esoteric. But in reality, they are just normal people trying their best to make their ends meet and earn a livelihood by buying and selling financial assets.
Are you interested in day trading or you just want to know how much do day traders get paid? We have explained just that along with a few other relevant topics in the article below.
What is the Salary of Day Traders?
Most day traders do not have a salary as such, as you sitting in the comfort of your house may start day trading in a matter of minutes! But various firms hire day traders. Most firms do not pay a base salary to the traders, as they get a cut from all successful trades made. On average, a decently skilled trader takes home around $48,826 annually. This number can vary due to the volatility of the market, one year the trader may earn from $100,000 to $300,000 annually with bonuses included, but the next year he may struggle to break the $40,000 mark thanks to inflation or market corrections.
Though the world of the stock market and day trading may look shiny and appealing from the outside, there are various things to keep in mind before you splurge your hard-earned income into this glamorous world.
What is Day Trading?
Day trading or intra-day is the practice of buying and selling financial assets and stocks on the same day. This is can be highly risky as the price of the shares may decrease drastically due to the volatility of the market.
But this may act in your favor if you plan on short selling, which is the practice of borrowing assets at a high price (preferably at their peak) from the stock exchange (NYSE, NASDAQ, BSE, etc,.) and selling them as they drop in price. You return the borrowed stock for the original price and you get to keep the profits made from the trade, barring some fees or taxes of the broker.
The methods of day trading are highly risky and are not suitable for everyone. One needs to undergo months or sometimes even years’ worth of study and time devoted to day trading. If one enters this market without sufficient knowledge or skill then they are deemed to lose their savings.
Requirements for Day Trading
The traders are handed a serious amount of responsibility and they must be capable enough to handle it. For that, firms and hedge funds have set some standards and minimum eligibility requirements for traders who want to work for them. Some of the requirements are mentioned below.
- Bachelor’s in Economics/Marketing/Business/Finance or any other related field
- Minimum 2 years of previous experience in trading
- Must understand the global market
- Analyze and study the market daily to create effective strategies
- Maintain and report the daily number of shares under your ownership
- Hire a broker who can carry out your transactions
The requirements may largely vary in different companies. Since the stakes are high and the companies do not want to incur any losses, they will only hire the cream of the crop which means the absolute best. If you’re an individual trader who is investing your funds then this will not be relevant to you since this section is about individuals who desire to work for a firm as a professional day trader.
Day Trading as a Career
As you may know, over 50% of Americans invest in the stock market and over 23.2% of the day trade. There is a huge financial risk involved when investing money in the stock market, especially in day trading. You have to be extremely careful as one slight mistake may lead to extreme financial loss. Some people may think of quitting their day jobs to trade full-time at a firm or for themselves at home, this comes with its own set of difficulties and challenges which they often underestimate. Yes, it is viable but only if you are good at calculating or assessing risks.
Like any other career, day trading has its set of pros and cons.
Pros of Day Trading:
- Formal Training
The prerequisites of formal training aren’t necessary. Some people may think that you need to undergo rigorous training on the simulator before you invest someone’s real money in the market.
- Flexibility
You as a day trader can work at any time you want, even if you work for a firm, you may opt what shift to work in. Flexibility is the biggest perk that not even money can buy. You may work whenever you feel like it.
Cons of Day Trading
- The Risk
It is very evident why the other 50% of Americans do not invest their hard-earned money into stock trading. The simple answer is a risk. The risk may sometimes make the reward not so appealing or worth it anymore. A great trader can assess and learn how to manage risk.
- Solitary Confinement
Since you will be working odd hours or working early in the morning till late noon, sometimes all by yourself, this may make you feel isolated and lonely. This can also have profound adverse effects on your mental health. Many day traders quit due to this reason even if they earn a hefty amount.
- Discipline
No matter how intelligent one is, they can not excel in the stock market if they don’t have discipline. If they control their senses and prevent greed from taking over then they can earn twice as much, this has been proven by surveys all around the world. But if there is a dearth of discipline then one can only expect to earn less if nothing at all.
Jobs at Wall Street
If you don’t think that day trading is your forte then fret not! We have mentioned some alternatives to day trading jobs at Wall Street.
A financial advisor is like a coach who guides you concerning your investment. They guide you on where, when, and how to invest. Financial advisors also provide guidance and counseling sessions or investment plans made for individuals or a big organization. They provide information and guidance based on the requirements of their clients, they regularly monitor portfolios and revisit them from time to time.
On average, a financial advisor gets paid around $87,453 annually. The pay may skyrocket with your years of experience and notable clients under your belt. You may get paid a whopping $158,225 annually after a decade of experience.
Research Analyst
The Research Analysts usually work for big firms and hedge funds, making it one of the most sought-after jobs on Wall Street. A Research Analyst collects data and further interprets it, along with conducting thorough research of the target companies and industries. They provide investment recommendations as well. They also report and develop research papers for the shareholders and upper management. A great Research Analyst has a keen interest in data and research science.
On average, a Research Analyst takes home an astonishing $88,144 annually. With increased experience, one may earn up to $125,321 annually. The need for a great Data Analyst is increasing with the awareness of the stock market in the general masses.
Conclusion
The salary of a day trader may vary, if they are self-employed then they can earn much more compared to working under a firm where they only receive incentives and a percentage of the trades they successfully execute. You may need proper certification to match the criteria for working under a firm. There are various alternatives to day trading as mentioned above, which are proved to be financially sound.
The career as a day trader may be viewed as chaotic but nothing can be better than flexibility in your work timing, as no stock is greater than flexibility and peace of mind.
Frequently Asked Questions F.A.Q. on Salaries of Day Trader
If you’re reading this then you must have read the whole article and maybe you still have some doubts that were left unanswered above. That’s why we have the FAQ section that will help clear your questions and queries regarding Day Trading, salaries, and other relevant topics.
Q. What happens if I don’t sell my intra-day shares?
A. As you may know, you have to close off your position on the same day if you opt for intra-day shares. When the market is closing for the day and if you don’t square off your position, the broker will automatically sell the shares off and close your position.
Q. Is there an ideal time to trade?
A. There isn’t an ideal or peak time to trade. Though people may consider 10:30 am ET as an ideal time to trade, as it’s exactly one hour after the market opens, it’s entirely arbitrary.
Q. Is day trading illegal?
A. No, it is legal, though it was banned in some countries due to their concerns. It’s not unethical either. It involves risk more than any other component.
Q. Can I buy stocks after the market closes?
A. No, you can’t buy stocks after the market closes, instead, you can play a buy order that will be executed the next day, right before the market starts.
Q. Is it viable to day trade?
A. Yes, if you are an individual looking to earn some money on the side or make it your primary source of income then yes it is viable, but only after thorough market analysis.
