How Much Do Day Traders Make?

Day trading has the potential to be a very lucrative career, but also one that can end in financial ruin. With the proper training and strategy in place, your trading income can scale to whatever psychological tolerance for risk you can withstand. As you size up, the more capital you have to risk, and the larger your fluctuation in income can be month to month.

There are two types of traders to consider in this article. Self funded traders have no base salary and are entirely dependent on their performance to generate income. They risk their own money and usually develop a withdrawal schedule that suits their financial and psychological plan. Funded day traders, or prop firm traders trade based on the firm’s risk management plan and may have a set base salary and be compensated additionally based on performance.

Day traders working at prop firms have an average salary range of $85,000-$125,000 with performance based bonuses added on top as of 2023.

Trading Strategy and Account Size

Self funded day traders have a nearly unlimited range of potential salaries. If you have a $5,000 account that you aim to make 1 percent on daily without compounding, your salary could be $13,000 assuming you hit that target every day. Not very impressive and certainly not a living wage. If you had a $500,000 account that you could make 1 percent on daily without compounding that turns into $1.3 million assuming you hit the target every day. Much more impressive and far beyond a living wage.

If we think about averages, most day trading accounts have a balance of about $130,000 based on a compilation of publicly available reports direct from brokers (Fidelity, TD Ameritrade, Interactive Brokers, E*Trade, Webull, Robinhood). Let’s then assume the average profitable trader can make half of a percent, after accounting for losses, on the account daily without compounding. The average salary a self funded day trader might be able to pay themselves falls around the range of $169,000.

To actually realize those profits as a salary, day traders should have a consistent schedule to withdraw, otherwise the salary you think you were making could be taken away in one bad trade.

Factors Influencing Day Trading Profits

Market Conditions: Day trading profits can be influenced by market volatility, liquidity, and macro economic conditions. Traders may find more opportunities and increased profits during periods of higher volatility, while low volatility can present challenges.

Skill and Experience: Obviously a more skilled and disciplined day trader can aim to make a higher percentage of their account, and thus will likely have a higher annual salary. But beyond that, a seasoned trader likely will be better at adapting to changing market conditions and able to generate profits regardless of volatility.

Realistic Expectations

Approach day trading with realistic expectations. While success stories of highly profitable day traders do exist, it’s a well documented fact that most traders lose money or make far less than a lavish wage.

Don’t fall for the get rich quick schemes that plague the internet. There is no guaranteed salary anyone can promise you. Day trading requires continuous learning and adaptability in regard to both strategy and emotional control. In the first few years of trading, you shouldn’t be expecting to make a livable wage. The focus should be on learning and building a profitable strategy you can scale over time.

Don’t Forget Taxes!

Oh yeah, anything that you make is taxed under the short term capital gains rate, which usually falls somewhere around the ballpark of 30 percent. You should always consult a professional accountant for specific and individualized tax advice but be prepared to set aside at least a third of your profit to pay the big man at the end of the year. The projected $169,000 salary turns into roughly $118,000 after taxes based on a ballpark of 30 percent short term rate.

Conclusion

“How much do day traders make?” doesn’t have a definitive answer. There are too many individualized  factors influencing how much profit a day trader can make. Trader A with a well defined strategy, adaptable for all market conditions will far outperform Trader B who doesn’t have clear risk parameters and can only profit in controlled environments. But, Trader B with a $1 million account can outperform Trader A if Trader A only has a $5,000 account.

As a beginning trader, focus should be on strategy development, risk management, and getting more screen time. Once a profitable trading strategy is achieved, then the transition to scaling your income can become the focus.