Day trading involves entering and exiting the stock market – all in the matter of a single day. This Buzzle article will take a look at the salary quotient of a day trader.
Employment of securities, commodities, and financial services sales agents (careers similar to day traders) is expected to grow 11% from 2012 to 2022, according to the U.S. Bureau of Labor Statistics.
A day trader enters the stock market in the morning, with the intention of leaving it at the end of the day, with a tidy profit – no strings attached. It’s a pretty simple mechanism – go in, buy, sell, come out. But, for a layman (average stay-at-home day trader who operates on his own), day trading can prove to be hazardous to his wealth…. Study reports by Brad M. Barber, a finance professor at the University of California, Davis, show that losers far outnumber the winners. Four out of five people lose money, and only one in hundred does it well enough to be described as “a successful trader.” In short, day trading involves high investment risks.
Now, “If day trading were so risky, why so many professionals would day trade?” must be the question swirling in your mind. Here is the answer. Most Wall Street traders get paid to day trade other people’s money. Successful traders are in demand at hedge funds and investment banks, and can command huge salaries. If you think you’re good at trading, you should do it for a hedge fund.
➻ The 2008 Hedge Fund Compensation Report shows that the average salary for junior traders was around $200,000, including bonuses and other benefits.
➻ According to the BLS, the median annual wage for securities, commodities, and financial services sales agents was $71,720 in May 2012.
➻ According to the job portal Simply Hired, as of June 2015, the average salary of an equities day trader is $89,000, that of a broker day trader is $49,000. A proprietary day trader takes home $78,000 annually. On an average, the salary of a day trader is $53,000.
➻ The average salary according to Indeed (as of June 2015) is $102,000. While traders in New York earned $124,000 p.a., day traders in Florida earned $95,000. Those in Massachusetts earned $123,000. Traders in California were offered $110,000 p.a.
➻ According to Business Insider, the average professional trader gets paid somewhere between 1% – 3% of assets per year, just to trade those assets all day. The average hedge fund trader gets paid another 20% on top of that for any “gains” he or she makes (regardless of whether the gains are the result of the trader’s trading or the bull market).
Thus, the salary of a day trader varies significantly depending on a number of factors such as the type of industry where he is employed, location of the company, other benefits offered by the employer, and his work experience.
To be a good trader,
➻ You first need to have the basic knowledge as to how stock trading works.
➻ Secondly, you need to have a good grasp of finance to be able to understand how a particular company is doing.
➻ Thirdly, you should be able to feel the pulse of the market to know if the stock is going to go up or down.
➻ A good day trader always has his antennae up, looking for clues or hints, which will help him invest in the right company.
➻ Enthusiasm, resourcefulness, quick decision-making, and math skills are essential part of his personality.
➻ A successful trader has the necessary skills, information, and tools that an average stay-at-home day trader cannot have.
➻ There are no specific educational requirements for day traders, but usually, they enter the field after acquiring a bachelor’s degree in business, finance, or accounting. They need a license to sell general securities.
➻ Experience is the key factor behind earning a high salary as a day trader. Experienced proficient traders can better recognize which stocks to trade, and when to buy and sell them. With a larger client base than inexperienced traders, they are relatively high earners.
➻ After all, day trading is a way of gambling. To be successful, you need insane amount of capital, knowledge, determination, smarts, patience, hard work, and luck all together.
In most jobs, more time and effort bring success. However, in day trading, more effort does not equal greater results. According to Adam Leitzes and Josh Solan (Bulls, Bears and Brains: Investing With the Best and Brightest of the Financial Internet), the more volatile the market, the more favorable the conditions for the day trader. Clearly, day trading has the highest amount of risk attached to it. However, with a steady paycheck, aptitude, and lot of experience, day trading can be fun.