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Day Trader Salary – Learn How Much Top Traders Earn
You’ve heard the stories; you’ve heard of the growing popularity of forex; you’ve done your research and are now ready to become a forex trader.
What appealed to you in the first place are probably the many advantages of forex trading, including:
- No commissions/exchange fees or government fees
- Low transaction costs
- Works 24-hours, 5 days a week
- You can use leverage to enhance profits
- High liquidity
- Not controlled by government/banks
Those sure are some attractive aspects of forex trading and have drawn a large number of new traders over the past years. All of the above-mentioned characteristics and more contributed to the forex market becoming the largest and most liquid market in the world with an average daily volume of trading exceeding $5 trillion.
The size and depth of the forex exchange market is what makes it an ideal trading market.
Today, we want to specifically talk about day traders and try to answer essential day trading questions including what day traders do, how to get started with day trading and, of course, the most important question of them all – How much money can I earn from day trading?
Every trader is in it for the money. The question is how do you become an efficient day trader? And how can you benefit from the market?
The answer to these questions is simple: get a proper trading education!
We can help with that.
Before talking about day trading, how to become a day trader and what is a day trader’s salary , we want to talk about Trading Education and how we help beginner traders on their new and thrilling trading adventure.
Trading Education offers a beginner’s guide to forex trading to the traders of tomorrow. Our course is absolutely free and is easily accessible once you apply on our official website: “The Ultimate Guide To Forex Trading ”.
Why is it free?
It is sponsored by our partner brokers who want to make sure there are more well-educated traders out there. Traders who easily quit after the first run, ending in an inevitable loss, are usually those who lack preparation or those who think that forex is just a quick-buck-scheme. Well, it’s not. It requires effort, knowledge and the right mindset.
We want to make sure traders stick around for the long run and enjoy the many benefits of the forex market. For them to do so, they need to be well-educated.
Thus, it becomes a win-win situation for both sides.
Let’s go back to day-trading and talking a little bit more about the income of a day trader.
What is Day Trading?
First thing you have to know about day traders is that they make money by buying commodities, stock or in our case currencies (or any other tradable securities) and hold them for a short period of time (from a few minutes to several hours) before once again selling them off.
The goal is to make a profit from short-term price fluctuations. To do so, day traders enter and exit positions throughout the day, rarely holding positions overnight.
Basically, forex day trading is buying/selling instruments only within the same trading day.
To be a successful forex day trader, you need to have a solid amount of capital and a great deal of knowledge. That’s not news, though. It’s something you should be very well aware of if you are interested in becoming an efficient trader.
One more thing you should always keep in mind is the risk.
Having a decent amount of capital and a good amount of knowledge doesn’t necessarily mean that you will succeed. Sometimes prices fluctuate enormously during the day and you might end up losing a lot, especially if you forget to use a stop-loss.
One of the best professional traders, David Green, for instance, always advises against risking more than 1% on a trade, depending on the size of your portfolio. If you stick to the 1% risk strategy, set up your stop-loss and profit taking points, you have the key to managing your risk and limiting your losses.
Day traders use leverage to get more financial power and larger profit possibilities. Forex day traders leverage their capital in order to obtain an asset and then sell it when the price of the asset changes in a positive direction.
Day traders are usually looking for a day trading currency that is highly liquid.
Some of the major currency pairs that traders consider the best choice (since they have the highest trading volume) are EUR/USD currency pair. The reason why it’s so advisable to focus on this particular currency pair is that its price fluctuates a lot and it usually has the best trading conditions, especially for beginners.
Though, as we already know, using leverage is very risky and beginners should be very cautious of using it or, in fact, not attempt this strategy at all.
How to start Day Trading?
The first thing we want to say is that day trading is definitely not a get-rich-quick scheme and if you are in it for a quick buck you better step back.
Everyone agrees that day trading is a very risky activity and should be approached only if one has the knowledge and a clear understanding of all those risks.
Let’s talk about what are the necessary qualities a successful day trader should have:
Capital is the most important thing to a trader. The way a trader operates it (how much you have, how you distribute it, etc.) will basically determine his final income.
Forex day trading doesn’t have a legal minimum, meaning you can start with as much as $500. However, if your goal is to produce a good monthly income, it’s advisable to start with $5,000.
Day traders are looking for more return, in comparison to the regular sizes that traders usually achieve. Therefore, a large amount of capital with a suitable risk/reward ratio is definitely what day traders need.
Market knowledge and experience
We’ve already mentioned it but let’s talk about it again. If you want to become a successful day trader, you must have a complete knowledge and understanding of how the market works and be able to keep an eye on and quickly analyse both fundamental and technical indicators.
Ultimately, practice is key to day trading. Practice your strategy.
Some experts or websites will probably advise you to start with a demo account before risking your money. We, at Trading Education, however, think that this might not be the best idea. A demo account can’t possibly emulate the true emotions and pressure you will feel if trading with your real money. Thus, it will you will never be trulyprepared for the high-risk forex trading environment.
Discipline and a Well-Formulated Strategy
In day trading, discipline is everything.
You have to be aware of all price movements and not make any hasty trading decisions. Monitoring prices requires a lot of discipline.
In addition to discipline, you have to adopt one (or more) strategies that work for you and will maximise your profits (and naturally minimise your losses.)
Market conditions change every day. Therefore, a day trader needs to adjust their techniques and strategies accordingly. A creative mind is also something a day trader should have in order to succeed in trading forex.
Important to remember:
Day traders risk their own capital every single day to make the profits they strive for. Day traders need to be focused, flexible and knowledgeable. In addition, they need to be using the right broker, do a lot of research and last but not least, log their trades and keep a trading journal.
Traders need to weigh in all these aspects and decide for themselves if they are up for the task. Day trading surely is no joke or a way for them to get rich overnight.
Let’s talk about salaries and how much can a day trader make.
Most day traders are not particularly keen on disclosing their trading results to everyone out there (except the maybe tax authorities if outside the UK), therefore an exact answer to how much money an average day trader makes is kind of difficult to answer.
It’s impossible to give an exact answer because the results vary depending on the strategies a day trader uses, the risk management techniques and, of course, mostly on the starting capital each individual trader works with.
For example, if you start day trading with $500, your earning potential would be much less than someone else who will start day trading with $50,000.
An article by forex day trader Cory Mitchell says that if on average, you make around 100 trades per month (that’s approximately 5 trades per day/20 days per month) and your starting capital is $30,000, you can make around $3,750. Of course, you do have to pay commissions and other fees.
In this example, you are likely to end up with a net profit of $2,750 once you deduct your commission costs.
In the end, since you started with $30,000, your monthly return will be over 9%. Reinvesting in those profits will bring you even higher yearly profits.
The best thing about everything – you don’t even have to get suited up for work.
However, keep in mind that as good as those results sound, everything is too subjective and depending on the current market conditions. We can’t simply come up with a list of things you have to do and the amount of money you have to start with or how many trades per day/week you have to make to win a certain amount of money.
Keep in mind that forex is a dynamic marketplace and things can change in a blink of an eye. Nothing and absolutely no one can guarantee that you will be the trading millionaire you strive to be.
There are myths and then there is the reality.
Some studies point out that only around 1% of day traders actually make a profit at the end of the year.
Ultimately, this is not news to us. The percentage of traders who lose money is higher than the percentage of those who make money. The whole idea is to make more profits than losses, not to completely eliminate losses.
It is quite easy to lose money day trading (the reason why we have been talking about the importance of trading education throughout this whole article.)
How much time you put into trading is also important. If you want your income to be consistent (meaning you have a good trading plan and the resources, such as time and capital, to implement it), it will take you around one year or so, if you are willing to dedicate yourself full-time to day trading. If you plan on practising day trading only part-time, it might take you a number of years to develop a consistent strategy and end up with satisfying and steady returns.
Ultimately, how often you trade is determined by your trading strategy. If your strategy is making, let’s say, 70% winning trades. Skipping day trading many times will result in skipping winning trades (70%) than the losing trades (30%). Try to find the balance.
One more thing that we should consider is that day traders can also incur relatively high fees from the transaction costs.
Last but not least, another important factor that can certainly influence your earnings potential, as well as your future career is whether you choose to trade independently or for an institution/band or a hedge fund. Of course, if you work for an institution, you are not technically risking your own money and they are way better capitalised. Not just that but big financial institutions have access to beneficial information and various tools.
Day traders have to pick the right broker, utilise a successful strategy and a good risk management plan. All these things can affect the final income results.
Future career opportunities and Bottom Line
You have to think about career longevity and how determined you are to turn day trading into your future career.
However, it would be somehow wrong to think of day trading as a hobby or activity that you can just do every once in a while.
If you want to succeed, you have to be serious about it.
Yes, predicting your average rate of return over a specific period of time maybe somehow difficult; there are also no guarantees that you will make money.
However, there are strategies and techniques you can study that will minimise your losses and help you progress.
We want to yet again emphasise on how important it is to learn discipline , patience and risk management techniques if you want to become a successful day trader.
Many people say that forex day trading is for those who have great experience and who should consider doing it only full-time.
Others claim that day trading is one of the best ways to make money in no time and it prevails over any other type of trading.
We are not saying one is right and the other one is wrong.
Whatever the case may be, day trading has its pros and cons and there’s one thing we can agree on – it’s only effective for those who are eager to learn and commit a lot in order to end up succeeding.
Day trading will put to test your stress, emotional intelligence, discipline, willingness to improve, confidence and skills.
If you are ready and understand the risks, we at Trading Education can help you achieve your goals.
“ The Ultimate Guide to Forex Trading ” course application is now open and we welcome future forex traders aboard.
For more information, take a look at our official website.
How Much Can I Earn With Options?
I’ve encountered a group of questions and comments from traders that tells me that traders have a certain way of viewing the world. These each represent part of the Trader’s Mindset. Today I’ll tackle one of those questions: How much can I expect to earn when using options?
I plan to reply to each question and will group them as part of the Trader Mindset Series. Taken together, they represent how one trading professional, but psychology amateur, views the psychology of how trader’s think.
Are You Asking The Right Questions?
I understand the thought process behind today’s question, but it always disturbs me. It’s just the wrong question. It would be better to ask any of these:
- How much time should I expect to devote to my options education before expecting to earn money?
- How much cash do I need before opening an options trading account?
- Do most new option traders find success? Or do most give up?
- I’ve never traded stocks or anything else. Will that make it difficult to learn to trade options?
- Should I learn to trade options or pay someone else to trade for me?
These questions demonstrate that the person who wants to become an options trader recognizes that this is not a gimmie, and that some time and effort must be expended before rewards can be expected. The commonly asked question: ‘How much can I earn?’ suggests to me that the person asking ‘knows’ success is easy, and that the only thing holding him/her back from joining the game is wondering whether it’s worthwhile.
I seldom, if ever, receive a question along these lines: ‘What does it take to succeed?’ It’s always similar to: ‘I’m going to succeed. How much can I make?’
A recent letter from Jo:
Is it possible for an ordinary person to generate income from trading options if they are able to sustain themselves for a few months without a job while they learn the ropes? How much can one hope to earn through trading options on the conservative side, and how long does it take to become an expert on average? Is it necessary to purchase special software for options trading (technical indicators and such)?
Yes. It can be done. You can generate income. However, when you ‘need’ the money for living expenses, it often places too much pressure on the investor/trader to succeed, and succeed right now. That added pressure can will lead to poor trading decisions. I know you understand. And that’s why you plan to have ‘a few months’ cash in reserve.
The good news is that you recognize that profits do not begin from day one. The not so good news is that you are asking whether it’s reasonable to learn enough to make a living – during those few months. The first answer is that every student has a different ability to learn and some just have a better aptitude and can understand how options work more quickly than others. So yes, it is possible to produce earnings within that time slot. But not everyone can move that quickly.
To succeed, you must understand what you are trading, and that means taking time to learn options basics. You should have no trouble understanding that options are different from other trading vehicles.
But I must warn you that some traders never get the special characteristics of options and mistakenly believe that they can be traded as if they were stocks. Options are different. Not difficult to understand, but they are different.
If you are brand new to trading, that means there is even more to learn, including basic things such as how to enter an order, how to use your broker’s trading platform, the different order types (market, limit, stop etc.). Someone with stock trading experience is already familiar with those items.
In addition to how options work, the trader must possess (or be able to develop) certain personality traits.
Jo, if you are willing to learn how options work, and if you believe you can demonstrate the traits listed below, then you may very well be able to succeed. No guarantees.
I do want to mention one important point. If you expect to make money (income) by buying options and then selling them for profits, let me tell you that this is an almost impossible path. When earning an income stream, the method of choice is to adopt specific option selling strategies – all with limited risk.
Anyone can trade. Anyone can enter the arena and place his/her bets. But to have a chance of making money on a consistent basis, the trader must have:
- The ability to recognize risk
- How much money is at stake for a given trade
- The probability of losing money
- Patience to learn before trading
- Patience to practice what you have learned, usually in a paper-trading account
- Ability to control your feelings.
- Fear leads to panic, which results in terrible decision making
- Greed has you taking too much risk for too little reward
- Pride has you refusing to recognize that you made a bad trade and must accept a loss
- Recognize that a few successful trades does not make you a star trader
- Understanding that you cannot make money every month
- Understanding that low probability events do occur – just as statistically predicted
- Recognize that a 90% chance of winning means there is a very real 10% chance of losing
- Accept the fact that you cannot make much money when you only have a small sum to invest
- Knowledge that luck plays a role, and your job is to manage risk when luck is bad
If you are not a member yet, you can join our forum discussions for answers to all your options questions.
Now, to your Question: How much can you make?
If you trade high risk strategies, you have a chance to earn a large sum (10+% per month), but that comes with a very high probability of going broke. High rewards come with high risk.
If you are more conservative (as you are), you may try to earn ‘only 2-3%’ per month. That’s a very good return. Most professional traders cannot earn that much. Brett Steenbarger once told me that the best professional traders earn ‘in the low (emphasis on low) double digits’ per year. That sounds right to me.
Going by that, earning 1% per month is a realistic target.
However, to give you a better answer, I must ask: How much cash do you have for trading? This is a key question that most beginners ignore. They assume they can earn the same amount of money, no matter how much cash is in the account. This is a huge fallacy. Why? When you begin with a small sum, the risk of ruin, or the probability of going broke, is very large. When you have extra cash, you can withstand a string of small losses and still stay in the game.
Also: When you have a small account, if you have outstanding success and double the account in one year, the total dollars earned is small. It does take money to make money.
Thus, I repeat, how much cash do you have? If you have $10,000 and can do an excellent job and earn 2% every month, that’s a grand total of $200/month. That will not take you very far. I assume you would want to earn a minimum of 10 to 20x that amount. To do that you would have to take big gambles. There’s a chance that you could have a nice win streak and quadruple your money in a year or so. But the most likely outcome of seeking such huge returns is the loss of all your capital.
Yes Jo, you can do it. If you have the patience. If you take the time to learn and are not rushed into trading. And if you have sufficient capital to give you a realistic chance. If you lack the capital, you can still learn and trade part time. If you grow the account, if you save more cash over the years, if you show the talent and discipline, you may eventually have enough to try trading full time.
I wish I could offer better encouragement, but trading is not a business for everyone. Being a successful investor can be very rewarding over the years. Trading full time is different.
Becoming an Expert
On average, far more traders go broke than become experts. Very few become experts. This question depicts another trader mindset that I believe demonstrates no conception of reality. How long does it take to become an expert? A lifetime.
Experts are few and far between – assuming that by ‘expert’ you are referring to someone who knows how to make money and then actually makes it and keep it. With that definition, few are experts.
Trading is a game in which you are continually learning. And that’s important because markets change over time and if you still do whatever it is that you are an expert at doing, eventually it will no longer work and you will cease being an expert.
It is not necessary to become an expert. You do not have to earn more than the next guy. In my opinion, you can do well (earn decent income) if:
- You have the ability to understand how options work. This is not difficult, but some people just don’t have the head for it
- Trade with discipline and overcome emotions. Fear and greed are harmful. It takes a while to overcome those and trade with confidence
- You take the time to practice. That means using a paper-trading account with fake money. But to gain useful experience, you must believe it is real money and trade accordingly
- If you don’t have to win right now, you need the time/patience to learn. I don’t know if a few months are enough. That depends on you
No. I have NEVER used technical indicators. I know that some traders are very skilled in doing just that. But they do not learn overnight, and anyone who tells you it’s easy to learn is not telling the truth.
I use no trading software, other than risk management software supplied by my broker.
I suggest getting started by reading or attending some free seminars. If you like what you read and hear, if you understand what you see, then go for it. Plan to spend some time in the education mode. Especially if you set a few months as the time limit. There’s no time to waste. I wish you good trading.
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Financial Planning Lessons From the Pandemic
The first quarter of this year will end up being one of the most volatile quarters of our investing lives. Many lessons can be learned. Perhaps none are more important than the basic principle of maintaining sufficient cash liquidity in the form of an “emergency fund” during both our working and retirement years.
By Jesse, 10 hours ago
Human Nature and Option Risk
Traders may tend to think of risk in purely mathematical terms. It can be quantified by analysis and by a deep understanding of probability. But there is more to this than just the math, and for options traders, some of the intangible considerations might have more impact on trading decisions than the formulas.
By Michael C. Thomsett, Sunday at 02:20 PM
Anchor Analysis and Options
Anyone who has been trading the Anchor Strategy over the past few months should be extremely happy with its performance. Now that many have realized how well it performs in down markets, one of the most common questions is “what should I do now?”
By cwelsh, Sunday at 03:32 AM
Discount Stock Shopping In High Volatility Markets
The COVID-19 pandemic has rocked markets over the past month. The fear of the virus, the fear of the impact on global economics from the mitigation taken on by governments, and, finally, the fear of “what’s next” has propelled the VIX.
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The Fallacy of Market Timing
The headlines say it all. “The worst day since the financial crisis”. “Markets in turmoil”. And today was “Stock markets post best day in years as governments fight coronavirus with cash”. Could anyone predict the crash? And can anyone tell us where we are headed next week/month/year? Is it possible to call the tops and the bottoms?
By Kim, March 24
Long Option Risks
Among all options, the most easily calculated payoffs are tho se for long options. But there remains a great misunderstanding, even among experienced option traders. This must be clarified before moving forward. The misunderstanding is often seen expressed online and in the literature: “75% of long options expire worthless.”
By Michael C. Thomsett, March 20
Option Payoff Probability
Many options analyses focus on profit, loss and breakeven. These show what occurs on expiration day, assuming the option remains open to that point. But this is not realistic. Most options are closed or exercised before expiration, is calculation of how probable a payoff is going to be, how likely the loss, or the exact neutral outcome (breakeven), are all unrealistic.
By Michael C. Thomsett, March 6
Value of Trend Following During Periods of Market Volatility
Our trend following system looks at two things when planning a position. The first piece is obviously the direction of the trend. Does the system signal up or down? The second piece of a position plan is how much risk we are going to take.
By RapperT, March 3
Intrinsic vs. Extrinsic Value
A lot is written about intrinsic value, but how does it work and what does it mean? The fact is, intrinsic value is an estimate of how future premium levels will change. It is base don current volatility and a set of assumptions. In dividing premium into its component parts, most descriptions deal with intrinsic and time value.
By Michael C. Thomsett, February 23
McDonald’s, Not A Shelter in the Coming Storm
The amount of time and effort that investors spend assessing the risks versus the potential returns of their portfolio should shift as the economy and markets cycle over time. For example, when an economic recovery finally breaks the grip of a recession, and asset prices and valuations have fallen to average or below-average levels, price and economic risks are greatly diminished.
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How much traders earn in the stock tournaments
The tournaments for traders — one of the real ways to break into professional trading without starting capital. Competitions allow not only to earn real money, but also get valuable prizes or become a Manager of your PAMM-account without any investments. What a trader can get participating in tournaments, we will discuss below.
The tournaments for traders — is it worth the time?
Almost every broker (with rare exceptions) in the attraction of new customers holds tournaments for traders. Someone holds daily, someone weekly or monthly tournaments. They all differ in starting conditions (the initial deposit, the traded instrument, etc.), but almost all have the ban on automatic trading and the use of locking (hedge, that is, simultaneous exposure of 2 opposite positions) strategies.
Skeptics have serious doubt in tournaments for traders. Arguments are:
since in most cases trade is conducted on a demo account, as the prize, the winner gets the money as bonuses. To withdraw them, you need to replenish your account with real money and spend on it a certain amount of lots. Traders perceive it as yet another attempt to lure customers and in principle they are right. Brokers doesn’t bring client with small amounts on the real market, so the bonus is a kind of leverage and they have nothing to lose;
despite the fact that the tournaments of traders are constant, almost no broker publishes their open results. The thing is, not only to see the profit of the winner, but also information about his experience and the strategy to be applied. And it is unlikely that he will give you the opportunity to contact the winner directly, for example, to exchange the experience.
In most cases the tournaments for traders — is only a testing of your own strategy and the taste of the excitement, it makes no sense to expect more. But there are exceptions. For example, one trader holds a unique contest — the tournament of robots. Trade on demo account is allowed only with the use of expert advisors. The trading period is 3 months. Though it’s not the greatest period for testing, but this is a unique opportunity to see how really robots are acting with the same starting conditions and the tool.
Real chance to get something – is to attend the tournaments for traders in prop companies and exchanges, that is, bypassing brokers (although the prop-company itself may be a broker. In the first case, the winners, the last who passed few stages of selection on demo accounts, have the opportunity to become a member of a team of professionals. This gives a trader access to a system of risk management, and training with experienced traders and PAMM-account without investment (under the control of the employees of the proprietary company).
The Moscow stock exchange holds a contest “Best private investor” for 11 years in a row. The trader selects any market (about 20 categories), the trading period is 3 months. The average number of participants from year to year is the same — about 10.2 thousand people, the cumulative turnover of about 30 billion rubles, last year the cumulative loss amounted to 350 million rubles, this year, the traders went into profit — 550 million rubles. The peculiarity of the tournament — trade with real money. However, the prize is real too. Any start-up capital, the goal is to show higher profitability. The average starting capital of 50 thousand rubles, the yield of the winners 200-800%. Theoretically, the tournament for traders was intended to promote private trading, but eventually became a contest for professional traders. Prize for winners — 500 — 1000 thousand rubles in real money.
Summary. Tournaments for traders is not so much an opportunity to earn, but an opportunity to try your hand and to hone your skills. Participation in tournaments of brokers will unlikely give anything for the trader, because to win you need to be a professional, and professionals will not participate in competitions on demo accounts. Who is the real winner, the brokers do not tell. Much more interesting are the tournaments of prop-companies or of the Moscow exchange, but it will not be easy for beginners here as well.
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On one hand, we see movies like the Wolf of Wall Street and shows like Billions, where successful traders earn millions and live lavish lifestyles. On the other, we see the statistics, that tell us that the majority of day traders lose their money. So what is a typical trader’s salary?
That is the question this article aims to answer. We’ve done the research for you – we’ve compared what hedge fund managers make and compared this to typical Forex traders. We’ve looked at traders working for companies and banks, as well as independent investors who are trading directly on the markets with their own money. So if you’re wondering what traders really make, you’ve come to the right place.
Trader salaries: Working for yourself vs. trading for a company
Before we share the different salary levels for traders, the first point to cover is that there are different options for building a career as a professional trader. They can be broadly broken into two categories – working for a company and working for yourself.
If you’re working for a company (such as a hedge fund or investment bank) as a day trader, hedge fund manager, or quant trader, you are an employee who is paid a base salary, and often a commission based on performance. Some of the benefits of being a salaried trader include:
- You can use the company’s existing tools and strategies, which have hopefully already proven to be profitable
- There are often trainings and mentoring programs built into the company structure, meaning you have more support than you might have on your own
- You are not risking your own money to trade, which can remove some of the stress of trading
- There is the opportunity for career progression, which means you can climb the ranks to manage higher-value clients’ or more clients’ funds
- While you have a job, you have a reliable salary and, depending on the company and local laws and regulations, you might also get health or pension benefits
However, there are some downsides to being a salaried trader:
- If you don’t meet the company’s profit targets, you will probably have to deal with more rules, restrictions and observation
- There is less flexibility – while TV and movies might make the role of a trader seem glamorous, it is still a regular job, with hours that regularly go beyond 9-5
- There may be office politics or difficult clients you need to deal with
- If you do well, you will only get a percentage of your profits paid as a bonus, rather than getting to keep all of them
If you’re an independent Forex trader, stock trader or commodities trader, rather than getting paid a salary, you would trade and invest your money and pay yourself with the profits of your trades. The benefits of working for yourself include:
- More flexibility – you can work from anywhere with an internet connection, and can trade any time the market is open (that’s 24 hours a day, 5 days a week for Forex)
- No limit on your earnings – if you have a profitable strategy, there is no limit on the amount you can earn (assuming you have the capital available to trade, of course)
Like trading for a company, though, being an independent trader does have its downsides:
- You are risking your own money, which could lead to higher levels of stress
- There is less security, as you can’t rely on the same base salary being automatically paid each month, especially if you have a bad month
- There is less built-in structure and support than with a company – while there are plenty of educational resources available for traders, you will need to look for them yourself rather than having them handed to you
- You will need to find or develop your own tools to improve your trading performance
Are you already thinking that trading independently would be a good match for you? The good news is that you can start today with a free demo account!
A demo account allows you to trade the markets risk free, so you can develop your trading strategy and learn how to use the different tools, all with a virtual account balance. Learn more and open a free demo account by clicking the banner below!
Now that you have an overview of the pros and cons of working for a trading let’s look at the typical salaries for each of these traders.
Trader salaries: What do the numbers say?
For traders who are employed by companies, their salaries can vary dramatically depending on the trader’s specific job title, the company they work for and even the city they are working in.
If we start with US trader salaries, according to Indeed, the average trader salary is $98,652 per year plus $25,000 in commissions. However, the highest salary figure they quoted was $196,917 with Citi Trader.
According to Payscale, equities traders earned an average of $80,935 with a bonus of $14,916, commission of $21,000 and profit sharing options of $6,000. Their range for base salaries ranged from as low as $47,000 and as high as $160,000.
Source: Payscale.com, Equities Trader Salary
Glassdoor quoted a similar range, with an average salary of $91,642, and an average of $32,599 in additional cash compensation.
Source: Glassdoor.com, Average Trader Salary
ZipRecruiter, on the other hand, found that the average trader salary in the United States is $60,698 a year, with the range going from just $16,000 up to $148,000. They found that the majority of financial salaries ranged from $30,000 to $74,500
Source: ZipRecruiter, Professional Trader Salary
So what do things look like across the pond?
According to Glassdoor, the average salary of a London trader is £65,621. For the basis of comparison, that’s about USD86,000 at the current exchange rate, so a $10,000 drop from the average figure in the US.
Source: Glassdoor, London Trader Salary
Meanwhile, CW Jobs calculated the average trader salary as only £42,500. Prospects, on the other hand, placed starting salaries for trainee financial trainers at £26,000 to £32,000, plus commissions, while they gave a range of £45,000 to £150,000+ for experienced traders.
For associate traders, especially derivatives traders, they gave a salary range of £140,000 to £230,000, with bonuses paid on their profits made. EU regulations limit bonuses to less than 200% of the base salary.
So why is there such a wide range? And why don’t the trader salary numbers reflect the astronomical sums we see in shows like Billions – which pays their analysts a base of $350,000, and top traders salaries in the millions?
There are a range of factors that can influence a day trader’s salary, which we cover below.
Factors that influence a trader’s salary
The factors that can trader salaries include the trader’s role and seniority within a company, their performance, the company they work for, and even their location.
Salaries for different trader roles
There are a range of different positions available in hedge fund trading, including:
- Junior traders/portfolio managers
- Senior traders/portfolio managers
Most people will work their way up from being an analyst (4-8 years), assisting the junior and senior traders with data, after which they progress to being a junior trader. According to 80000hours.org, junior traders typically earn between $300,000 and $3 million a year, while senior portfolio managers can earn over $10 million per year, however, these figures are based on performance.
Because this is a high-turnover industry, while the highest salaries are very high, the average gets dragged down because most traders won’t make it to that level.
Trader salaries and performance
Working as a trader within a hedge fund or investment bank is a performance-focused role, and the salaries listed above are heavily reliant on bonuses.
According to 80000hours, if a trader is managing a portfolio of $50 million in assets, and they earn a return of 10%, their income will be $600,000. If they fail to perform, they will be left with their base salary, which is about $60,000 to $90,000, according to the Page Executive 2020 survey.
A senior portfolio manager, who manages a portfolio of $500 million and gets a 10% return, would earn a salary of about $6 million per year.
Whether you’re trading independently or trading for a company, performance is everything when it comes to how much money you can earn. The good news is that there’s a simple way you can improve your trading performance, and that’s by learning from the pros.
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Trader salaries by company
Salaries also vary by company. According to Glassdoor, the average trader salary at Citi is $147,418, but the range goes up to $252,000.
HSBC’s trader salaries are slightly higher, with an average of $195,061 and a high of $286,000, while both Barclays and Goldman Sachs have lower averages at higher highs, topping $320,000.
Note that Glassdoor’s salary figures focus on base pay, so these numbers could be higher once bonuses are taken into consideration.
Note that these are all publicly traded companies. Private equity traders are a bit more of a mystery, but are known to pay much higher base salaries and bonuses than public firms.
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