Daily profit from stocks (Daily income of a stock trader)
How much are stock trading profits? This is not an easy question to answer. The difficulty boils down to what each trader trades, how much they trade, how much capital they have, how much leverage they use, and the stocks they trade. Simply put, there are too many differences to be reduced to one summary number. To answer the question about the amount of daily profit from stocks, we need to check several scenarios and hypotheses that will provide you with useful information that may help you while trading in this financial market.
We first need to understand the difference between a regular stock trader and a day trader. The average stock trader enters the market for the long term, i.e. for a few months or possibly years, while the day trader might sell the stock they just bought on the same day. This means that the daily profit from the stocks that they were able to make is different from each other.
Daily profit hypotheses from stocks: the day trader
The income earned by traders varies according to the trading strategy and risk management methods as well as market knowledge and experience. This is why it is almost impossible to accurately quantify the amount of stock trading profits in numbers.
While discussing this point, it is also important to identify several factors about day trading. It should be noted that if you are trading in the US stock market, you need a large amount of capital to be able to day trade. According to US law, a minimum deposit of $25,000 is required for day trading.
Here are the best and worst case scenarios for you to better understand daily profit from stocks:
Best case scenario
Let’s say you start trading with $25,000. In most cases, stock brokers will offer you a leverage ratio of 4:1, which means you can buy $100,000 worth of stocks. Let’s say you buy shares of $50 each. Given the level of leverage, you would buy the 2000. Your goal is to get a profit of about $0.5 per share but you are willing to risk about $0.2 per share.
Now suppose you make about 5 trades each day. Since there are usually 20 trading days per month, that is 100 trades per month. Now suppose that 40% of your trades are successful. This means that 40 times out of 100 you won $1,000 on your trades (because 0.5 x 2000 = $1,000), so your total profit is $40,000 (40 x 1,000 = 40,000). On the other hand, you fail on 60% of your trades. This means that you lost a total of $24,000 (because 0.2 x 2000 = 400 and 400 x 60 = $24,000). So your total profit is 40,000-24,000 which equals $16,000. It is very likely that all of your trades will have a certain amount of commission (let’s say it was $20 per trade), i.e. you have to pay $2000. The final total you get is $14,000 per month, which is 56% of your initial investment.
Remember that this scenario is hypothetical. Getting a large number of successful trades in a row is almost impossible.
Worst case scenario
Perhaps the worst case scenario is the opposite of what we said above in our hypothesis. According to the same situation, suppose 20% of your trades are successful. This means that 20 times out of 100 you won $1,000 on your trades (because 0.5 x 2,000 = $1,000), so your total profit is $20,000 (20 x 1,000 = 20,000). On the other hand, 80% of your trades fail. This means that you lost a total of $32,000 (because 0.2 x 2,000 = 400 and 400 x 80 = $32,000). This means that you suffer a loss of $12,000.
Remember that this scenario is the most likely reality as markets are unpredictable when it comes to day trading.
Hypotheses of daily profit from stocks: the average trader
The average trader enters the market with the intention of trading for the long term, i.e. they buy stocks and hold them for a few months or maybe years. The stocks that regular investors buy are usually dividend stocks. This means that each share they own brings them a specific annual income.
Let’s say you buy $30,000 worth of company stock, for example. You received a total of 1,000 shares, which means that each share is worth $30. The company is then obligated to pay you an annual dividend of the shares you own. The percentage here can be quite diverse, it could be 1% or maybe even 20%, it all depends on the company. Let’s assume it’s 15% in this scenario.
If the share price doesn’t move for one year, you can expect $4,500 at the end of the year, which means you’re making $375 a month without moving a single muscle. However, traders should not forget that the share price can increase over the years, which means that annual profits can increase as well.
Most people tend to deposit all their savings into dividends and then live on it. But this method is not guaranteed for financial security, rather market crashes can seriously damage the source of wages of a trader in the stock market, as happened in 2008 and 2020 to many people when the financial crisis happened all over the world and many people lost huge sums of money.
The monthly income of a stock trader
The amount of money a trader makes depends on several factors such as the amount of capital, the level of leverage and the stocks they are trading. There is a big difference between a normal stock trader and a day trader, stock traders open for a long period of time compared to a day trader who trades in a very short period.
The day trader’s income depends on the direction the market will take and the leverage ratio they will use, but they can make a lot of money if the market goes up. And if there is no market crash or sensitive period in the global economy, regular stock traders are able to make substantial profits from their long-term trading.
Common questions about daily profit from stocks
Who is the richest stock trader? Warren Buffett is one of the richest stock traders in the world. As per May 2021, his net worth is $73 billion. He managed to make all this money investing in the stock market only. Warren adopts a very unique trading strategy and has managed to stay on top even when the global financial market was dealing with the crisis. He earned a lot of money during his career and that is why today he is considered as one of the richest traders in the entire world.
How much daily stock trading profits? It is impossible to say precisely how much money you can make by day trading the stock market. People who use these strategies use different ways to generate money, so the total amount of their earnings also varies.
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