It is the million dollar question. I've received many emails recently with my limited internet access here in Madagascar (shameless plugin about my travel blog where I talk about traveling around the world and day trading) asking me just that, how much money can I make day trading? And more specifically how much money I make day trading.
One of my plans on this site is to share my group of traders day trading statements so you can get a realistic idea of not how much I make, but how much a typical trader makes. In order to figure out how much money you have the possibility of making day trading it takes a bit of understanding of your options in the industry.
I don't trade stocks, I trade futures.
The reason that I trade futures instead of stocks is because I can make 10 times more money day trading futures. When you day trade stocks you make $1 for every $1 that the market moves (assuming you win). It sounds like a great investment right? You invest $1 and if you made a good decision you make your money back plus profit.
With futures you can make up to $1,000 for every dollar that the market moves
That is with the emini crude oil futures contract which is not a market that I would suggest you start practicing on. It's very erratic and you have to be a pro day trader in order to really understand the crude market. The most common market that traders start and practice with is the emini S&P 500 (ES) futures contract (I trade both crude and the ES). The ES has very good movement and it's also very fluid providing easy opportunities to identify and practice.
The numbers calculated below are the absolute bottom of the barrel, the very minimum that a day trader can make using the emini S&P 500 with only 200 day trading days in a year. Assuming you do well day trading you are going to want to take 3 months of vacation a year aren't you? When you talk about futures the difference in price movement is called ticks not cents. If a futures contract moves from 90.25 to 90.26 that is one tick, after a tick is a point which would be the movement from 90 to 91.
The ES has 4 ticks in a point, very similar to 4 quarters in a dollar. Each point is worth $50 and each tick is worth $12.50. If the market moves from 91.25 to 91.50 that would be a profit of $12.50 (one tick). With the ES you can make a minimum (I stress minimum because you can do much better than this) of 2 points a day.
Okay get your calculator out and do the math
I won't lie to you, I am a calculator baby and need this awesome invention most of the times. It's okay to admit it we are in this together. 2 points at $50 per point (or $12.5 per tick) is $100 per day. Your also going to have to excuse my grammar in this post as I am currently in the back seat of a Toyota 4x4 driving through rough terrain in the interior of Madagascar. There are 200 trading days in a year which makes a total of $200,000 a year.
Not so fast!
You are assuming that you aren't going to make any mistakes and not lose any money. Losing money and having bad days are part of day trading. In order to calculate very conservative results I assume that you will lose 1 day a week (I would say 1-3 days a month is the norm for a pro day trader). That is 4 days making $100 and one day losing $100 which brings us to $300 a week. One thing that I forgot to mention is this is only with 1 contract. You can trade roughly 400-500 contracts with each trade on the emini S&P 500.
So how much money can I make day trading?
I would say $50,000 - $100,000 a year is a reasonable estimate for your first year
Remember that this is the absolute lowest amount of money that you can make and the potential is much greater. I want you to consider that even if you make many more mistakes you can still make $50,000 with one contract, once you add more contracts you can be in 6 figures in no time. Also consider that this is assuming that you trade all 200 trading days in a year. There is actually 245 trading days to be exact. Happy Trading!
Click here to read a disclosure on hypothetical results in the stock market.