While many overeager professionals will tell you that they made hundreds of thousands as a day trader, they may not go into the nitty-gritty details.
For example, while you can make a significant amount in a few months of being in the right place at the right time, markets will plateau. If you’re calculating a day trader salary off of the best day in a day trader’s life, you won’t get an accurate picture.
Here are three things to help you understand how to calculate a day trader’s salary based on what you’re making now.
1. First Manage Your Risk
If you’re looking to become a professional day trader, you’ll need to calculate your salary starting from a risk management perspective. Every trade you make could carry risk with it. Traders need to make a fast decision about whether or not a given trade is worth engaging with or if they should sit it out.
It takes experience to know both how much you’re risking and how much you could be making with any trade. You should start with a basic understanding that if you can’t at least double your money, it’s not worth the time.
When many traders first start out, they might risk $1,000 only to make $500, which might seem okay, but you can’t maintain that ratio for long. To make a good salary, you need a better trade ratio.
2. Choose the Right Currencies
Out of the myriad currencies you could be trading on the forex market, it’s hard to know which one is right for you. When you’re just getting started, you want to become a master of at least two currencies.
Start with the currency you use on a day to day basis. Understand how it relates to similar currencies as well as emerging currencies. Watch the news around another currency from a much different area.
This will give you two general ideas of how currencies can function under vastly different conditions. Becoming a whiz at currencies will raise your earning potential.
3. Watch Patterns
You need to be using the best tools on the market to make good money in forex trading. Being able to get real-time data, alerts about drastic changes, and potential for making a big profit will make the difference between whether you can live as a trader.
If you learn how to avoid stocks that are extremely extended, you’ll be able to manage your position relative to market patterns. There are rules to the game, and the better you understand them, the higher your earning potential is.
Calculating a Day Trader Salary Is Tough
Calculating what you could make as a day trader depends on your experience and how committed you are to learning. A day trader salary is one salary that’s deeply dependent upon how well versed you are in the ins and outs of the type of trading you do and your dedication.
If you’re thinking of going into the forex market, check out our guide on free forex signals to get an idea on how the professionals trade.