By day trading only 1 to 2 times per week, you can turn $2,000 into $514,172 in only 5 years. If you start with a larger amount of money, imagine how quickly you could start living from just day trading (or even make yourself a millionaire).
Long-term day traders are able to maintain a high success rate by achieving small percentages on their daily trades. Most successful day traders only gain 1% on their trades. Even traders who claim to make $1,000 in one day are trading with roughly $100,000 by buying and selling thousands of shares of stock. This 1% strategy is simple and effective. Enter the trade of a volatile stock while it is going up, get your 1%, then get out of the trade.
By only trading once per week, with a 1% gain per week, that translates into a 68% gain in one year. However, if trading in a margin account these gains can actually amount to 340% increase in one year!
While there are 52 weeks in a year, rather than a gain of 52%, the effects of compounding actually results in a 68% yearly gain. Here's the math: 1.01^52 weeks = 1.678
For those foreign to math, you would get 100% of your money plus that 1% per week. As a decimal this would be 1.01, so imagine multiplying your money by 1.01 each week: 1.01 x 1.01 x 1.01... (52 times). That is what 1.01 to the 52 power means: 1.678 = 68% increase.
Related: Stocks vs Forex: Why Trade Forex?
Trading in a margin account essentially allows you to trade with up to four times your money. Those who pattern day trade (trading more than 3 times per week) are required to have a minimum balance of $25,000 in their margin accounts. However, if you day trade less than 3 times per week, then the minimum balance is only $2,000.
The following gains are based on trading once or twice per week in a margin account using only three times your account value, which is 3/4 your buying power (triple your money):
In only 5 years, we turned $2,000 into $514,172! That's a 25,709% increase overall! After year 4, by trading on margin you are making $344,702 profit in one year just by day trading once or twice per week. And that is only using 3/4 your potential buying power, since you are often able to buy up to four times your margin account value.
In only 3 years you could be making $113,613 yearly from a trading account of $55,857.
These calculations assume a 1% gain per week, which would be a 100% success rate if you are only trading once per week. A 1% gain per week is very realistic and these numbers are accurate as long as you achieve a 1% gain per week. However, a 100% success rate is unrealistic.
If you trade once per week, even with a 75% success rate, which means 50% of your trades were profitable, it is possible to turn $2,000 into $226,759 in 6 years when trading with your full margin buying power.
Notice that we are multiplying by 1.3 instead of 1.678, because with only 50% profitable trades rate your effective yearly gain would be about 30%. These numbers also assume that you are a skilled day trader and effectively know how to use stop-losses.
Now, let's see what happens if we don't trade with margin, and only trade our own cash:
Without using margin, in only 8 years we turned $2,000 into $125,709. From this point on, in year 9 you would be able to turn that money into $210,939. Compared to year 8, that's a $85,230 gain which means that if you spent that $85,230 (because you decided to quit your job and just day trade once per week instead), then you would be able to generate that $85,230 every year from your $125,709 account balance.
And this is without using margin!
While actual results will vary significantly, theorizing day trading gains with an effective strategy like aiming for only 1% gain per week shows how long-term professional day traders are able to make a living and earn a significant yearly income just from day trading.
Most brokers charge anywhere from $5 to $10 per trade, which would reduce how much you actually gained on the trade (it would be less than 1% once you took out the fees). However, these calculations ignore the cost of trading fees because there is a broker that offers $0 Commission.
Stocks vs Forex: Why Trade Forex?
Download this easy-to-use Stock Profit Calculator. Just type in the stock price and it will automatically fill with stop-losses and profit goals. You can also change the percentages to match your personal needs, as well as enter in your margin use in order to keep your stop-loss at -1% of your account value.
Normally $15, the cost is currently only $9.
Get the Stock Profit
Calculator now for $15 $9.
How to Day Trade with Daily Volatility (Stock Selection)
How it Actually Feels to Day Trade
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