How to Make $50,000 per Year Day Trading

Money Stacks How to Make $50,000 per Year Day Trading

In order to make $50,000 per year day trading, you would need to have a minimum of $21,000 in your margin account if you use only half your buying power (double your money) when day trading. This assumes that you are aiming for a 1% profit per week. However, if you use your full buying power (four times account value), then you would only need to have a minimum of $9,000.

Notice that using your full buying power requires only $9,000 to make $50,000, whereas using half that buying power requires $21,000 to begin. This is the power of leveraging, and it is the same principle used in the forex market when trading currencies.

Related: Stocks vs Forex: Why Trade Forex?

The Power of Leveraging and Compounding

Leveraging and compounding are the two primary principles behind day trader success. A 1% profit per week translates into a 68% gain per year, which is well above the 10% desired by investors. However, a 1.5% profit per week translates into 117% gain per year. This is the power of compounding. That half percentage increase translates into a much higher yearly gain.

Here's the Math:

As a decimal, a 1% profit would be represented as 1.01 because it is 100% of your account value plus the 1% = 101% or 1.01. While there are 52 weeks in a year, imagine multiplying your money by 1.01 each week 1.01 x 1.01 x 1.01 (52 times). This is 1.01 to the 52 power: 1.01^52 = 1.678 or 68%

Likewise, a 1.5% increase would be represented as 1.015, which is earned 52 times: 1.015^52 = 2.17 or 217% of your account value which is an increase of 117%. That half percentage increase massively affects the end result, because of the power of compounding.

With leveraging, by using your four times buying power you are actually trading with $36,000 instead of $9,000, which means that your 1% increase is actually a 4% increase of your account value. This is the power of leveraging.

Turn $2,000 into $55,857 in 3 Years Day Trading

Don't have $21,000 to day trade with? Let's look at how you can turn $2,000 into over $21,000 in only 3 years. We will assume a 1% profit gain per week, and we will assume that you are using only 3/4 your buying power (which is triple your money).

  • Year 0: $2,000 (Trade triple with margin = $6,000 x 1.678 = $10,068) While we are trading with $6,000 we didn't earn a full $10,000. We earned $10,068 - $6,000 = $4,068. Our new account balance is $2,000 + $4,068 = $6,068.
  • Year 1: $6,068 (Trade triple = $18,204 x 1.678 = $30,546; then $30,546 - $18,204 = $12,342 increase; so our account balance is $6,068 + $12,342 = $18,410)
  • Year 2: $18,410
  • Year 3: $55,857

After 2 years, you have gone from $2,000 to $18,410 by gaining only 1% per week. By year 3, if you continue to use 3/4 your buying power, with a 1% profit per week, you can start making well over $50,000 per year from your $55,857 account value.

If you are thinking about quitting your day job, you will likely want to wait until your account balance is at least $25,000 because if you day trade more than 3 times in a week you will be required to have a minimum balance of $25,000. The above calculations are based on day trading only 1 to 2 times per week.

What About Commission and Fees?

While most brokers charge between $5 and $10 per trade, these calculations ignore fees because there is a broker that offers $0 commission.

Stocks vs Forex: Why Trade Forex?

Want to easily calculate your stop-loss and profit goals?

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.

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Stock Profit Calculator for Daytrading/Day traders -

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4 Simple Steps to Turn $10,000 into $133,033 in 5 Years Day Trading

How to Day Trade with Daily Volatility (Stock Selection)

Day Trading Strategy Basics

How it Actually Feels to Day Trade

Day Trade Articles

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