Day Trading as a Career

Many traders and investors have thought about making the leap to day trading as a full-time job. Taking on day trading as a career can be incredibly rewarding, but also highly challenging. The truth is that only a small percentage of traders find success in full-time day trading. 

In this guide, we’ll cover everything you need to know about day trading as a career, including the benefits and drawbacks and what it takes to make it as a career day trader.

What is Day Trading?

Day trading involves trading stocks or other assets like forex, commodities, and cryptocurrencies for a profit on a daily basis.

Day trading isn’t the same as active investing. Instead of investing in companies with long-term growth potential, day traders look for short-term price movements that can be traded for a quick profit. Day traders also rely mostly on technical analysis rather than fundamental analysis. Whereas active investors might just glance at the market most days, day traders need to carefully monitor price action for several hours a day in order to trade effectively. 

Benefits of Day Trading as a Career

There are several major benefits to day trading as a career. First, there’s no cap on your potential earnings. Highly successful day traders can make hundreds of thousands of dollars a year or more, depending on how much capital they have to deploy for trading. Day trading takes a lot of work and isn’t a get rich quick scheme, but it does offer a way to build wealth in the long run if you’re skilled at it.

Another major benefit to day trading is that you get to work for yourself. You don’t have a boss to answer to and your schedule is fairly flexible. You’ll still need to work at least several hours a day most days, but you don’t need to put in a vacation request if you want to take a day off. You are accountable to yourself and yourself only (which is a big luxury that many entrepreneurs don’t even have).

Downsides of Day Trading as a Career

Naturally, there are downsides to day trading as a career – otherwise there would be millions of professional day traders.

The biggest drawback to day trading as a career is that it’s financially risky. Whereas traditional jobs guarantee you a fixed salary, there are no guaranteed payouts in day trading. You might make $100,000 one year and $25,000 the next. You can even lose money when day trading, which means you could end the year with a negative salary.

The other thing to keep in mind about day trading is that just because you find success for a period of time doesn’t mean you will always be successful. You might make considerable money in a bull market, only to find out that your strategy no longer works in a bear market and you’re unable to make money. This uncertainty around whether your performance will last is enough to turn a lot of people away from career day trading.

Is it Possible to Day Trade as a Career?

It’s certainly possible to day trade as a career. However, it’s important to keep in mind right from the start that the odds are stacked against you. The reality is that the majority of people who try to make a career out of day trading fail. It’s better to think of day trading less as a “career” in the traditional sense and more as a high-risk form of entrepreneurship.

This shouldn’t deter you. Most worthwhile ventures are associated with risk and uncertainty. For example, the majority of new businesses fail, but entrepreneurship is still a worthwhile pursuit. We bring up this caveat so that traders who are seriously considering a full-time trading career can approach it cautiously. 

Another thing to keep in mind is that it takes capital to start day trading. While there’s no hard-and-fast rule for how much you need, most day traders start out with at least $30,000. If your brokerage account balance falls below $25,000, you could trigger the Pattern Day Trader rule. Once triggered, this rule can prevent you from placing day trades for a period of 90 days.

The majority of day traders are self-funded, although you may be able to trade with a proprietary trading firm. These are firms that allow day traders to trade with the firm’s cash instead of their own. The firm keeps the majority of the profits and you get a cut for your work.

It’s up to you to decide whether or not these firms are a good fit for you. In any case, you’ll need to prove your abilities as a day trader first before proprietary trading firms will accept you as a trader.

How to Become a Career Day Trader

If you want to pursue day trading as a career, there are several important steps you need to take first. You can’t just wake up and decide to become a full-time trader.

Additionally, the path to career trading is not as well-defined as some other careers. You can’t simply get a degree in trading and start making money. 

Every full-time trader starts as a part-time trader who graduates to a full-time position after proving their skillset.

Here’s how the journey looks.

Learn

Before you do anything else, it’s important to educate yourself about trading as much as possible. Read trading books, watch videos, and sign up for a trading course. If possible, shadow another trader or follow traders who post details about their trades. Don’t be afraid to ask questions from people who have more experience than you.

Practice

Once you have a foundational understanding of how to trade, it’s time to practice. Build a strategy and open a paper trading account to test it out. Tweak your strategy to see what works and what doesn’t. If you decide to start trading real money, be sure to start off with small amounts until you can prove that you’re able to win trades consistently.

Prove Your Trading Skills

Once you have a strategy that appears to be profitable, it’s time to start trading with it – but not as a career. You should start day trading as a side hustle first. Most traders should spend at least two years proving that they can generate consistent returns before they consider jumping into trading full-time. That’s enough time to discover more about what market conditions your strategy works under and what conditions it’s not suited for. 

Don’t assign too much weight to early success or failure. Going full-time means you need to generate income for life (or until you switch careers). It’s not enough to have a great month or even a great year. If you are going to say goodbye to your guaranteed salary, you should be confident that you can generate income from the markets over a long period of time.

Build an Emergency Fund

Before you make the jump to full-time day trading, it’s important to build up an emergency fund (separate from your trading capital). Leaving a stable job and salary for day trading means that your income could disappear at any moment without warning. You should have enough money in your emergency fund to cover all of your expenses for at least one year and ideally longer.

Day trading can be stressful enough as is. This stress is 10X worse if you are trading with your mortgage payment (which you should never do – obviously). 

Your emergency fund gives you the runway you need to make your trading career work. You know you have at least one year to “figure it out.” 

Determine Whether Full-time Trading is a Fit

Before you fully commit to day trading as a career, it’s important to ask yourself a few questions:

Have you proven your ability to trade profitably and are you confident you can continue trading profitably for years to come?

Be honest with yourself. Can you really generate a full-time income with trading or is trading better used as a source of supplementary income?

Do you enjoy the challenge of day trading or are you likely to burn out?

Trading to supplement your income can be a fun challenge. Every dollar you make is additional income and every dollar you lose is part of the learning process. 

When you become a full-time trader, the stakes are raised. Now, you need to make money with trading. Is that a challenge that excites you or is that a stressful situation you’d prefer to avoid?

Will trading full-time significantly increase your income compared to part-time trading?

Many highly successful traders still work another job. You can make hundreds of thousands of dollars from trading and still collect an income from another job.

Why would you do this?

Two reasons.

First, the stable income provides a level of security that trading will never provide (even if the stable income is lower than your trading income).

Second, many traders wouldn’t benefit from full-time trading. Spending more time trading does not guarantee that you will make more money. In some cases, it may lead to lower profits as you start overtrading and taking subpar trades.

Certain trading styles do not benefit from additional time in front of the screens. For example, if you are a swing trader that manages positions for a couple of hours a day, will you really make more money if you trade full-time?

The answer will vary by trader, but you should definitely consider whether or not your job is holding you back from making more money in the markets.

Are you disciplined enough to be your own boss and work when your schedule is flexible?

Trading part-time can be thought of as a hobby or a side hustle. It’s fun and exciting.

When you start trading full-time, trading becomes your job. This doesn’t mean it can’t be fun, but it does mean that you now have a responsibility to generate income. Waking up to start trading is no longer an ambitious way to generate some extra income, it’s literally your job.

Do you have the discipline to be your own boss? Furthermore, can you thrive in a solitary setting where you’re the boss and employee (i.e. no coworkers)?

Successful traders thrive in this setting, however, it’s worth considering whether or not it fits with your personality type.

If day trading doesn’t work out, will you be able to find a new job?

We mentioned the importance of an emergency fund earlier in the article. We talked about how it is important to have at least one year of expenses saved up in advance. This allows you to give yourself a full year to make your trading career work.

So, what happens after a year?

This question is worth considering before you leave your secure income behind. If you quit your job to give full-time trading a shot, will you be able to find a comparable job in the future?

This isn’t to say you are going to fail, nor is it a pessimistic perspective. It’s risk management (which every trader should be aware of).

If you are leaving a job to pursue full-time trading, make sure to plan for what happens if full-time trading doesn’t work out.

Conclusion: Day Trading as a Career

Day trading as a career offers a way to be your own boss while making a potentially unlimited salary. But it’s also very challenging and requires hard work, discipline, and a willingness to fail.

If you’re considering day trading as a career, it’s important to approach it cautiously and lay the necessary groundwork for making the jump. Most successful traders spend years trading part-time before moving into day trading as a full-time job.