Investing Assets & Markets Stocks Is It Possible To Make a Living Trading Stocks? What You Need To Know About Trading for a Living By Brian Lund Brian Lund Brian Lund is an investing expert with over two decades of experience. He's made numerous appearances on CNBC; his articles have appeared in The Wall Street Journal, CNN, and AOL's Daily Finance, among others. Brian is the author of "Trading: The Best of the Best - Top Trading Tips for Our Times." learn about our editorial policies Updated on October 31, 2021 Reviewed by Julius Mansa Reviewed by Julius Mansa Julius Mansa is a CFO consultant, finance and accounting professor, investor, and U.S. Department of State Fulbright research awardee in the field of financial technology. He educates business students on topics in accounting and corporate finance. Outside of academia, Julius is a CFO consultant and financial business partner for companies that need strategic and senior-level advisory services that help grow their companies and become more profitable. learn about our financial review board Share Tweet Pin Email In This Article View All In This Article Trading Requires Discipline Get Educated About Trading Choose a Good Trading Strategy Set Aside Some Income Prepare Yourself Mentally The Bottom Line Frequently Asked Questions (FAQs) How much can I make trading for a living? How does the IRS define a day trader? How do I start day trading? Photo: The Balance Stock enthusiasts commonly wonder whether it's possible to make a living trading stocks. The idea that you could quit your job and support yourself just by trading stocks is fascinating. To some, it seems like an impossible fantasy, but it is possible to make a living trading stocks—the real question is if it's probable. Novice investors, buoyed by their successes with paper trading simulations, may take the leap of faith and decide that they're going to earn their living from the stock market. Some find success, feeding fantasies of sitting on a tropical beach, making a killing with nothing more than a laptop and an internet connection. However, many people who independently trade for a living use day trading strategies, and studies have shown that the majority of day traders lose money over the long term. That, of course, doesn't diminish the allure of trading for a living, which is freedom. Freedom to be your own boss, to work where and when you want, and to be financially secure. Key Takeaways While some can make a living trading stocks, the majority of day traders lose money over the long term.Education is critical to being a successful trader.You should also develop a trading strategy and stick to it.Set aside enough money to support yourself while you learn the ropes. Trading Requires Discipline Being able to successfully trade for a living means achieving a level of focus and discipline most people will never achieve, no matter what career they choose. This is as opposed to traditional investors, who buy relatively safe products and let their equity grow over decades. You can think of it as the difference between being a movie extra and an Oscar-winning actor. Note The point here isn't to discourage someone from pursuing their dream. If you want to pursue day trading for a living, it’s important to go into it with your eyes open. Day traders who work from home may not have a "boss," but this isn't a good career choice for those who want flexible, low-key workdays. Day traders live and die by their trading schedules and plans. They diligently take notes on their watchlist stocks at predetermined times throughout the day. When a profit target on a trade is reached, a successful trader closes the position without hesitation or temptation to hold on in hopes of even more profit. On the other hand, when a trade turns bad, professional traders calmly cut their losses and close the position. In addition to day trading, other prominent trading methods that are similar to day trading include scalping and swing trading. Get Educated About Trading Before you quit your day job, spend some serious time educating yourself about everything related to trading. You should be familiar with just about every type of trading that goes on in the markets, but as a day trader, you should emphasize short-term strategies and the securities that work best with those strategies. The Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the Internal Revenue Service (IRS) all offer valuable information for traders. Introductory books on strategies and theories will help you get acquainted with the playing field. Once you understand the theories, products, and institutional players in the markets, spend some time testing your knowledge with a paper trading simulator. You shouldn't make the leap into a full-time trading career until you've maintained ample profitability through a variety of market conditions on a trading simulator. Choose a Good Trading Strategy To get started trading, you'll need to develop a sound trading methodology that takes advantage of volatility without forgoing risk management principles. Again, this methodology should be tested over months or years and in all different kinds of market environments. Start with a demo account, then ease your way into trading with real money. Slowly swap out simulated positions with actual, risk-taking positions. Set Aside Some Income Trading for a living does not lend itself to a "rags to riches" story. Whether you plan on day trading or not, you'll need a significant amount of capital just to get started as a professional trader. Many experienced traders suggest having at least one year’s worth of income set aside before you start. This is not the bankroll that you will trade with—you'll need separate capital for that. These funds should be set aside purely for living expenses such as housing, insurance, and food. Having this financial cushion will give you peace of mind, allowing you to begin your new career without the pressure of having to trade to “make the rent.” Even when it comes to capital for your brokerage account, day traders need significant capital to trade in earnest. FINRA has special requirements for "pattern day traders," who are defined as those who open and close a position on the same day at least four times per week. In other words, if you want to day trade every day, you're a pattern day trader. FINRA mandates that pattern day traders must maintain a brokerage account balance of $25,000. That's $25,000 on top of the year's worth of income you've set aside. In addition, you'll have to do your day trading in a margin account, although it isn't difficult for most traders to open this kind of brokerage account. If you don't plan on day trading but you still want to make a living trading, you'll need to make every trade worth more. Since you won't be able to execute as many trades, each trade needs to be for a significant sum—and the more money you put into a trade, the more you expose your portfolio to risk. Note You'll need to have a record-keeping strategy ready for tax season. Prepare Yourself Mentally Professional traders need to leave emotion out of their trading. Psychologically, you will need to steel yourself for the severe financial losses that typically accompany the first few months of day trading. The only way you can move past those losses is to approach them with calculating reason rather than emotion. Learn from your mistakes without getting caught up in emotional highs and lows. The goal when trading for a living is to have a reliable and consistent revenue stream, but that will take time, diligence, and luck to achieve. Not everyone has the mental fortitude to work up to the point where they have a consistently profitable strategy. Watching the daily fluctuations of your income can be extremely tough on the psyche, especially when it's a sustained experience that lasts months. The combination of speed, volatility, adrenaline, and losses can make day trading a jarring experience for newcomers. You'll need patience and coolheadedness in the face of repeated losses; otherwise, the stress of day trading can wreak havoc on your emotional well-being. The Bottom Line These are some of the basic things to be aware of if you are going to try to make a living trading stocks. To be blunt, the odds are against your success, but diligence, discipline, and capital can tilt the odds a little more in your favor. If you're one of the few who can master this art, you'll enjoy the excitement, independence, and financial rewards. Frequently Asked Questions (FAQs) How much can I make trading for a living? Your profits as a day trader will depend on whether you do it full or part time, how well you learn trading skills, and how willing you are to take risks. According to data from ZipRecruiter, the average day trader in the U.S. makes about $80,000 per year, but wages reported range from $11,000 to $253,000. How does the IRS define a day trader? The IRS will consider your day trading an official business if you seek to profit from daily price movements on the stock market, you do so regularly, and your activity is substantial. Otherwise, it will treat you as an investor. How do I start day trading? To give yourself the best shot at successful day trading, you should learn as much as possible about the process and practice trading on a simulator without risking any cash. When you're ready to start real day trading, you'll need to put at least $25,000 in a margin account. Keep in mind that most experts recommend you don't risk more than 1% to 2% of your account on a given trade. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Securities and Exchange Commission. "Day Trading: Your Dollars at Risk." Taylor & Francis Online. “The Profitability of Day Traders.” Securities and Exchange Commission. "Pattern Day Trader." ZipRecruiter. "Day Trader Salary." IRS. "Topic No. 429 Traders in Securities (Information for Form 1040 or 1040-SR Filers)."