Nearly 61% of Americans report owning stocks, but whether you can make a living trading them is a question many still ponder. Those who choose to make a living trading stocks often use day-trading strategies aimed at profiting from short-term market fluctuations. Day trading can be highly risky.
Making a living from trading stocks is becoming increasingly popular. But those who want to trade professionally should know it requires ambition, patience and the allocation of sufficient capital.
Is It Possible to Live Off Trading Stocks?
Those passionate about trading stocks often wonder whether making a living off the profession is possible. It’s important to understand that earning enough to support your lifestyle may not be linked directly to your decision of whether to trade stocks. But it can be associated with the trading strategy you use.
What Does It Mean to Trade Stocks for a Living?
If you’re considering stock trading for a living, you may already know that it requires focus and discipline. Prices and performance of equities can change quickly, potentially leading to rapid decisions about buying and selling that won’t necessarily generate profits. Try learning about ways to analyze stocks, such as fundamental or technical analysis, to identify opportunities.
Best Questions to Ask Yourself Before Committing to Trading Stocks for a Living
Trading decisions can be influenced by various factors, including your temperament, experience, trading strategies and risk management. If you’re pondering whether to trade stocks for a living, you should ask yourself:
1. Should You Quit Your Job to Trade Stocks?
If you want to become a full-time trader, you should learn about the stock market before you hand in your resignation. Before quitting your job and turning to trading for a living, you should know about the different types of markets and strategies that are suitable for you.
International trading markets are becoming increasingly interlinked with each other, meaning that trades occur around the clock, so you might not need to quit your job. Think about it, you can come home from work and trade stocks in global markets open in the evening.
2. Did You Allocate Enough Money for Trading?
Before deciding whether you can make a living trading stocks, consider whether you have sufficient capital. If you favor the trading lifestyle, you might be inclined toward day trading, which can lead to short-term profits.
Those profits can allow you to pay your daily expenses. But if you are considering this approach, know that the Securities and Exchange Commission (SEC) minimum equity requirement for a pattern day trader is $25,000 so you’ll need at least that much to begin.
3. Are You Mentally Prepared?
Stock performance and prices are impacted by market conditions and external factors such as government policies and geopolitical events. Even the best strategies can fail because of the adverse effects of such factors.
Imagine you spend hours on end developing a trading strategy that considers the company’s revenue and growth potential, yet your stock price still drops. Would you be able to handle such stress, or would you give in to market pressures and make hasty decisions? Also, be aware that it carries significant risk.
4. Can You Manage Your Emotions?
The stock market might not be the place for you if you let your emotions get the best of you. If you’ve opted for long-term investments, changes in the market and their effects on your stocks might be mitigated over time. So, your emotions may not play a significant role.
You might not want to sell a stock because the price took a dive on news of a natural disaster only to discover that you could’ve made profits if you’d held on for a week or two.
5. Are You Ready to Have an Inconsistent Income?
The idea of setting up an investment account and trading stock for a living can go hand-in-hand with inconsistent income. Some days you may generate profits from most of your trades, but on others find achieving gains more difficult.
If you want to trade stocks for a living, you should be ready to live off of inconsistent income. Before you take this step, you might consider things like reducing expenses and increasing savings, as it may help you budget accordingly.
6. Do You Have Other Sources of Income?
Making a living off trading stocks might be possible, but it can put you in a position where you’re not earning on a regular basis. This lack of consistent income can lead to a loss of morale which might cause you to quit.
Before you decide to be a full-time trader, you should consider other sources of possible income. For example, you could work a part-time job in the evening and trade during the day.
7. Should You Trade from Home?
Trading stocks from home can have its ups and downs. When you first think of the idea, you might be lured by a flexible work schedule and family time. But sometimes the stock market might need your undivided attention. You’ll need a strong internet connection and to avoid constant interruptions.
8. Are You Prepared for the Solitary Lifestyle?
By now, you know that becoming an individual trader means having focus, discipline and undivided attention. It’s easy to think you can manage all of this initially. But you might realize later that becoming a trader can be more isolating than you expected.
Imagine you’re trading and get up to take care of a few household chores. In that brief period, the value of your position drops significantly. As a solo trader, you often lack the external resources that could help or support in case of challenges or mistakes. You are solely responsible for your trading decisions and their outcomes
So before making the big move, you might want to ask yourself whether you're prepared for such a lifestyle. Consider factors like setting up a separate home office, ensuring minimal interruptions from others. The solitary trader’s journey demands careful consideration and planning.
Decide Your Trading Commitment
Whether you are day trading for a living or trying to make money for retirement, stocks can be a popular asset class. The answer to thoughts like, “Can I make a living trading stocks?” can depend on various factors, including personal finances, trading strategy and effective risk management. Anyone considering such a lifestyle could benefit by gaining knowledge and experience prior to making this big shift.
Frequently Asked Questions
Can you make a living trading stocks daily?
Trading is a complex profession that requires an in-depth understanding of the stock market. Those who can achieve such an understanding may be able to succeed at trading for a living.
How much do traders make per day?
The amount you can earn trading stocks depends on how consistent your overall gains are and how they compare to your overall losses.
How long does it take to become a profitable trader?
The time it takes to become a profitable trader varies from person to person. It can typically take several months to a couple of years of dedicated learning, practice, and refining your strategies to consistently make profits in the stock market.
About Anna Yen
Anna Yen, CFA is an investment writer with over two decades of professional finance and writing experience in roles within JPMorgan and UBS derivatives, asset management, crypto, and Family Money Map. She specializes in writing about investment topics ranging from traditional asset classes and derivatives to alternatives like cryptocurrency and real estate. Her work has been published on sites like Quicken and the crypto exchange Bybit.