How Much Profit Can A Day Trader Make?

Who is a Day Trader? 

Experienced traders in the stock market tend to take their expertise seriously and get involved in day trading. Day traders attempt to book profit using quick price movements and trends in the market. They generally target equities, futures, options, commodities, and currencies to trade within the same trading session. They rarely hold assets overnight.

Profits for Day Traders

Losses are common for day traders as they trade actively and speculatively. Day trading is about managing risk by establishing profit-taking points. They are disciplined and stick with their strategy to minimise their losses. A day trader's income varies depending on trading capital, strategies, and several risk management practices. 

Earning Potential in Day Trading

Some factors that can affect a day trader’s earnings potential are as follows:

Trading dependency:

The earnings potential of day traders is a factor of how you trade - whether you trade independently or work for an institution. Day traders involved with an institution need not risk their funds. They can open demat account along with a trading account with the institution. They have access to advanced trading tools that can help you learn more trading strategies. Such day traders' income is derived from net profits. Many firms charge to allow them to use their trading software. If you are an independent trader, you need to put your funds at risk and put all your profit in your pocket. 

Markets

Different markets offer different opportunities to make a profit to day traders. Equities are considered the most capital-intensive asset. Day traders can trade with less capital in other markets, like futures and forex compared to stocks. You may find an opportunity to make significant profits with little capital deployed.

 

Capital: 

If a day trader starts with Rs.10,000, the earnings potential is lower than the other starting with Rs.50,000. Like most day traders, you can consider a renowned discount broker to open your demat and trading account. With them, demat account maintenance charges and brokerage fees are much lower as compared to full-service brokers. 

Time

Profitable day trading strategies take years to develop with the right approaches. It is rare and unstable if day traders achieve success in just a few weeks. It is a time-taking process to make profits successfully in day trading.

Margin: 

Generally day traders utilise the margin trading facility (MTF) with their stockbroker. They use the borrowed funds to amplify their profits. With those profits, they plan to pay the MTF interest and borrowed funds. The remaining amount will be in their pocket. However, it is the case, if the market favors your position just like the way you strategise. If the trade goes opposite to your expectations, you will have to bear huge losses and also need to pay interest on the borrowed funds.

Impact of Brokerage Fee on Day Trading Profits 

A brokerage fee is a fee on every trade charged by stockbrokers. Brokers deduct the fees from your day trading profit. Brokerage charges are one of the concerns for most day traders as they trade multiple times during a trading session with high volumes. With a high volume of trade, the brokerage fee turns into a considerable amount. This fee becomes a concern for traders. Day traders look for a brokerage firm offering online trading platforms at competitive charges. 

 

If you invested in stocks worth Rs. 2 lakh and sold for Rs. 2.2 lakhs. The total trade transaction for a day is 4.2 lakhs. The broker will charge the brokerage the total trading value of Rs. 4.2 lakhs. If the brokerage charge is 0.5%, you need to pay 0.5% of 4.2 lakhs = Rs. 2100. It will be deducted from your profit of Rs. 20,000. It is an indicative calculation. There can be tax implications on trading transactions.

 

Therefore, a discount brokerage is a preference for most day traders to save on trading costs. These brokers charge a flat percentage as a brokerage fee, irrespective of trade volume.

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