Day trading is an intriguing topic that many people have sought out in order to make easy money through the stock market’s ups and downs. It can draw fortune seekers looking to get rich from what would seem to be an easy and quick investment.
Therefore, it is only natural for one to wonder if traders can actually become millionaires day trading? Day traders cannot become millionaires by day trading alone. The only reliable method to becoming a millionaire is to have a diversified portfolio of income streams. Day traders, on average, do not make enough money with their daily trades to make millions.
Stock market fluctuations as well as personal and market ceilings hinder day traders from making millions from their daily trades.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
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Why Day Traders Are Not Millionaires?
There are several reasons why day traders are not millionaires. As a generality, the vast majority of day traders do not trade enough to make millions, and people who are millionaires don’t day trade. Most people who day trade make somewhere in the range of $500-$3000 a day, which can be lucrative but will not make you an immediate millionaire, at least not quicker than normal investing.
A lot of the profits are taken up by taxes and commission fees that must be paid on every transaction. This can really eat into the amount that a day trader makes every day and make the take-home amount that much smaller. However, while taxes contribute towards reducing the odds of a day trader becoming a millionaire, they are not the primary driver here.
The top six reasons why day traders are not millionaires are as follows –
- Not all day traders are knowledgeable
- Day traders need to have start-up money
- A day trader’s personal ceiling
- The market ceiling
- Personal discipline
- Unpredictability of the market
Now, without further ado, let us discuss all six of these top reasons in the following sections.
Not All Day Traders are Knowledgeable
A big issue that many people face when they decide that they want to become day traders is a lack of knowledge. It seems to be an easy way to make good money if you just put up some of your own, buy a good looking stock at the beginning of the day and then sell it for a profit at the end of the day.
In a perfect world that would be how it works; however, you have to know what stock it is that you want to buy and understand what a good price for that stock is. Also understanding the market fluctuations and having a good idea of whether or not the stock will peak before the day is out is vital in day trading. Remember that day traders are just that – traders by day and will not hold on to stocks from one day to the next. Outside of that, they still need to have a solid foundation of investment principles and a sound trading strategy, just like any professional investment fund in the market.
Day Traders Need to Have Start-Up Money
In order to make money, you need to start out with money. Investing $100 in the stock market and trying to be a day trader won’t get you very far. In order to be successful at all day trading, you need anywhere from $30,000 to $50,000 to get going. Sometimes even the money that you make by investing that kind of cash is negligible.
The trading fees and taxes also take a toll on the profits that may be earned from day trading. Many traders don’t think of these types of expenses when beginning their investments and it can derail an otherwise promising beginning.
A Day Trader’s Personal Ceiling
The day trader’s ceiling, or anyone’s ceiling for that matter is how much work a person is willing to do in order to make a certain amount of money. For instance, you may want to work hard enough to make $4000 a month but are content with that amount and hence don’t work any harder to make more.
This is what a personal ceiling is and a big reason why there aren’t a lot of day trading millionaires. Most people are content with the amount that they are making and don’t work harder to make it to the next step. This is the same with any profession, but it may be more prominent with day traders since it is that much more difficult to make millions at it.
The Market Ceiling
The day trading market ceiling is where you will eventually get capped out if you are successful enough in your trading since there is only so much that a particular strategy will get you. From there you will either have to change strategies or trade something else. It can be difficult and each one can be a gamble which makes this even harder.
Being able to diversify and trade in multiple stocks will help your gains and keep the market ceiling high. Most inexperienced traders get stuck on trading the same stock or currency pair and that is where the market ceiling comes into play. Mixing it up is the best way to keep yourself under the ceiling but again it comes with that much more risk.
Personal Discipline
As with anything else you need personal discipline in order to make it to being a millionaire. Most people once they start making money have a hard time not spending it. Like making money doing anything else people tend to spend more as they make more and detracting from your profits is not going to keep you on the path to becoming a millionaire.
Saving money and investing in more than just day trading will help you keep your profits and put them to work for you. Having multiple income streams is part of how millionaires make their money- and keep it. Consider other investments as a way to keep making money because there is an insanely high probability that simply day trading will not get you there.
These investments don’t even have to be in the stock market, they can be in something totally different as long as you have another revenue stream. It can take the pressure off of day trading if you know that you have money coming in from somewhere else. This is what many day traders do in order to keep a steady stream of money flowing in. It also helps with the capital that they use to day trade with.
Unpredictability of the Market
The stock market can be very volatile with lots of ups and downs within a single day. Traders can make a lot of money in one day, which is part of the allure of it all. But you can also lose it all, which can often be the case. With a normal job, you may make your regular salary and then have a bonus on top of it or possibly a commission which could net you a few thousand extra dollars. With day trading there is the possibility of doing that in a day. It doesn’t happen very often, even for experienced day traders, but it does happen on occasion, and that is why people day trade.
Being that it is unpredictable is what makes day trading such a gamble for some and so risky. There is huge potential to lose money if your strategy or stock that you are trading doesn’t pan out. Then you tack on the extra fees and taxes that come with day trading and you can be in the hole pretty quick.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
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Conclusion
So, there aren’t a ton of day trading millionaires. Well, you know what? There aren’t that many millionaires in any one profession either, not compared to the number of people within that profession. So it shouldn’t be a deterrent if you are looking to start day trading, just understand that you will not instantly become the richest person on the planet. There is still plenty of money to be made day trading, and there are tons of people out there who do it successfully. Just make sure that you know what you are getting yourself into and the commitment that you are going to need to put into it in order to become successful.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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