This week's lesson.
Today I want to cover a topic brought up within my following quite a bit, and that is how much money do day-traders make in a year.
Because I started blindly at the age of 20, I will give a rough estimate since I can’t truly factor in the fees during my time as a beginner. I did become profitable after the first six months, but I owe that to my studies and applied knowledge since then. When calculating the annual income for someone in my field, fees probably don’t come to mind, but borrowing fees, execution fees, and overnight fees must be considered.
I use specific brokers such as CenterPoint, Interactive Broker, & TradeZero for my accountability in this work line.
Let’s get into the borrowing fees as I use my monthly performance as a reference.
I typically borrow $1,000-$3,000 per day, depending on whether or not there’s a ticker that meets my criteria. But on average, I would say I spend $800 on those fees, which multiplied by the twenty-two trading days in a month puts me at $17,600. When I add in the execution fees, I’m looking at a total of $30-$40,000 in those two fees alone.
Overnight fees are roughly 20% of your profits into the next day, which can be quite a lot, but if you’re trading a stock with a high winning percentage, then it’s free money.
You want to choose the right Broker to meet your strategy because each one is different.
Interactive Broker has cheap commissions, but it’s hard to find shares to short on those hard to borrow stocks. Now, E-Trade is suitable for hard to borrow stocks with floats around $10-$20 million. SureTraders and Cobra Trading are good brokers as well, but even if you have the right Broker for you, you can end up wasting those fees when the stocks don’t meet your criteria.
It would be best if you remembered that even when you lose, those fees still add on, and that can make for a more significant loss.