There was a time when day trading was reserved for only the most elite investors. Those who had the means to act quickly on a hunch. That is no longer the case. With the rise of discount brokerage platforms and free trading apps, day trading is made available to most investors. However, before you decide to go all in, here are a few strategies that could help you trade easier.
The Reality Check Every Aspiring Trader Needs
Have you been watching those flashy YouTube videos showing “day traders” flaunting their luxury cars and beachfront properties? Maybe you’ve been wondering if quitting your 9-to-5 to pursue day trading could be your ticket to financial freedom. Before you take the plunge, let’s dive into the nitty-gritty of whether day trading can actually be considered a legitimate job.
As someone who’s been following financial markets for years I can tell you that the answer isn’t as straightforward as many online “gurus” would have you believe.
What Exactly Is Day Trading?
First things first let’s get clear on what we’re talking about. Day trading is a specific form of speculation where traders buy and sell financial instruments within the same trading day. Unlike long-term investors who might hold positions for months or years, day traders close all their positions before the market shuts down for the day.
The key characteristics include:
- Rapid buying and selling of securities
- Positions closed before market close
- High-risk, potentially high-reward approach
- Heavy use of technical analysis and market timing
- Often involves leverage (borrowing to increase potential returns)
Yes, Day Trading IS Considered a Job… A Really Tough One
According to Wikipedia and financial regulatory bodies day trading is indeed considered “an extremely stressful and expensive full-time job.” This isn’t just my opinion or some random claim – this characterization comes from official sources including the U.S. Securities and Exchange Commission.
Let’s break down why it qualifies as a job:
1. It Requires Full-Time Commitment
Day trading isn’t something you can do effectively on your lunch break. Professional day traders typically:
- Start their day before markets open (reviewing pre-market data)
- Monitor positions throughout trading hours
- Spend after-hours analyzing performance and preparing for the next day
- Dedicate time to ongoing education and strategy refinement
2. It Requires Specialized Skills and Knowledge
Just like any professional occupation, successful day trading requires:
- Deep understanding of market mechanics
- Technical analysis skills
- Risk management expertise
- Psychological discipline
- Understanding of economic indicators and their impact
3. It’s Income-Generating (For Some)
The primary purpose of a job is to generate income, and day trading fits this definition – though with a massive asterisk that we’ll discuss later. Professional day traders aim to make consistent profits from their trading activities.
Types of Day Trading “Jobs”
Day trading isn’t one-size-fits-all. There are actually several different arrangements:
| Type | Description | Risk Profile |
|---|---|---|
| Professional Traders at Firms | Employed by financial institutions, using the firm’s capital | Lower personal risk, salary + bonus structure |
| Independent Professional Traders | Self-employed, using personal or investor capital | High personal risk, variable income |
| Semi-Professional Traders | Part-time trading alongside other employment | Moderate risk, supplemental income |
| Amateur/Hobby Traders | Casual trading with limited capital | High risk, typically not primary income |
The Hard Truth: Most Day Traders Don’t Make Money
Now for the reality check. While day trading is technically a job, it’s a job where the vast majority of people fail to make a profit, let alone a living wage.
According to research referenced in the Wikipedia article:
- A 2019 study of Brazilian equity futures traders found 97% lost money
- Only 0.4% earned more than a bank teller (US$54 per day)
- The top individual earned only US$310 per day with extreme risk
- There was no evidence that day traders improved with experience
Forbes has quoted estimates suggesting only about 10% of day traders make any money at all, and merely 1% make significant profits.
Why Day Trading Is Such a Challenging “Job”
So why is day trading such a difficult way to earn a living?
1. High Costs Eat Into Profits
Day trading comes with significant expenses:
- Commission fees (though these have decreased in recent years)
- Spread costs (the difference between bid and ask prices)
- Market data fees
- Software and hardware costs
- Education and research expenses
2. The Competition is Fierce
As an individual day trader, you’re competing against:
- Sophisticated algorithms and high-frequency trading systems
- Professional traders with decades of experience
- Institutional investors with vast resources
- Other retail traders all trying to profit from the same opportunities
3. Psychological Pressure is Immense
The mental toll of day trading shouldn’t be underestimated:
- Dealing with financial losses regularly
- Managing constant uncertainty
- Making rapid decisions under pressure
- Isolating work environment
- No guaranteed income or benefits
Regulatory Recognition of Day Trading as a Profession
Interestingly, financial regulators do officially recognize day trading as a distinct activity. In the United States, FINRA (Financial Industry Regulatory Authority) classifies someone as a “pattern day trader” if they execute four or more day trades within five business days, provided these trades represent more than 6% of their total trading activity.
This classification comes with specific requirements:
- Must maintain a minimum equity of $25,000 in their trading account
- Subject to special margin requirements
- Additional regulatory scrutiny
The fact that regulators have created specific rules for day traders indicates recognition of this activity as a legitimate financial profession – albeit one they feel needs extra supervision due to its risky nature.
Day Trading vs. Traditional Employment: The Key Differences
If you’re considering day trading as an alternative to conventional employment, consider these crucial differences:
- Income Stability: Traditional jobs typically provide regular paychecks; day trading income is highly variable
- Benefits: Traditional employment often includes health insurance, retirement plans, and paid time off
- Structure: Traditional jobs provide external structure; day traders must self-motivate and self-discipline
- Skill Development: Traditional jobs may provide training; day traders must educate themselves
- Social Interaction: Traditional jobs offer colleagues; day trading can be solitary
- Startup Costs: Traditional jobs pay you from day one; day trading requires significant startup capital
Who DOES Make Money Day Trading?
While most individual day traders struggle, there are some who succeed. Those who do typically have:
- Significant starting capital (often $25,000+ in the US due to pattern day trader rules)
- Formal education in finance or extensive self-study
- Professional experience or mentorship
- Strict risk management systems
- Emotional discipline
- Realistic expectations about returns
- Multiple income streams beyond just trading
My Take: Is Day Trading a Viable Career?
Look, I’m not here to crush anyone’s dreams. Day trading CAN be a legitimate job for some people. But it’s more comparable to being a professional poker player than to being an accountant or teacher. It’s a high-risk endeavor where skill matters but luck and market conditions play enormous roles.
If you’re still interested in day trading as a career path, here’s my advice:
- Start small while maintaining your primary income source
- Invest in proper education (but be wary of “get-rich-quick” courses)
- Practice with paper trading before risking real money
- Set aside enough capital to meet regulatory requirements
- Develop and test a clear strategy before going “full-time”
- Have a backup plan and emergency fund
- Be prepared for significant losses, especially early on
The Bottom Line
Yes, day trading is technically a job – in fact, Wikipedia explicitly describes it as “an extremely stressful and expensive full-time job.” But it’s a job where success is far from guaranteed and where most practitioners fail to make a sustainable living.
If you’re drawn to financial markets, consider alternatives like swing trading (holding positions for days or weeks), position trading (holding for months), or traditional investing. These approaches typically require less time commitment, generate less stress, and have better long-term success rates for most people.
Have you tried day trading? What’s been your experience? Drop a comment below – I’d love to hear your thoughts!
Day trading strategies to consider
While this is by no means a comprehensive list of day trading strategies, weve included six common tactics to help you get started.
- Price action: A simple trading strategy that involves the study of charts to identify patterns and predict the direction of an assets price.
- Scalping: This combines fundamental and technical analysis to take advantage of small price changes in the market. These positions can last mere minutes or seconds. The goal is to sell a position quickly at a profit, so having an exit strategy is a must.
- Trend following: This strategy includes simply following trends and riding market momentum. Day traders use trends, momentum, and volume indicators to go long when prices are rising or go short when theyre falling.
- Counter-trend trading: This involves deliberately placing trades against current trends. It banks on an asset’s value reversing its direction or settling to a price point that is more stable.
- Fundamental trading: This approach includes using fundamental analysis such as the study of key economic indicators and financial figures to arrive at a buy or sell decision.
- News trading: For day traders, a news event can be a source of valuable data and any information that can affect stock prices is highly valued. This can include everything from a new product announcement to industry rumours. Day traders use this information to help make strategic decisions.
Is day trading legal?
Yes, it is. You do however need to make sure that your discount brokerage firm is regulated by the IIROC (Investment Industry Regulatory Organization of Canada). It regulates investment dealers in order to protect investors.
Trading With A Day Job Vs. Trading Full-Time (My Experience)
FAQ
Does day trading count as a job?
Earned income
It’s money that you make on the job. But even if day trading is your only occupation, your earnings are not considered to be earned income. This means that day traders, whether classified for tax purposes as investors or traders, don’t have to pay the self-employment tax on their trading income.
Is a day trader an actual job?
Day traders usually get paid on commission when they buy and sell stocks for their customers. In other words, every time they sell stock and end up profiting from it, they receive a percentage of the profit. They also can make a salary if they work for an agency such as an investment bank or hedge fund.
Does day trading count as income?
Day trading can significantly impact your taxes, as your profits are typically taxed without the benefit of favorable long-term rates. Gains from investments held for a year or less are taxed as ordinary income, which is usually higher than long-term capital gains rates.
Why do 99% of day traders fail?
Some of the most frequent reasons for traders’ failure to reach profitability are emotional decisions, poor risk management strategies, and lack of education.