November 1, 2011 | In: General

# How Much Money Can You Make With Stocks?

Everytime one of my friends knows that I trade stocks, he immediately asks me this question: “How much money can you make off stocks?” My immediate answer is that you can make unlimited amount with stocks. In fact, stocks can make you rich in a very short amount of time. So, the response is infinity once you have the necessary experience, and the patience and discipline needed to trade stocks.

Now infinity is a very nice number, but it’s not very realistic. Because stock trading does not only consist of making money, it also consists of losing money, and you may lose 10% of your investment in one day the same way you can make 10% of your investment in one day (you’d know this if you’re trading BAC nowadays).

So, realistically, how much money can you make off stocks? I’d say anything between -5% and +15% a year if you’re not an active trader, and 5% every month if you are an active trader with some experience, and about 0.75% __per day__ if you are a day trader and you trade stocks for a living.

Let’s examine these results in details:

**You are not an active trader**

– Let’s say you start with an initial amount of $10,000. Let’s say that you are not that lucky and you lose 5%/year, this means that you make -$500 (negative 500).

– Let’s say that you invest the same amount, but you make the maximum of 15%/year. This means that you will make $1,500/year.

– Let’s say that you make the average of 5%. In this case you will make $500/year.

Obviously, stock trading is not very lucrative if you’re only trading for fun.

**You are an active trader**

– If you start with $10,000, with an average return of 5% every month, then this means that you will make about $8,000 in a year ($7,958 to be exact), which is 80% of your investment (assuming that you re-invest your profits every month). It’s obvious to see that the game changes completely for you if you are an active trader.

*Note: Active does not mean stock trading for living, but it means that you trade stocks ever day or so. (Some banks refer to Active Trader as someone who makes 30 trades every quarter [here’s a comparison of active trader programs at Canadian banks], I think an active trader should be someone who makes at least 30 trades every month).*

**You are a day trader**

– Again, if you start with $10,000, but this time with an average return of 0.75% every day, then you will make $59,777 (almost $60,000), which is almost 600% of your initial investment (based on 261 stock trading days and assuming you re-invest your profits every day). When you are a day trader, the sky really is your limit, provided, of course, you know how to trade and you rigorously follow the first rule of day trading: “By the end of the day you should not have any shares in any company.” Note that in some days you may lose money when you sell by the end of the day, but this shouldn’t deter way nor should it make you waiver from the first rule of day trading. Day trading seems to work for many investors. You must understand though that day trading can be a very stressful job, and may lead to heart problems if you’re the worrying type or if you’re investing money that you actually need.

So, again, you can make a lot of money with stock trading, but remember, to make a lot of money, you need to take stock trading seriously (e.g. trade every day and not treat it as a hobby), and also need to possess the qualities of a good stock investor.

Final word of advice: Stock trading can be stressful to the point where you become an obnoxious person if you don’t control yourself – on the other hand, stock trading is always, *always*, fun…

*This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on fadi.el-eter.com.*

## 1 Response to How Much Money Can You Make With Stocks?

What Is the Number of Stock Trading Days Per Year? « Fadi El-Eter

November 2nd, 2011 at 4:07 pm

[…] writing an article yesterday on how much money you can make with stocks, I was trying to calculate how much money a day trader makes per year provided he makes 0.75% of […]