How much can you make trading stocks?
It’s no secret that you can earn millions trading in the stock market. There are plenty of ‘rags to riches’ stories where amateur traders start from rock bottom and work their way to the top through hard work and dedication. And indeed, if you start from an early age with a solid investment plan and steady fool-proof strategy, you can certainly build an impressive amount of wealth by the time you reach your golden years.
Although it is entirely possible to become a millionaire by trading stocks, it largely depends on how much disposable capital you already have and how much you have invested. Time is also a crucial factor at play here as many returns are made through the slow and steady method of investments.
So, how much money can you really make by trading stocks as the average trader?
How much exactly?
In the UK, a trader’s salary sits at an average £37,800 per annum. However, that doesn’t include bonuses or returns made through day trading in the stock market. As such, you’re going to need to work hard and consistently to keep delivering consistent profits for yourself – and your clients.
Historically speaking, the stock market delivers an average return between 7% to 10% based on a 100-year study of the stock market. This figure can fluctuate dramatically from year to year, sometimes worse while other times better, hence the need to invest long-term and sit patiently as you gradually build positive results.
However, it is important to note that you won’t generate 7-10% each and every year, but rather the overall average return rate over a long stretch of time. It is estimated that somewhere between 10 to 15 years is the milestone you need to reach before seeing this impressive return on your investment.
Why is investing in the long-term better?
Because of this historical average, you can mitigate against major risks in the stock market. Investing in the long-term is always the safest option. Although it is not a 100% guarantee, it is far safer than day trading, for example, where you are expected to make small and quick wins within one trading day.
The only downside to investing long-term in this manner is that you won’t have access to those funds for a decade or more. Therefore, you need to already have accumulated some degree of impressive capital in order to ensure you have enough funds to support yourself while your money is in the stock market.
Another bitter pill to swallow is that it still might not work out in your favour. The market can still move against you. It can be unpredictable and volatile where even the most well-trained veteran traders could not have predicted the plunge. Still, compared to other trading strategies, investing long-term is always the safest approach.
On way to boost your success rate is by investing in dividend stocks. This can be like a pot of gold for traders as an estimated 40% of all the stock market’s gains is said to come from dividends.
It isn’t the most exciting way to participate in the stock market. And in the short-term, dividend payments may seem completely insignificant. But history shows us that dividends are enormously advantageous. Take for instance one study by Bloomberg conducted in the 10 years to the end of 2016: while profits remained at around 15% when dividends were not utilised, the total return shot up to 67% when dividends were included.
Dividend stocks can hold all the answers. When stock prices begin to strain and struggle, dividends can make up for any losses, and actually serve to contribute a lot more in the total return over time. Some traders even consider dividends an absolute must if you’re looking to generate passive income and protect yourself from unpredictable market volatility.
What skills are needed to trade stocks?
It is without a doubt that the more skills a trader has, the more opportunity they have to rake in a lot of money.
Knowledge is at the heart of a successful trading story. You need to have an in-depth understanding of the stock market and study its history to identify – and mitigate – against common mistakes.
A typical trader will have honed the following skills:
- Mental discipline
- Autonomous thinking
- Finance and economics
- Ability to work under pressure
Invest in your education
Although stock trading can largely be self-taught online, investing in an accredited financial trading course is the best first step when it comes to acquiring the above skills.
A Level 5 Financial Trading Diploma will teach you everything you need to know about trading, from technical analysis, the different financial products, economic principles and money risk/management to psychology such as emotional intelligence and trading emotions. This certification will no doubt prepare you for a successful career in stock trading – and is well worth the fee as the costs you pay to invest in your financial education will no doubt be returned to you through the stock market with your new found knowledge and experience.
Can I become a millionaire trading stocks?
Becoming a millionaire through trading stocks is clearly possible – some can even reach the milestone in a shorter timeframe by adopting the right strategies early on.
However, it’s clear the only way to get there is through the right financial course which is designed to teach you every strategy and methodology. You need to be willing, and financially able, to invest in the stock market in small amounts and on a regular basis. And with the right risk-management strategy, you can turn to day trading, options trading and futures contracts to really boost your income and diversify your portfolio.
In other words, you can become rich from stocks, but you must be devoted to your ambition.