How much should a "good" trader earn?

AllenZ · Nov 26, 2003

If you make your living as a trader you will typically find that at least 50-60% is eaten up by taxes and ideally, retirement savings. Another 20% would be nice to grow your account with leaving maybe 20-30% to live on.

So even if you are making possibly 250k a year trading you are living the lifestyle of someone taking home 50k per year. Keeps things in perspective.

AllenZ

gms · Nov 26, 2003

Quote from Tea:

How much wood would a wood-chuck cut if a wood-chuck could cut wood?

Sadly, 90% of beginning woodchucks chuck woodchucking.

vikana · Nov 26, 2003

It's easy to focus on "how much" one should be making. In reality that's a waste of time and you'll end up comparing yourself to others in stead of improving yourself.

For the handful of good prop traders I know, the consensus seems to be that 250k on a 100k (prop) account is considered "good".

I try to focus on making good trades and let the money take care of itself. I've had both small and large years, but that's how the game is played. Focusing on "must make $100k" will distract you from the current reality (read potential) of the markets

Cheese · Nov 26, 2003

What a good trader earns .. sorry, this is where the perception is counter-productive.

Capital + net gains = larger capital + larger net gains = compound multiplying capital = large fortune. Now you are there.. you've won. Capital and gains less big/smaller 'earnings' for living expenses = foot soldier forever. Now why would anyone want to jack away the rest of his life as a foot soldier always trading.

Going somewhere. If, "yes". Get there.

USAtrader · Nov 26, 2003

Gotta contrast on that one.

That someone making 250 as a trader is living the lifestyle of someone who does 50k. Don't agree.

A TRADER making 250k, if paying 50-60% in taxes, needs a new accountant (unless my calculations are way off, which I'm sure you'll correct me if they are). But let's assume that person is paying 50% total. That leaves 125k for guy A. And guy B, the trader who earned 50k, after taxes is left with, say 40k or so.

So after taxes A has 125k, B has 40k.

Assuming they're both living around any major city, guy B will not be able to afford the luxuries guy A will be able to.
Guy A can get a nice apartment, maybe even lease a nice car, have spending money, and still have, say, at least what guy B was left with after taxes, to save.

Guy B has to be tight with his money, and even if he is, again, living in a major city, he'll have little left to save.

SO a few years later guy A is sitting with low six figures in his bank account, while guy B has low end 5 figures.

Of course, money is not nearly everything, but that's what particular discussion is about.

These seem like major differences to me. Am I missing something?

ElectricSavant · Nov 26, 2003

Quote from Cheese:

What a good trader earns .. sorry, this is where the perception is counter-productive.

Capital + net gains = larger capital + larger net gains = compound multiplying capital = large fortune. Now you are there.. you've won. Capital and gains less big/smaller 'earnings' for living expenses = foot soldier forever. Now why would anyone want to jack away the rest of his life as a foot soldier always trading.

Going somewhere. If, "yes". Get there.

Perhaps, however after you get there would it be wrong to reduce your trade size and trade for the love of it?

When is enough .....enough......could a trader transfer capital slowly to a conservative vehicle from futures trading for example.

Schizophrenia is key to this. If you know you have a lot of money would it cause an inflated confidence? Would it be valid to transfer money and not believe you are wealthy or have enough to stay motivated and "in" what you love?

Michael B.

ChartingMarkets · Nov 26, 2003

Quote from AllenZ:

If you make your living as a trader you will typically find that at least 50-60% is eaten up by taxes and ideally, retirement savings. Another 20% would be nice to grow your account with leaving maybe 20-30% to live on.

So even if you are making possibly 250k a year trading you are living the lifestyle of someone taking home 50k per year. Keeps things in perspective.

AllenZ

Ok have to chime in here as well. I almost fell over laughing on this post. So your saying that someone who makes 250k a year is living the lifestyle of someone taking home 50k per year? Hmm thats a pretty silly statement to make. I would rather you have said it this way, instead. Someone making 250K a year trading gross is making the the same as someone who is making 250K a year gross digging ditches. IS THE TAX RATE DIFFERENT FOR SOMEONE TRADING THAN IT IS FOR A WORKER? NO! If you're making 250k a year trading you're making the same 250K a year as a guy working a desk job, everybody pays taxes! Both have their taxable writie offs and 401k plans/retirement plans so take that out of the equation. Your post was just so completely silly and not thought out I had to reply to this. Have a good day!

DHOHHI · Nov 26, 2003

Quote from AllenZ:

If you make your living as a trader you will typically find that at least 50-60% is eaten up by taxes and ideally, retirement savings. Another 20% would be nice to grow your account with leaving maybe 20-30% to live on.

So even if you are making possibly 250k a year trading you are living the lifestyle of someone taking home 50k per year. Keeps things in perspective.

I have to disagree. Lots of variables to consider. But first, how is making $250K trading any different than making $250K as an attorney, executive, dentist, etc.?? To me $250K is $250K and the profession is irrelevant. Next, I think your tax rate is too high at 50-60%. Personally, I have no reason or desire to grow my account as far as what I trade with on a daily basis. With margin I have more than enough money to trade each day so having more $$$ of my own in the account isn't what I prefer. I'd rather use someone else's money and close out the positions by the end of the day.

icarus618 · Nov 26, 2003

Quote from ChartingMarkets:

* * *

IS THE TAX RATE DIFFERENT FOR SOMEONE TRADING THAN IT IS FOR A WORKER? NO! If you're making 250k a year trading you're making the same 250K a year as a guy working a desk job, everybody pays taxes!

* * *

I'm with you on the spirit of your post. Just a minor correction, however.

I trade futures and there is a little thing called the "60/40" rule that allows me to treat 60% of my gains as long term capital gains which is, thanks to George W, taxed at a flat 15%. The other 40% is taxed just like ordinary income. It's quite a nifty rule and saves me a lot over a desk job.

Another nifty rule is that I don't pay FICA tax, which I paid at my old desk job to the tune of about 7.5%.

I do pay for my own health insurance, but it's not that bad. About $200/mo. Retirement money is not an issue; in a way I retired when I decided to trade full-time.

All in all, I'd say even if I made the same as at my old desk job, I would still be better off in terms of money. Even if I made less, I would still trade for a living. There's no comparison.

Guardian Angel · Nov 26, 2003

Quote from Cutten:

In your opinion, what annual income would qualify as "good" for a trader?

Day trader: canibus journal
Swing trader: t-rex journal
All around: marketsurfer surf report

depending on the timeframe one should strive to do as good as the above gentlemen.

i to strive for such perfection.
i will probably never be able to achieve the same results as the above mentioned but i'm still confident.