Have you ever considered if starting day trading with just $1000 could sustain your livelihood?
Have you taken the risk of flipping your trading account?
Or perhaps you’ve experienced the downside, over-leveraging and losing everything on a single trade?
In this blog, we’re going to explore a commonly pondered question: Can you make a living day trading with only $1000?
We’re going to look at some number-based scenarios and psychological factors vital for anyone looking to thrive in day trading.
Additionally, we’ll compare this to trading with a simulated funded trading account.
But before we delve into it, let us learn what is Day trading and why you should consider starting Day trading in the first place.
Table of Contents
What is Day Trading?
Day trading is a quick trading style where traders buy and sell financial instruments within the same day to profit from short-term price changes.
Day traders prioritize immediate gains from market swings over the long-term value of any given instrument.
What are the Benefits of Day Trading?
Day trading is like jumping into a fast-moving river. It’s exciting, and a bit risky, but can be rewarding if you know how to swim.
Here’s why giving day trading a try could be a great idea.
Be Your Own Boss
Day trading lets you call the shots. You decide when to trade and for how long, offering flexibility that’s hard to find in regular jobs.
It’s perfect for anyone who wants to manage their own time and not be tied to a 9-to-5 routine.
Quick Results
Unlike investing in stocks or real estate, which can take years to pay off, day trading gives you the chance to see how you’re doing right away.
This means you can quickly learn what works and what doesn’t, helping you get better over time.
Learn A Lot
Day trading isn’t just about making money; it’s also a fantastic way to learn about financial markets, economics, and even a bit of psychology.
It’s a continuous learning journey that can make you smarter about how money works in the world.
Make a lot of Money
Day trading offers the potential to earn quick money by capitalizing on short-term fluctuations in the market.
Imagine you’re working a typical 9-5 job, where you earn a steady paycheck at the end of each month.
Now, contrast that with day trading: On a good day, you could potentially earn what you make in a week at your job in just a few hours.
This possibility of making quick gains is what makes day trading an attractive alternative to the slower, more consistent income from a traditional 9-5 job.
Build Emotional Strength
Day trading can be a rollercoaster of highs and lows.
Learning to keep a cool head when things get hectic is a valuable skill, not just for trading, but for life in general. It teaches you to handle ups and downs with grace.
But, Be Careful!
It’s important to remember that day trading isn’t a guaranteed way to make money. It can be risky, and it’s possible to lose money as well. Starting with a good plan, learning as much as you can, and trading wisely is the best way to go.
Can you make a living from day trading with only $1000?
Now this brings us to an important question: Is $1,000 capital enough to consistently make a living from day trading? Let’s explore this through a hypothetical scenario to gain some clearer insights.
Scenario 1: Day Trading with a $1000.
An initial deposit of $1000 in your trading account.
Your Trading Plan?
- With a rule to only risk 0.5% of your capital on each trade
- To maintain a minimum 57% win-rate
- With a plan to gain twice as much as you risk so with a Risk-to-reward of 1:2
- By executing 2 trades each day for 22 trading days in a month
Using these figures, the capital for the first month would become: $1125.4
With a 12.54% compounded monthly gain, starting with $1000, the figures for each month over a year would be:
From our calculations, it’s clear that with a starting balance of $1000, achieving a consistent monthly return of 12.54% compounded over a year can result in a profit of $3127.46.
From this assumption, we can say that achieving $100 a day from day trading is possible if you consistently compound your account of $1,000 over seven months.
This goal demands a reliable trading strategy and strict risk management.
Nonetheless, maintaining emotional control and extreme discipline is crucial, making this target somewhat challenging to sustain over the long term.
This scenario assumes that you do not make any withdrawals and that you’re able to maintain this rate of return every month, which is an optimistic outlook.
In reality, it’s unlikely that each month will deliver identical profits.
The two key insights from Day Trading a $1000 trading account
Time: Our calculation showcases growth over a year, but to truly live off trading returns, one would need to amass a much larger capital base, requiring several years of disciplined trading and compounding.
Scale: The initial capital of $1000, even with a 12.54% monthly return, would not generate enough in absolute terms to cover living expenses, especially without withdrawing any profits to actually “live” off of.
How does Day Trading Affect the Psychology from Trading Undercapitalized Accounts?
This is where the challenge lies.
It’s common to experience a strong emotional reaction to the ups and downs of trading, leading to unrealistic expectations.
A single setback might tempt you to chase after higher profits by taking greater risks, which can jeopardize your entire account.
Maintaining steady discipline in the face of such setbacks is psychologically demanding.
It takes considerable mental fortitude to adhere to a consistent strategy all year round without faltering with a $1,000 capital in the trading account.
The minimum trading capital to start Day trading with to make a living off of would ideally be $10,000.
With an initial capital of $10,000 and a compounded monthly gain of 12.54%, the total amount at the end of one year would be approximately $41,274.61.
This would allow you to make regular partial withdrawals and still be able to compound a decent capital in 12 months.
Scenario 2: Day Trading with a $200,000 simulated funded Trading Account
(As it costs an average of approximately $1,000 to get a 200k challenge at any evaluation firm)
A starting balance of $200,000 in your trading account.
Your Trading Plan? (same)
- With a rule to only risk 0.5% of your capital on each trade
- To maintain a minimum 57% win-rate
- With a plan to gain twice as much as you risk so with a Risk-to-reward of 1:2
- By executing 2 trades each day for 22 trading days in a month
Now this time, we will also take into account that you are withdrawing 50% of your profits generated each month.
With a 50% withdrawal of the profits each month, starting with an initial capital of $200,000 and a compounded monthly gain of 12.54%, the breakdown of your capital at the end of each month over a year would be:
By getting a simulated funded Trading account, a trader can make much bigger returns.
Starting with $12,540 in the first month and reaching $24,480 in the twelfth month, this shows what you can achieve by withdrawing 50% of your profits each month, with a 12.54% return compounded annually.
These earnings can then be put back into their personal trading account, giving them more money to trade with.
To wrap up
We trust that this blog has provided valuable insights and a fresh viewpoint on managing small capital trading accounts.
Successful day trading demands stringent adherence to your trading strategy and risk management, as well as robust emotional discipline to ensure long-term profitability.
Nonetheless, relying on a $1000 trading account as a primary source of income is not practical.
Conversely, utilizing a simulated funded trading account presents a viable option for earning a respectable income.
