Stock trading in India – How much can you earn?
According to data, full-time traders in India can earn a salary of anywhere between ₹4-10 lakhs on an average, with these numbers going up to ₹20-50 lakhs for the top-of-the-class participants. For those pursuing trading with their own capital, a return of 2-5% per month on their invested capital is considered average.
Trading in the Indian stock market is a lucrative but challenging endeavor that has attracted the attention of many individuals seeking to earn a substantial income. However, it's crucial to approach trading with a realistic outlook, understanding that while there are opportunities for significant profits, there are also substantial risks involved. In this article, the experts at TU will explore the earnings of traders in India, considering two primary approaches – trading as a full-time job and trading as a form of investment. Further, they will also delve into the factors that determine trader earnings, the level of success among traders, and strategies to achieve consistent profitability.
Trading as a job
A trading job refers to the professional role of individuals employed by financial institutions, proprietary trading firms, or investment banks to execute trades on behalf of their employers. These professional traders are responsible for buying and selling financial instruments with the aim of generating profits for their firms.
In terms of compensation, the average salary for traders in established financial institutions can vary widely based on experience, expertise, and the institution's size and location. Data suggests that entry-level traders can earn annual salaries in the range of ₹4-10 lakhs, while experienced traders, especially those dealing with complex financial products, can earn significantly more, often reaching ₹20-50 lakhs or more. Bonuses and performance-based incentives are also a common component of trader compensation, which can substantially increase overall earnings.
Professional traders in this role often face high-pressure environments, stringent risk management rules, and the expectation of meeting profit targets. Their trading activities are closely monitored, and success is measured not only by trading profits but also by adherence to risk parameters and risk management strategies.
Trading as an investment
Trading as an investment involves individuals trading their own capital in financial markets with the goal of personal financial growth and wealth building. These traders are not employed by companies to trade on behalf of others but instead allocate their own funds for trading.
Income from trading as an investment varies widely and depends on the trader's skill, risk tolerance, and the size of their trading capital. On average, traders who invest their own capital can aim for annual returns that range from 10% to 30% or more, though the average return for this class in India is anywhere between 2-5% per month. However, it's important to note that trading as an investment carries a higher degree of personal risk, as traders are responsible for their own financial success and bear the full consequences of their trading decisions.
Traders who pursue trading as an investment enjoy a high degree of independence and flexibility, as they can choose their trading strategies, assets, and time frames. While there is potential for substantial income and capital growth, trading as an investment requires discipline, continuous learning, and effective risk management to mitigate potential losses.
How to earn 500 per day in the share market?
To achieve a daily income of 500 rupees in the stock market, experts suggest adopting a specific strategy tailored to this objective. The primary focus of this strategy is on generating consistent profits by concentrating on small gains through multiple trades in a single trading day.
One of the fundamental strategies employed by day traders in India is targeting smaller profits through numerous trades in a trading session. The rationale behind this approach is that expecting a 2-3% profit on a frequent basis in a single trade is quite challenging. Instead, traders concentrate on securing smaller profits but increase the frequency of their winning trades.
The key principles of this strategy are as follows:
Exposure to short time frames
Day traders limit their exposure to the dynamic stock market by operating on shorter time frames. This approach minimizes the probability of encountering adverse market events and allows traders to adapt swiftly to changing market conditions.
Small price movements
The strategy capitalizes on the fact that it is easier for a stock to make a small price move, such as 2 to 4 rupees, rather than attempting to achieve larger price swings, like Rs 20-30, in a single trading session. Smaller price movements are more frequent, even when the market is range-bound, providing multiple trading opportunities throughout the day.
Booking profits
The most critical element of this strategy is the practice of booking profits whenever an opportunity arises, rather than holding onto positions hoping for larger gains. By consistently taking profits, traders accumulate a series of smaller wins, ultimately contributing to a substantial daily return.
Implementing this strategy allows traders to aim for the daily income goal. However, discipline, risk management, adherence to stop-loss levels, and minimizing trading costs are essential considerations. Further, accounting for various fees, such as brokerage fees, GST, etc. is also vital. Finally, traders must do their own research and evaluate the applicability of this strategy in line with their own financial goals before stepping into the realm of day trading.
How much money can you make day trading with 1000?
For beginners, commencing their trading journey with just 1000 rupees is indeed possible, however, it's crucial to manage expectations. While it provides an opportunity to learn and gain experience in the market, it's unrealistic to expect that this modest capital can replace a full-time job and guarantee a sustainable income to cover your expenses.
Starting with 1000 rupees can turn out to be a valuable learning experience, as even if one incurs losses, the financial impact wouldn’t be substantial. In the early stages, the primary goal should be to refine one’s trading skills, understand market dynamics, and develop a winning strategy. Once the ability to consistently generate income is developed, increasing the capital and venturing into the full-time trading club can be considered.
How many traders are successful in India?
Based on the data analyzed by the Securities and Exchange Board of India (SEBI), the success rate of traders in India, specifically in the futures and options (F&O) segment, appears to be relatively low. Out of a sample size of 45.24 lakh individual traders in FY22, only 11% were able to generate profits.
To put it in perspective, out of the 39.76 lakh individual active traders (those who traded in the equity F&O segment more than five times during the year), only 11% managed to make profits. This means that approximately 89% of individual active traders incurred losses during this period.
It's worth noting that the number of unique individual traders in the F&O segment saw a significant increase of over 500% from 7.1 lakh in FY19 to the reported 45.24 lakh in FY22. This surge in participation could be attributed to the increased interest in the derivatives market, especially during the Covid-19 pandemic.
However, despite the growing number of participants, the percentage of profit-making traders has decreased from 13% in FY19 to 10% in FY22. The average loss incurred by the 89% of traders who reported losses during FY22 was Rs. 1.1 lakh, while those who made profits averaged Rs. 1.5 lakh.
Interestingly, the data also shows that a small percentage of top traders, specifically the top 1% and top 5% of active profit makers, accounted for a significant portion of the total net profit earned by all active profit makers. The top 1% accounted for nearly 51% of the total net profit, while the top 5% contributed to approximately 75%.
Best brokers in India
Key Skills Required for Day Trading in India
While having adequate capital is important, day trading success depends predominantly on developing the right set of skills. Here are some of the core abilities one must focus on cultivating:
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Technical Analysis - Understanding charts and patterns to identify trends and make well-informed entries/exits is fundamental. Traders must learn tools like candlestick patterns, indicators, and trend/breakout analysis
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Discipline - Strictly adhering to a proven trading plan and not letting emotions influence decisions is key. This involves placing predefined stop-losses and profit targets consistently
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Risk Management - Every trade must be backed by a comprehensive risk analysis. Traders should learn techniques like position sizing and hedging to minimize risks from market fluctuations
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Flexibility - Being able to adapt strategies based on changing market dynamics is crucial. Strategies that worked in bull phases may not be effective in bear trends
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Focus - Day trading demands full attention during market hours. Traders must learn to screen out all distractions to capitalize on short-term opportunities
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Patience - Scores of losing trades are inevitable, so one must practice patience and accept small, consistent gains rather than chasing targets quickly
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Self-Awareness - Understanding one's psychology, strengths, weaknesses, and limits helps take trades tailored to individual skills and risk profiles
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Continuous Learning - Markets evolve constantly, so day traders should dedicate time daily for technical and derivative learning via courses, seminars, or mentorship
Maintaining these skills through regular practice can help Indian traders overcome challenges and achieve consistent success in day trading. With experience, these skills also help identify profitable trading styles.
Summary
As per data, full-time traders in India can earn a salary of anywhere between ₹4-10 lakhs on an average, with these numbers going up to ₹20-50 lakhs for the top-of-the-class participants. For those pursuing trading with their own capital, a return of 2-5% per month on their invested capital is considered average. It is possible to earn 500 rupees per day from trading in India, however, it requires following a strategy with discipline and employing strict risk management techniques. Further, traders can also test the waters with an initial capital of 1000 rupees and develop their trading skills. However, expecting high returns out of such modest capital would not be practical. Finally, only a small proportion of active traders in India are actually profitable. Hence, trading should be pursued with caution and after consideration of one’s financial situation and goals.
FAQs
How much money do day traders make?
According to experts, day traders can make anywhere around 2-5% on their investing capital per month in India. However, data suggests that only a small proportion of active traders are actually profitable in the country.
Can I earn 2000 daily in intraday trading?
Earning 2000 rupees daily in intraday trading is possible. However, traders must evaluate the profit goals in line with their invested capital, risk-taking ability, and overall financial goals.
Is day trading a job?
While most of the day traders are individuals employing their own capital for trading, day trading can also be pursued as a job. Employers for this role primarily include investment banks, prop trading firms, and other financial institutions.
Can I become millionaire by trading?
It is possible to become a millionaire by trading, though the chances of that happening are extremely slim. Data suggests that the majority (80%+) of active traders lose money in the markets. So to become a millionaire by trading, one must be the top-of-the-class and possess extraordinary skills relative to other traders.
Team that worked on the article
Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data. He is also an educator in the field of finance and technology.
As an author for Traders Union, he contributes his deep analytical insights on various topics, taking into account various aspects.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).