How to Pay Yourself as a Day Trader? 4 Methods

Do you ever ask yourself how you should pay yourself as a day trader? At the end of the day, you want to make money day trading.

The truth is, as a day trader you don’t get paid a salary like a normal employee, unless you work at a firm. As a retail day trader, you profits depend on your performance, and there is no guarantee that you make money every day.

So a day trader, you need a system to withdraw profits from your work, to cover living expenses.

Let’s go over a few systems that help you pay yourself as a day trader.

1. Pay Yourself the Daily Profits

Pros

• Helps reduce risk
• Provides a regular income
• Compound profits over time

Cons

• Limits the amount of profits available
• Increase taxable frequency

A lot of traders make the decision to pay themselves on a daily basis. Whatever is made for that given day, they withdraw it from their brokerage account and into their bank account.

2. Pay Yourself a Percentage of Daily Profits

Pros

• Reduces risk
• Provides a regular income
• You can slowly compound your profits and your brokerage account

Cons

• Reduces the limit amount of money you can make day trading
• Increase taxable frequency

This method of paying yourself as a day trader, is a bit more flexible as it allows you to compound both your profits, and the value of your brokerage account. If you’re not in a rush, to grow quickly, this may be a nice approach for you.

3. Set a Target Profit

Pros

• Helps limit losses
• Can help you overtrading
• Helps you stay disciplined

Cons

• Limits your profit making amount
• Less flexibility in your day trades
• May lead to taking profits too early

This type of payment to yourself as a day trader is when you set a profit target, and you withdraw the amount once it has been made.

For example, your goal is to make $1,000 and to withdraw those $1,000 wether it’s made in a day or the next couple days.

4. Set a Payment Date

Pros

• High profit making amount

Cons

• Difficult to predict outcome.
• Inconsistent profits

Some people like to pay themselves on a specific date as a day trader. Some prefer on a weekly, bi-weekly or monthly basis.

This type of payment to yourself, allows you to maximize your profits because you have a higher liquidity pool of money to day trade with.

But this comes at the risk of unpredictable and inconsistent outcomes. You’ll have to deal with economic or global event that can wipe a majority of your profits.

For those who practice great risk management skills, this can be a great method to pay yourself as a day trader.

Conclusion

Ultimately, the decision to pay yourself on a set profit target, daily percentage or even a set payment date as a day trader is a personal one. There is no right or wrong answer here, and the best approach will depend on your circumstances and day trading goals.