There is no standard limit that describes your first year's earnings because various factors can affect your earnings. These factors can be your risk appetite, account size, total capital invested, types of trades, strategies, approaches used, and many more. So, what can you expect in your first year of trading? Let's find out today on this page.
The main objective you have started trading in stocks is to increase your wealth by making more money. Your income from trading will help you keep motivated and empower you to learn and grow. But every New trader entering the stock options market has only one question; how much can I make in my first year of trading?
The answer is very variable on how much an option trader can make in the first trading year because everyone has a different portfolio and portfolio management strategies.
The majority of the new options traders jump into trading and invest their hard-earned money into trading without making a stringent trading plan or learning risk management strategies. They learn the hard way that it may seem easy to make a full-time trading career and source of income, but it is not that easy. At AALAP, our main aim is to help you make money by implementing the right approach and helping you bypass the initial losses in your trading life.
What can be the realistic earning expectation by trading in stock options
As we have said above, there is a lack of risk management skills in the new traders, who generally come into the trading with unrealistic goals for the first year. The reason behind their unrealistic and unachievable goal is films, TV shows, online gurus, and friends without any proven history of the trading world. All this leads to high expectations, and they begin trading stock options without any plan or strategy and with unrealistic expectations.
A few curious people ask how much they will make at the end of the year, and a few ask if I will get a 25% return this month. Let us make it clear that it is not possible. Someone might have traded the stock in one rupee 5 years back, which is currently traded at Rs. 250 does not mean the 250% return.
With your starting point being unrealistic, your end will only be a failure. It will be better for you to know the reality now rather than when it is too late. To end your curiosity, let us break the ice and answer your question about how much money you can expect in the first year of your trading. You can expect approx. 20-25% return per year. Don't expect that in a month.
Checklist for New Traders:
If you want to make trading your profession and a full-time career, you must go through the checklist below and learn how to become a successful options trader.
1. Don't repeat the common mistakes: Majority of the new traders make a constant loss and leave the whole trading idea behind. The sad thing is they could have prevented the loss by learning what to do and what not to do in the options market. If they could follow the footsteps of successful traders, then also they had a chance to win a few trades. They could have used a tip or two and invested strategically in the stock options market.
2. Accept the fact that losses are inevitable: Losses are the hard truth, and only a few traders make consistent money. You don't have to feel bad about that. Everyone has fallen off the cycle before learning how to balance. So, as a beginner, be open to the loss, and take that loss as a learning stage.
For example, you might have an options contract that is about to turn against you and will expire out-of-the-money. You will lose all the premiums paid. You can exit from the position by closing the trade and to prevent any further loss on your position. The best thing that will make you different from others is that you are not leaving the trade but instead learning from your mistakes and coming back with a better trading plan.
3. Invest small amounts and start with a paper trade: We always recommend that beginners start trading with paper trades first. Paper trade helps you avoid real money in the market. It helps in learning how to enter the options order, make adjustments on the trades, most importantly, you can find your mistakes and learn what not to do.
As you gain enough confidence from your paper trades, you must start with a small amount. Imagine, if you cannot manage the small amount of Rs. 1000 invested, would you manage Rs. 1,00,000? Thus, we always recommend everyone start with a smaller amount to stay in the market and avoid any stress.
4. Maintain consistency and do not leave: Many people leave trading after failing 4 to 5 times continuously, which is not the right approach, as your first failed trades are the best teachers for you, which makes you know what to do and what to avoid. Winning and losing are parts of the game, the main thing is how you manage your failures, and that's you different from others.
If you are serious enough, here is a piece of advice, write down every single detail you can about your trade, starting from why you chose the specific company to trade, which strategies you used, and why you selected a long position or a short position. How accurate were your predictions? Were they in your favor? Etc.
You cannot predict the price movement in the beginning, and thus there are many strategies you can use without predicting the price movements. You need to learn technical indicators, analysis of charts, and operate various calculators. Above all, the most important thing is to learn how to control your emotions while trading and safeguard your investments.
5. Financial independence cannot come overnight: To further elaborate on the earlier point, you cannot expect a steady income from a small account of Rs. 50,000 and make a steady income that can replace your job. You can only succeed in the trade with consistency without losing. Try to focus on low-risk and high-frequency trading options that are income oriented.
Try to break the thought that you can become a multi-millionaire overnight and make a clear objective in your mind, and no one can stop your success. You should see trading as a long-term profession instead of a hobby and remember your hard-earned money is involved. Improve your focus, be determined, and make trades without being emotionally attached to them because the ultimate goal is to make money.
6. Trust the facts for developing strategies: The most effective method to get success in options trading is to develop a strong trading strategy. Do not always rely on the gut feeling, instead take some time for market research, and make use of all available resources you need, there are unlimited resources available at your fingertips. Just type and get it in whatever form you want, podcast, video, e-book, and many more. This research will help you set achievable goals, and the knowledge will allow you greater insights to avoid mistakes. Above all, try to keep your emotions out while developing the strategy for your position.
Another method can be properly organizing your research, selecting any of the websites, subscribing to its newsletter, and updating your perspective.
If proper research becomes your habit in the initial trading times, it will help you in the long run. Later you will be able to quickly identify the opportunity to trade and become alert where you have to exit.
Always base your research on the facts to develop a deep understanding of realistic earnings expectations. You may find your initial days difficult, but keep trying, be consistent, and you will be able to develop the most effective trading strategies to make money.