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So, how much can you make from stocks in a month?
There are quite a few ways to make money from stocks every month:
- Day trading (i.e. you are buying and selling stocks within the same trading day, meaning all your positions are closed before the market closes for the trading day)
- Swing trading (i.e. you are trying to capture short- to medium-term gains in a stock over a period of a few days to several weeks)
- Scalping Stocks (i.e. you are trying to profit off small price changes in stocks)
Before we talk about how much you can make from stocks in a month, you need to understand that there is ALWAYS risk in trading stocks.
Yes, it’s true that when it comes to the earning potential of trading stocks, the sky is the limit.
Here are some real-life examples of people who have made millions from stocks in just days or weeks:
- A Japanese day trader known as CIS made $34 million during the 2008 financial crisis and frequently makes millions in just hours day trading stocks.
- Famous penny stock millionaire trader Timothy Sykes turned $12,415 into $5,237,584 in a few years
But, it’s also possible to lose some of your trading capital or maybe all of it.
So, while trading could be very lucrative, you have to bear in mind that the risk is also very real.
Factors That Determine How Much You Can Make From Stocks In A Month
So, how much you can make from stocks every month really depends on a number of factors.
Factor #1: Your Capital
First of all, the amount you can make from trading stock depends on your trading capital.
When you start with more trading capital, you can take a bigger position per trade and thus make more money if the trade works out in your favor.
Here’s an example.
Assuming that you are only risking 1% of your trading account for every trade and you have a total of 10 winning trades and 5 losing trades in the month.
If you have a trading capital of $30,000, you risk $300 per trade (which is 1% of your capital) to make $600.
Total profit is $6,000
Total loss is $1,500
Net profit for the month: $4,500
On the other hand, if you have a trading capital of $1,000, you risk $10 per trade (which is 1% of your capital) to make $20.
Total profit is $200
Total loss is $50
Net profit for the month: $150
As you can see from the above, you will be able to make more every month with a larger amount of trading capital.
Factor #2: Your Trading Strategy
Next, your trading strategy also plays an important role in determining how much you can make trading stocks.
To make money from stocks, you MUST have a profitable trading strategy.
This is quite obvious.
Now, how profitable is this trading strategy?
To answer this question, you need to know the following:
- Win Rate (i.e. win/loss ratio)
- Average Win Per Trade
- Average Loss Per Trade
- Frequency of Trades
The win rate refers to the percentage of your winning trades out of total trades.
For example, if you have a total number of 100 trades with 65 winning trades, then your win rate will be 65%.
Now, what is your average win per trade and your average loss per trade?
Before you place a trade, you should always plan your stop-loss and take-profit.
Stop-loss is the maximum risk you are willing to take for the trade.
Take-profit is the profit target that you have for the trade.
Let’s say, for every trade, you set a stop-loss of $50 and a take-profit of $100.
Then, for your trading strategy, your average win will be $100 while your average loss will be $50.
So, why do you want to know your win rate and also your average win and average loss per trade?
Because you can calculate the expectancy of your trading strategy using this information.
The expectancy of your trading strategy shows what the typical profit is for each trade placed.
If it’s negative, the strategy is loss-making.
If it’s positive, the strategy is profitable.
Here’s the formula for the expectancy of your trading strategy:
(Win % x Average Win Size) – (Loss % x Average Loss Size)
Let’s continue from the example above.
You have a win rate of 65% and a loss rate of 35%.
Your average win size is $100 while your average loss size is $50.
The expectancy of your trading strategy is, therefore, equal to $47.5 which is ($100 x 65% – $50x 35%).
Now, what does this mean?
This means you will make an average of $47.5 per trade with this trading strategy.
So, you already know that a positive expectancy means that the trading strategy is profitable.
The higher the expectancy of the trading strategy, the more profitable it is.
Now, let’s say you have a profitable trading strategy.
Is it guaranteed that you will make a lot of money every month trading this strategy?
Unfortunately, it’s not.
If there are only very few trading opportunities for this trading strategy every month, then your profits will be affected.
For example, let’s assume that you only have 5 trades a month based on this trading strategy.
If you only make an average of $47.5 per trade, then you will only make $237.5 that month.
Generally, you want to have a reasonable number of trades that you can take every month to let the probability play out and make more money from trading your profitable strategy.
Factor #3: Your Trading Skill
The third factor that determines how much you can make from stocks every month is your trading skills.
When we talk about trading skills, it means a lot of things:
- Ability to keep your emotions under control
- Have the discipline to stick to your trading plan
- Good risk management skills
- Good money management skills
You see, people might have different results even if they are given the same profitable trading strategy.
This is just the same as not all students get the same grades even though they have the same teacher and have access to the same learning materials.
To make money from trading stocks, you must follow the trading strategy and not let your emotions get in the way.
Here are some common reasons why people are not profitable trading stocks:
- Not cut your losses when you should (i.e. fear of loss)
- Revenge trading to win back your loss by taking more risk than you should (i.e. anger & frustration)
- Trade too big a position (i.e. poor risk management)
- Take profits too early and not let it run according to their trading plan (i.e. no discipline to stick to the plan)
So, even though you might have a profitable strategy, you still have to master trading psychology as well as money and risk management to make money from stocks.
Factor #4: Leverage You Use
Lastly, it’s the leverage that you use which also determines how much you can make from stocks every month.
Leveraged trading allows you to take a trading position much larger than your own capital.
For example, if you have $10,000 in your trading account, without leverage, you can only buy up to $10,000 worth of stocks.
With leverage, you can buy more than 10,000 worth of stocks.
So basically, you are borrowing money to trade stocks.
Leverage usually refers to the ratio between the total value of your trading position and the capital you need to fund this trade.
For example, a leverage ratio of 1: 2 means that you can buy up to $20,000 worth of stocks if you have $10,000 in your trading account.
Leverage is a double-wedge sword.
If you have a profitable trading strategy and you can manage your risks and emotions well, then it’s a good idea to use leverage to increase your return on your stock trading and make more money.
On the other hand, if you cannot manage your risks well, it can make your trades riskier and cause you to lose money much faster.
Now, let’s take a look at how leverage can affect how much you can make (or lose) from stocks.
Scenario #1: Without Leverage
Let’s say that you bought 10 shares of Apple shares at $200 and sold it at $205.
Without any leverage, you would make a profit of $50.
Scenario #2: With 1:10 Leverage
Now, if you are given leverage of 1:10, you could have bought 100 shares of Apple shares at $200 and sold it at $205 with exactly the same amount of capital in scenario #1.
And your profit would be $500.
So, you can increase your stock trading profit by 10 times with 1:10 leverage.
However, the converse is also true.
If you make a losing trade, your loss would be multiplied by 10 times as well if using a 1:10 leverage.
Generally, profitable traders are all using some degree of leverage in trading to help them make more money per trade.
But, if you are just starting out, it’s not a good idea to use leverage.
Now that you understand all the factors that affect your monthly income from trading stocks, let’s dive into some more specific questions.
Can You Make A Full-Time Monthly Income From Stocks?
If you are reading this post, the chances are that you are either trying to figure out if stock trading can generate a consistent full-time income and help replace your day job or you want to know if it’s worth your time going into stock trading on the side.
So, can you really make a full-time monthly income from stocks?
The short answer is yes.
But it’s not going to be easy.
If stock trading is the ONLY way for you to earn an income, then you might be under a lot of pressure to perform (i.e. make money every single trade)
When you are in this kind of mental state, it would affect your trading if you cannot keep your emotions under control.
Next, when it comes to trading, there are bound to be losing trades and maybe losing months.
So, what that means is that you might be averaging a decent monthly income for the entire year, but you might have one or two months that you don’t make money at all.
Are you prepared for this?
Now, let’s look at some numbers.
Let’s say a full-time monthly income you are looking for is $5,000 a month.
What that means is that you are looking to make about $170 per day on average.
So, if your trading strategy has an expectancy of $ 170 per trade, then you can expect to make $5000 a month with at least one trade a day.
Of course, you can further increase your trading profits by using higher leverage and putting in more trading capital.
Recommended Trading Software
TradingView is my No.1 choice when it comes to trading software for stock analysis.
It’s very user friendly, and the design is very intuitive and visually pleasing too.
Unlike some stock trading software that has a steep learning curve, you will find TradingView very easy to use even if you are just a beginner trader.
Next, it covers a wide range of markets such as stocks, futures, bonds, forex, cryptocurrency, and indices.
So, if you are trading more than one market, you will find TradingView very useful because you can do your trading research and analysis all in one place.
How convenient is that!
Personally, I use it to analyze stocks, forex, and indices charts.
It really saves me a lot of time switching between different brokers’ trading platforms.
Bear in mind that, some stock trading software only caters to the stock markets in specific countries.
For example, Spider trading software is designed exclusively for the Indian stock market.
For TradingView, it covers almost all the international stock markets.
Whether you are trading the US stock market, the HK stock market, or the Indian stock market, you can simply input the stock symbol to retrieve the stock charts and all the other relevant stock information.
Now, when it comes to trading analysis for stocks, stock screeners are essential.
Inside TradingView, you can choose from quite a number of filters such as
- Stock market by country
- Most capitalized
- Volume leaders
- Top losers
- Top gainer
- All-time high
- All-time low
- New 52 week high
- New 52 week low
- Earnings this week
What is cool is that it also allows you to choose from a huge number of different column setups to compare and analyze the stocks.
For example, if you want to look at the fundamentals of the stocks, you can select fundamental filters such as valuation, income statement, margins, or balance sheets.
If you want to look at the technical analysis of the stocks, you can select from all the available indicators.
Speaking of indicators, TradingView has a wide range of technical indicators that you can use to do your technical analysis.
If that is not enough, you can create custom indicators and run them on its servers using TradingView‘s very own scripting language called Pine Script.
What if you want to design and backtest your own trading strategy, you can use Pine Script to do it, too.
Another cool feature of TradingView is that it has a huge and engaging traders community where you can follow the top traders or chat with fellow traders.
Lastly, you can trade through TradingView because it integrates with a lot of brokers such as Oanda and TradeStation.
The best part is that it has a FREE plan which allows you to use most of its powerful charting tools.
If you are a new trader or investor, this FREE plan is perfect for you.
But, if you are already an experienced trader, then you might want to check out its paid plans for the additional features such as “more indicators per chart”, “multiple charts in one window”, “alerts” and “more data on charts (20K bars)”.
Its app is available both on Andriod and IOS.
But, if you don’t want to download and install any app, TradingView also has a web-based version.
Try TradingView For FREE
How much you can make from stocks every month really depends on these four things: your trading capital, profitable trading strategy, leverage used, and lastly your trading skills. If you can master all these, there is no limit to how much you can make trading stocks.