Everyone starts trading forex in the hope that they can make money. While some want to just ensure that they get enough profits to make them feel successful, others want to make a living out of it while some others want to become rich by trading forex. All these can be achieved as long as the trader is profitable.
Is forex trading profitable? It certainly is. Is it easy to make profits? Certainly not. Trading is a profession that needs a lot of time, effort, and dedication. Just as you take 20 long years to get a degree and a job, you need to spend a lot of time studying the instruments that you are planning to trade, practice them in different ways and finally try and find a way to be successful in the trading. If you manage to do that, there is not a more profitable thing as forex. But if you don’t, then there cannot be a worse slow-mo killer than trading as it slowly kills you mentally and emotionally.
How Much Money Can you Make from Forex Trading?
No one gives a forex trader salary. Whatever he earns is through his own efforts. He doesn’t get a salary at the end of every month. So he basically depends on his skills day in and day out to help him out and keep him profitable at the end of the month so that he can use the funds for his living. As for how much you can make from forex trading, well, there is no limit to that. You can slowly build even a $100 account to several hundred thousand dollars over a long period of time.
While this may sound very tempting, it is not easy. You have a far better chance of blowing up your $100 account than making any decent amount from it. Your first target, when you begin trading, is to be profitable and to be able to stay consistently profitable. How much profit you make is immaterial . Money and profit are a by-product of the work that you put into each and every trade and how successful each trade is. If you have a profitable strategy, you will be able to make money. And using the right leverage and risk management, you can easily scale up the earnings over a period of time so that you can make a comfortable living. Again, this is easier said than done.
Forex Trading: Demo Account vs. Real-Money Trading Account
When you start forex trading, you should start off with a demo trading account. If you did not, we suggest that you take few steps back and start again with a demo trading account. This is what will tell you how to make money trading forex. This is the practice that you need to have. This is the effort that you need to put in to sharpen your mental, analytical and emotional skills so that you are ready for real trading.
Once you have been consistently profitable in the demo trading account using your strategy, it is time for you to move into real money trading. However good you might have been in your demo account, start with a small account when you start with real trading. When real money is at stake, you will see that your brain starts playing tricks. You will no longer be able to be calm. Even though the amount at stake might be small, still the adrenaline will be pumping and it will screw up your emotions. It will make you want to win every time and in this thinking, you will slowly begin to lose sight of your strategy, stop the way that you want to trade and you will be made to trade in a way that the market wants you to. And that is a path towards destruction of your account. So remember, demo and real trading are two totally different beasts. Start small and make sure that you stick to your profitable strategy each step of the way so that you are safe.
How Much do you Need to Get Started on Forex Trading?
There is a lot of money in forex trading. There is no doubt about that. But as in any business, if you want to take out profits from trading, you need to put in a decent amount of investment as well. So what is a decent amount varies from person to person and it typically depends on what you expect out of your forex trading.
Generally, you should be happy if you are able to make 2-3% a month from trading. Though that might sound small, that is around 24%-36% returns in a year which is much larger than what banks or any other hedge fund or mutual fund would give you. If you need more profits, then it means that you should be investing more rather than trying to extract more profits as this would lead you to overtrade and make you lose your money. So, don’t get led into that trap, and always remember that if you want to make more money, the trick is to increase your capital and not to try and increase your percentage returns or overtrade. Your trading account will love you if you do that and you will be the answer to the questions of your friends and fellow traders who ask ‘does forex trading work?’.
Your forex trading strategy is the key at all times and that is the difference between success and failure for you as a forex trader.
Realistic Forex Income Goals for Trading
Your forex trading income depends on a variety of factors but it is always wrong to try and measure either your goals or your income in absolute terms. In fact, you should never ever do that as it would always mislead you and ultimately lead you to the path of blowing up your account sooner or later. You should always measure your success and your profits in terms of percentages of returns and win rate and you need to realise that the amount of capital that you have is the key and not the absolute number of dollars that you have made as profits.
As said before, if you need more income, then the plan should always be to see how you can increase your capital and not see how you can increase your success percentage. Many times, through greed, traders try to find the Holy Grail and keep trying to polish their forex trading strategy to increase its success percentage but that would ultimately lead to its failure in the long run. While there is nothing wrong to tweak your strategy to be in tune with the market and to make it as good as you possibly can, you need to remember that if you make 10 trades, it is enough if you are successful in 6 of those (assuming RR or 1:1 or better) and you don’t need to find the perfect technique to succeed in each and every trade that you take.
So the realistic goal should be that you should make 2%-3% a month and if you manage to do that, it would indeed be a fantastic achievement. Of course, this is the target for retail traders but if you have capital running into millions, then you need to scale down your targets to around 0.5% a month or so.
What is the Average Forex Trader Salary?
There is no clear data on what is the average salary for a forex trader. The reason is that most of the traders do not reveal it. While most do not reveal it as they may be losing a lot of money rather than being profitable and their ego would not allow them to accept it, there are others who are likely making millions from the forex market but they do not want the attention from other traders. Due to these factors, there is no clue on what a forex trader actually earns when he trades for himself.
Of course, the forex trader can work for financial institutions like banks where he would be paid a salary and if he is good enough, he is likely to get a lot of commissions on the profits that he makes and other perks as well but again, this varies widely from company to company and also depends a lot on the level of experience of the trader and how good he is.
For a trader starting out in a bank, he can expect to earn $4,000 to $5,000 a month at the minimum and this can go up depending on how good he is. There have been forex traders who have taken home millions as they did make billions for the bank or the fund that they worked for.
So, in conclusion, it is pretty clear that trading is indeed profitable. It just needs hard work and dedication and once a trader has found a strategy that is profitable and suits his skills, he needs to ensure that he sticks to it at all times and not get carried away. If he does manage to do that then there would be no limit to the amount of money that he can make but people who do manage to do this have been very rare over the history of the trading industry.
