Forex trading can be a great way to make a living or a decent second income, but it takes a lot of time, some investment and a great deal of effort to become profitable. A common question that most new Forex traders ask is 'how much can you make trading Forex', 'what is a realistic monthly return' and 'how much money does a Forex trader make'.
In this post, we will share our personal experience and answer these commonly asked questions...
Forex trading variables
There are a few variables that will impact how profitable a Forex trader is. These are; strategy, risk and capital.
Strategy
All Forex trading strategies perform differently. Some strategies focus on entering just a few positions a month whilst others are created to take numerous trades per day. A Forex traders performance will vary depending on the results of his or her Forex strategy. It is advised that all Forex strategies are back-tested. This will provide clear historic results of what to expect when trading the strategy.
Risk
The more you are willing to risk, the more you could potentially gain. If you have 2 traders trading the same strategy but 1 trader is risking 1% per trade while the other is risking 2% per trade, the Forex trading performance and results will be different. In theory, the trader risking 2% per trade should have higher returns and be more profitable.
Capital
Forex trading performance should always be measured in percentage return. The more capital a Forex trader has, the higher the monetary return when trading his or her strategy. A 10% return is not so great for a trader with only $500 in his or her account. A 10% return can be fantastic for a trader with an account balance of $500,000 though. The more money (trading capital) you have to trade with, the more money you can potentially make.
Perfect strategy, high risk and lot's of capital
So, all you need is the best trading strategy, take high risk trades and have lot's of capital - the perfect recipe to make a huge income from Forex trading! Unfortunately, it's not that easy. Developing a Forex trading strategy is much harder than it sounds. Taking too much risk has huge psychological and emotional challenges on traders. Raising capital can be a full-time job in itself.
Our advice
Learn from someone who is already successful in Forex trading, start small and take your time. Forex trading will not make you rich overnight. Forex trading can make you rich though, but you will need to be willing to invest your time, money and energy.
So, how much does a typical Forex trader make?
Forex trading results vary. Most independent Forex traders and Forex trading funds make anywhere from 10%-60% per year. Some of the better independent Forex traders can make at least 100% return per year.