Forex traders deal to make money. We’re often asked exactly how much you can make. Here is our considered answer.
Forex can be profitable
Many forex traders make good profits, but the results vary:
- Some say that doubling your money in a short time is achievable
- Some are satisfied with 5% to 10% returns
- Others keep on losing money – these traders don’t stay in the market for long
The amount of money you make in the forex market depends on your skills, dedication and attention to detail. To be a successful trader, you need to do the following:
- Learn everything you can about how the market works
- Develop a strategy that gives consistent results
- Pay attention to analyses from market experts
- Carry out you own detailed analysis before making a trade
- Know when to lock in your profits and to cut your losses
- Be patient and dedicated
- Don’t let your emotions overwhelm your common sense
Consider the following situation:
- A trader opens an Forex account and deposits $1,000
- They work 22 days in a month
- They make a daily return of 1.5% on their initial investment
- This is 33% per month – or $333
- Their annual profit is approximately $4,000 – a 400% return
This may not be representative of your own trading performance. You may make more or less, depending on your skills and the market conditions. Don’t forget that by increasing your capital and leverage, you can increase your profits (while increasing your risk at the same time).
Look for opportunities
Experienced traders often make consistent profits. However, there are some situations where most traders make money. When you’re starting out, look for these opportunities; talk to other traders and identify obvious market trends. Your first profit is likely to come from this type of deal.
Manage your risk
Earning potential and actual earnings are not the same thing. As a forex trader, your earnings potential is unlimited, but how much you make depends on your ability. One key skill is knowing how to manage your risk:
- Spread your investments across multiple deals
- Do extensive analysis before opening a position
- Don’t make too many high-risk trades
- Set stop losses
- Listen to experts – but make your own decisions
On the last point, keep in mind that experts have good track records, but they aren’t always right. If they were, they would be so rich that they wouldn’t be giving recommendations. Pay attention to experts, but verify what they are saying before you make a trading decision.
Develop your own strategy
Traders often share their strategies, and you can learn from these if they are successful. However, their strategies may not work for you. When you’re trading, there are a number of psychological factors that come into play, and these can affect your trading performance. It’s important that you develop a strategy that makes you feel comfortable, otherwise you’re likely to make mistakes.
Keep in mind the benefits
When you start out, it can take a while before you start making a profit. Don’t get discouraged and quit! If you do, you’ll lose the benefit of everything you have learned. Keep in mind the advantages of being a forex trader:
- You can make your own decisions
- You aren’t tied to an office
- You choose when you want to work
- Your earnings potential is unlimited
- Forex trading is interesting and fulfilling