In this article, we will discuss forex trading profitability.
How Profitable is Forex Trading?
Forex trading is not a highly profitable business for retail traders based on all significant brokers’ reports because 70%-95% of all retail traders lose money in trading every year. Retail traders making either risk too much, either over trade or create small profits on several positions but then holding on to a losing trade for too long, losing more than the initial investment. However, institutional traders and traders from prop companies generate profits trading currencies and managing large portfolios. The best forex trader in prop companies can profit from 20%-25% with less than 5% maximum drawdown.
Based on ROI, forex trading is not a highly profitable business too. If traders risk less than 1% of the portfolio at the end of the successful year, profit can be 20%-25% on average. Many other professions offer better ROI (Return on investment).
Above, we can see the part answer to the question is forex trading profitable. Forex trading is a profitable business in the case when trading portfolio capital significant. Forex trading ROI is less than many other businesses such as IT business, advertising, etc. However, trading profitability is different when comparing less than million-dollar businesses and billion dollars businesses (large capital) because each business is scalable to some point, and investing and trading have enormous profitability with more significant funds.
Is Forex a Good Way of Making Money?
Many people have developed a misconception that forex trading is a scam. These people do not understand anything substantial about forex. I will be explaining how forex trading is a genuine way, if not one of the best ways of making a lot of money online from your home.
Forex can not make people rich if they do not invest a large amount of money and do not follow risk management rules.
Forex trading does not require so much labor as other professions. External factors such as raw materials do not affect it as it is internet-based and comes with great flexibility and simplicity.
Beginners need to equip themselves with lots of books on what happens in the trading and financial markets and join social media forums that chat about forex. Also, legitimate and reputable courses and successful forex traders with no ulterior motives or an easy-money mentality will help you. Notably, making money on forex involves overcoming failures before winning.
Risk-Taking and Money-Making on Forex
Forex trading is about taking well-calculated risks, and the bigger the risks, the more significant the potential to make huge profits. Successful forex traders would not be there if not for taking risks, and they do not hesitate to say it by themselves. Note that risks mean you should be prepared to lose at times according to the amount you risk. Ask yourself a couple of questions.
How big is my risk appetite? Should I continue after losing my first two trades? Even the most successful forex traders still make losses, but the question remains; can you handle failure? If not, stay away from forex. However, risk management and emotion management are what you must rely on to control yourself when risk-taking and emotions are putting pressure on you. That minimizes your chances of losing.
How Safe is Forex Trading?
Taking the correct trading procedure is what makes forex trading safe. What happens is successful forex traders say forex is safe, whereas those who do not say otherwise. To make money safely on forex, you must follow these ethics:
1.Start with a demo account if you are a beginner. That will help you understand market dynamics as you practice your strategies well enough to know the right moves. The practice is key.
2.Adopt a trading style and practice it to perfection. Traders can choose from a variety of styles. Request successful traders to tell you their styles. Many failed traders are confused about their choice of styles and seldom even understand themselves well.
3.Be specific about the goals you set and how you manage your risk levels. That is what good planning is about. Your success plan to make money on forex is essential.
4.As earlier explained, you have to have a strategy and respect it consistently to become successful as a forex trader.
A newbie trader who begins with a real account instead of a demo account runs a high risk of not trading safely. If you are acquainted with forex but not its rules and strategy, then your trade may not be safe, which means you cannot make money on the platform.
Choosing the Right Trading Strategy
The particular strategy you choose determines whether you will make a profit on Forex or not. This does not necessarily mean that trade in forex does have a wrong or correct way of trading. Instead, it’s about adopting a strategy favoring you enough to help you make the cash you are looking to make. Besides, whatever approach you adopt, high-level discipline is vital. Different methods affect different currencies differently.
A good strategy that suits you well will also help you against your downfall through emotional trading. It takes experience to discover a suitable strategy for your forex trade. With that, the right attitude with risk management skills will have you making profits on forex.
To What Extent is Forex Trading Profitable?
Whatever you plan on making on forex, it always boils down to forex trading profit per day. Your trading strategy and level of risk, and management determine how profitable your time on forex is to you. If you have not been winning, change your risk appetite level, trading strategy, and upgrade your forex’s understanding to win on forex. Losing traders trade for profit instead of skill, which is not right. Skill is what brings profits.
Forex trading does not involve paying commissions, exchange fees, clearing fees, or brokerage fees (since forex has no middlemen). Brokers hang on bid/ask spread. You do your trading straight away with the market controlling the prices of currency pairs. Forex also does need big money for you to trade and make money. The absence of the above restrictions only helps you to make more money on forex.
Here are the Four attributes which check on your mindset and good attitude on forex.
•Patience
•Discipline
•Objectivity
•Having Realistic Expectations
How Much Can You Make on Trading Forex?
Many people ask this question regularly. It isn’t easy to come up with the exact amount you can make from trading on forex. Whether successful or not, how much traders make depends on the set of skills each trader has and exercises on the platform.
The activities you carry out on forex and how often you stay determine how much you can make. However, your level of success as per your risk levels must be taken into account. Besides, we are all aware that forex trading is an unpredictable business. One key question to ask is about how good you are as a trader. Sometimes, months of big downpour come and go, giving traders huge profits. Dry months also come and go, giving traders huge losses. Successful traders take full advantage of such months of high profits to make significant profits.
Have you been wondering how do you profit from Forex trading?
95% of traders lose their money because of bad risk management, greedy, overtrading, lack of knowledge.
With the Forex sitting as a global currency exchange market with a value of almost two trillion dollars, it is certainly understandable that you want a chunk of the profits. This is truly possible when you trade in a responsible and well-informed manner. However, if you do not prepare well and do not commit to planning regarding the trades you make, you will experience the odds of being against you and being upset with the money you lose. Research indicates that two out of three people who engage in Forex trading experience a loss of their money, and only a few percent of them really earn money from forex trading. This indicates a need for better caution and more self-education before actively engaging in Forex trading to increase the opportunity to make profits in the realm of Forex trading.
How to become profitable in forex?
1. The risk of ruin is not linear in trading. The more money you lose, the harder it is to recover back your losses.
If you trade and make a loss at some moment, 10%, you will need 11% to recover the loss in the next positions.
If you trade and make a loss at some moment, 20%, you will need 25% to recover the next positions’ loss.
If you trade and make a loss at some moment, 50%, you will need 100% to recover the loss in the next positions.
see Table below: 
I will repeat this Table a lot of times. This is the most important path to success. This is the difference between retail and pro traders. Pro traders do not have a drawdown in the portfolio above 10%.
When you max risk 1% of the portfolio in one moment, you can create a 10% drawdown in the long run, and then you need to have 11% gain to recover to break-even.
Retail traders with huge losses and drawdowns like 50% or 30% – can be broke easily because they need a huge percentage to recover their losses.
2. Conduct preparations before commencing your trading.
As a trader, you need to have strategy and edge, and you need to test that strategy statistically. Using the trading journal, you need to see when your strategy gives results and when it doesn’t.
My choice is the Kelly criterion as a mathematical formula relating to the long-term growth of capital developed by John L. Kelly. I use each trade to maximize long-term growth.
Mathematically shown in the formula below:
Position size = Winrate – ( 1- Winrate / RRR)
To get the Kelly ratio – we can use an example from my older article :
W = 26/50=0.52
R = (780/26)/ (600/24) =1.2
K% = W – [(1 – W) / R]
K% = 0.52- [(1 – 0.52) / 1.2]
K% = 12%
The goal is to compare various systems to see which system has the smallest risk.
Using this number, I can compare my strategies, performance – to improve myself as a trader.
Since there is much leveraging in the Forex market, such as even up to fifty to one, this can present a high appeal, such as purchasing a lottery ticket. There is a relatively small opportunity to make a large sum of money. However, buying a lottery ticket is not the same, as it is not trading and is gambling. The odds are truly stacked against you about purchasing a lottery ticket.
To enter the Forex market in a better manner requires real and careful preparation. It is a good idea to commence with a practice account. This will prove to be risk-free and deeply helpful. As you engage in trading in your practice account, it is advised to read high-quality books about Forex trading. You can readily access such books via Amazon for purchase, or you could choose some books from your library as well if you do not wish to pay for such books.
It is wise to apply the information that you have access to from what you read. This will allow you to engage in your trading strategies’ decent planning before going full speed ahead with trading. It is advised to stick with your trading strategy instead of changing your plan frequently. The truth is that the more one changes his or her trading strategy plan, the less likely he or she will make a profit. In other words, the Forex trade profit will slip away.
3. Apply diversification.
It cannot be denied that some key strategies should be part of each trader’s trading plan to reduce any risks of loss of money. Thus, one great element is to apply the usage of diversification. To increase the likelihood of achieving a profit, traders should conduct many small trades in diverse markets where the direct correlation is below. Generally, it is a poor decision to place all one’s money toward conducting one large trade. It is also wise to become familiar with methods that will generate a guaranteed profit on orders that are already proven profitable. Take into consideration, for example, a trailing stop. It is also wise to realize the importance of applying the stop and limiting orders to minimize any financial losses.
Advice:
So how to become profitable in forex? Do not try to predict the market all the time and chase for money. The trick is position sizing, small risk, preparation for each trade. Wait for the right moment to enter into the trade and always create a position exit plan.
Is forex profitable?
Forex trading can be profitable for trading companies and high-volume retail traders, but it is not profitable for most retail traders. Usually, 70%-95% of all retail traders lose all money in trading every year. The best forex trader in prop companies can profit from 20%-25% with less than 5% maximum drawdown.
Conclusion
Making a living off whatever trading activities you do is the goal of every trader, and the same is true with forex traders. Forex is one of the best go-to marketplaces to make money. It does not need you to stress yourself looking for huge capital to begin. With as little as 25 U.S dollars, you can become a beginner in forex trading. Unlike other busy and big capital businesses, forex allows you to trade anytime you want. With enough demo account practice sessions, learning, and a full understanding of forex trading and the forex market, you are good to go. However, even if you have undergone a lot of training on forex trading, practiced so hard, and planned so well, you will still not make money on forex if you lack self-belief. But, traders need to invest a lot of money if they want to have a good salary from trading.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
