In this article, I will describe why I do not think that people can earn a lot of money trading currencies for a living if they start with a small amount of money. This is just an article for thinking, and I hope you think differently than me…
Trading forex for a living
So you’ve decided to start a career as a Forex trader, living off forex. Your first 3 questions will be:
1) Does anyone make money trading forex?
2) How much do forex traders earn?
3) Does forex really work?
Can forex be traded for a living?
Trading forex for a living is a possible solution for traders that manage more than $50,000 and have excellent skills and proven forex strategies. Forex trading, as same as any assets trading, requires enough capital for traders. Traders can not earn a fixed amount of money every month, and very often, they have losing strikes. Sometimes even the most profitable traders have several trading losing months (investors whole years). High trading capital, excellent trading skills, and tested trading strategies are the most important conditions so
But there are a few things you should know before you get going and put your money down on the table.
And even if you think you’ve thought of everything, we ask that you take a pause and read this article.
We’ll tell you three things that we think every beginning Forex trader needs to know, but we’re telling you this because we don’t these three tips are emphasized enough to beginners.
That’s because you can make a lot of money on Forex, but you can also lose a lot of money on Forex.
In fact, no matter how sophisticated a trader is, he or she will lose money one day. Your goal now and always is to limit the amount of money you do lose on Forex.
That might not sound as exciting as telling you about how much money you COULD make or a better question: Can I make money trading forex?
Yet, we know for certain that if you don’t follow some baselines that your story will end up a tragedy. Such is the nature of trading foreign currency, but it is doesn’t have to be.
We don’t want to rain on your parade; we want to make sure it happens.
Before you make your first trade, read these three tips that will tell you what you need to know about trading Forex before you spend a dime:
Don’t Expect to Become a Midnight Millionaire and start making a living trading forex from the first day!
Probably the first misconception you need to dissuade yourself from immediately is the idea that trading Forex will make you instantly rich.
Don’t get us wrong. After years of sustained trading success and astute financial management, you can make a fortune off trading Forex.
That takes a long time, which is why Forex is a game for those with the patience to do it.
But, wait, you’re thinking, I have a lot of initial principal to invest.
After all, the more money you have to risk, the more money you can make.
You might even be thinking that you have enough training to know better than some general advice article, but you’d be wrong. The more you risk, the more you will lose. If you’re starting, you don’t want to begin with losses. Losses over your career are inevitable, but they should be as small as possible and contained.
Don’t risk all of your capital at once, and certainly don’t rely upon a “tried-and-true” strategy or a “surefire way” to make millions.
There is no better tried-and-true strategy than a sober, collected approach to trading.
Large Amounts of Initial Capital Can Lead to Enormous Losses with Short Periods of Time
Of course, you might think that this piece of advice is a no-brainer tip.
But, again, you’d be surprised how many traders disregard this advice. Whether it is because of a rushing bull market or emotions getting in the way of reason, risking a lot has huge rewards, yet it can have devastating consequences in Forex.
First of all, this approach stems from a day trader’s mentality with stocks and securities.
Forex is not a stock or security; it represents the exchange differential between two currencies.
The predictive mechanisms for a currency’s value are almost as vast as the ocean itself. The factors that impact a currency’s value are equally voluminous and nearly impossible to comprehend alone.
Many traders have developed strategies and metrics that they like to use, but those that tell you they “know” when something is good or bad are not trying to obfuscate the issue or hide some unique strategy from you.
This is because you will be wrong even in the best conditions, and you might be wrong more often than not. The key is to balance losses with huge gains, not recover from massive losses with depleted capital.
Never risk it all and, in fact, be conservative about how much you spend.
You can always regroup after a slight loss, but a huge loss might be enough to drive you out of the market.
And things can change in a heartbeat in Forex.
So we have to emphasize again: No matter how certain you are of your skill, strategy, or market conditions, an innovative risk leads to a future. Dumb risks can ruin it.
It’s that simple.
One tool that every beginning Forex trader needs in their arsenal is the Speculative Sentiment Index or SSI. It is basically measuring how many people are long or short for each currency pair being traded.
My personal opinion – Can I make money in forex trading or Forex Lies?
Suppose you think you can put $500 and make 5 million dollars in a few years – No. This is a small probability event. There is no holy grail or strategy that you can follow and earn money in the trading industry. After 11 years of trading, working for several prop companies, I can say that it is a tiny chance to succeed in and trading industry with small capital. I believe in Prop trading, manage significant portfolios, and 10%-20% gain per year.
Why I think like this – see Table above this text. This is the most important table for every trader who trades for a living. It shows the percentage of the profit needed to recover a loss.
Example 1 :
You risk 1% of your portfolio. If you trade and after a few months you have a 10% loss, you can recover as same as you made a loss. So after an 11% gain, you will be break-even.
You risk 5% of your portfolio. If you trade the same positions as in Example 1, you will have a 50% loss after a few months. So after a 100% gain, you will be break-even.
You risk 9% of your portfolio. If you trade the same positions as in Example 1, you will have a 90% loss after a few months. So after a 900% gain, you will be break-even.
Can you make living trading forex?
Trading for a living might be seen as a risky adventure that no one should go on by some persons who think having a job offers more security, but for others, there is nothing secure about working for a boss who can have a change of heart and fire you at any time. These persons will constantly learn about the many ways in which they can be the best trader so they can make a lot more money than the salary they would be getting if they had a job.
Having a job puts persons in a position where they will always be job seekers until they retire; being an investor/ trader means you will constantly be looking for and finding opportunities to earn a lot more than what the job offers. You will be putting yourself in a position to be the boss as you can constantly improve your ability to earn by simply learning more about the skills you’ll need to increase your investment. You can look at the many earning opportunities you will have when you become a trader. So, can forex be a career? The final answer is yes!
Do people make money in forex? Yes, but can they be successful several years in the future, not just a few months?
Proprietary Trading- the Pros, Cons, and More Important Information
There are day trading firms that offer traders trade with a capital pool instead of their own money to benefit all the parties involved. You’ll be entitled to a cut of the profits that are generated through trades. However, some challenges make it difficult at times for persons to generate profits.
When proprietary day traders make a few trades a day for more significant gains or many small transactions per day, you can work as a contractor for them. If you have been making profits and are seen by persons as an experienced trader, you can work from home with these proprietary trading firms, but these firms might still hire you before you have earned that reputation. During this time, you will be asked to pay for training, as the firm uses this method to eliminate persons who are not serious about trading.
You will need to decide on your own preferences, so you can put yourself in the position you want to be in. You will think about the type of trading you are best at and find ways to improve your knowledge about that way of trading so you don’t waste time learning about everything you could be earning and becoming more experienced in one area.
Technology has caused a change in the way persons can work for these firms, and some persons work for firms while they are with their children at home, as markets can be accessed with ease.
However, it can take several months before you are experienced enough to earn a living from trading, so if you are in a job, it is not suitable for you to leave it too quickly.
It would help if you made a trading plan or business plan
You can run a search for the proprietary trading firms in your area and start learning more about them if you are planning to work with them in the future. You will be choosing between two model types. One that takes 20 to 50 percent of your profits or others takes a little of your profits and gives you up to 90% of your earnings after you have used your own money to trade.
A company can also hire you to work on their trading floor, and you’ll be trained and given a salary plus bonuses. As a prop trader, you’ll be working up to eight hours per day, or you could work from home for 3 to 4 hours; it all depends on what is needed. However, these firms profit by charging fees for software, seats, training, and more.
Finding out what markets you’ll be trading in depending on your capital and interests.
Persons who want to become traders will benefit from working for a trading firm as they will have access to more trading capital than they would have on their own, they will be surrounded by traders who can help them to become profitable, they won’t need to worry about having a balance that is too low to trade in stocks, they will have access to training from professional day traders at a cost, reduced commissions when it is compared to what other day traders face.
New traders are always in need of training, and you should be trained by persons who produce successful traders. It would be best if you did some research as you constantly pay attention to your likes and dislikes, as well as the time you can spend on trading, the markets you want to trade in, your personality, and circumstances. When you know what is available to you, you’ll be putting yourself in a position to make better plans after deciding what trading method suits you best.
Forex for a living and psychology of trading
When you are willing to do what it takes to overcome the many challenges and learn about the psychology of trading, by remembering that fear and greed are two emotions you should avoid because they will harm your ability to make profits; you will also need to know about trading strategies and risk management techniques, how to bounce back after a trading loss, to pursue profits so you will be one of the experienced traders who earn a living by trading as a proprietary day trader.
Even though firms are now online as they reduce their costs and you won’t be sitting among experienced traders when you are starting to trade, chat rooms and Skype are useful tools but getting answers for your questions might be complicated, competition for seats on a physical trading floor is now higher than before, retail day traders access trading platforms, and internet speeds rival most proprietary resources, the fees charged to traders by some firms could reduce your profits and be a deterrent.
Other Trading Options
Persons who do full-time trading and have advanced degrees and a lot of experience are not confined to working in investment banks, and you don’t need a lot of expendable time and a huge amount of capital to start trading.
However, it is possible for persons who are not university graduates to start trading and get on the path that leads to wealth creation.
Persons can trade independently by choosing the easiest and flexible ways by including trading in their daily lives, changing from their homes
Even though your home’s trading stocks are a very capital intense arena as the lowest equity requirement for the trader who is designated day traders is $25000, this amount will have to be maintained. If the balance should go below the prescribed amount, the trader will not be trading until the lowest amount needed is restored when money or securities are deposited in the account.
New traders need to be aware of all the markets, as a lower barrier-to-entry that requires less capital can sometimes be a better option.
The currency markets or forex markets offer several alternatives these days. When traders can open accounts for as low as $100 with leverage, a huge amount of funds can be controlled with just $100; during the week, the market is now opened 24 hours per day. Persons who cannot trade during the daytime can trade when it is convenient for them.
Who trades forex for a living? For me, only people who develop strategy, figure out market inefficiency and then make forex trading as a business. This is the only approach that can give trading results consistency during the long-term period in trading.
Can forex really make money?
Yes, forex trading is business as same as stocks trading or bonds trading. There is no huge difference in profitability compared with other trading assets.
How much do forex traders earn?
When you work for a prop company average trader who manages $100 000 accounts can earn an average of $1000 per month. It is around 1% per month. So when you make $2000, you need to split and share money with the Prop company. Senior Traders manage more than 1 million dollars in smaller companies, and in large corporations, they work much more.
If you are a trader and trade your own money and risk more than 2% of your portfolio based on several data from brokers, you will lose money instead of earning money in 94% all of the time. I worked for 1 year as an affiliate manager for one reputable broker, and I saw that from 3 000 traders that I tracked in one year, all 98% of them had more considerable losses than the profit in the end.
Brokers are not guilty – risky traders are!
The Contract for Difference (CFD) Market
The (CFD) or contract for the various markets can also be entered with low requirements, and it is best for persons who want to get involved with trading to do extensive research and learn about what has caused this market to expand. An electronic agreement between two persons doesn’t need to own the asset used; it is a CFD. Gains are captured for a fraction of the cost of owning the asset.
The contract allows room for profits and losses to be earned, but the CFD contract can trade in the foreign exchange (forex) markets, even though the traders never own the assets. There is speculation on the underlying stocks or indexes as their movements are mirrored so that profits or losses are reaped in this way.
If a trader does not have a lot of money, this way of trading can be beneficial.
You can educate yourself on the risks involved in this way of trading as you build a strong trading plan.
How much do you make trading forex?
Personally, I made 10% in 2020. year. I managed $120K, and my salary from forex trading was around $1000 per month last year. Usually, my performance is between 15%-20% annually. It was not an excellent result in 2020. and I worked other jobs to pay the bills, earn for living.
Can you make living trading forex?
Yes, traders can make a living trading forex if they have a $50K or $100K portfolio. Trading implies a lot of losing months (months when traders, instead of earning money, lose money), and it is hard to pay the bills without a significant portfolio. The same rule is for stocks or any other asset trading. Without enough funds, it is hard to earn a living on monthly basis.
However, it would help if you remembered always striving to be the best trader as you continue learning from the best. There is no other way to continually increase your profits and reduce the impact of the issues seen as a deterrent. Remember, it is easy to quit when you suffer a loss, but you can always learn more and become one of the professionals earning huge cash sums every day.
You can earn money as a trader trading from your home. But remember that risk is something that can be your biggest mistake. Prop company traders, for me, have a significant advantage because they can manage a more considerable sum of money and have a small controlled risk.