This one is a very popular question newbies often ask. No matter whether you are a newbie, intermediate or an expert forex trader, you must be excited to know how much does a forex trader makes in a year.
Foreign exchange or FX is a currency exchange market. In simple terms, forex is the process of converting one currency into another currency. Whenever the monetary transaction between two parties of different countries happens, the forex plays a crucial role. Let’s understand this with an example.
Do you know more than 90% of forex traders lose their money in this market and end up quitting? There could be many reasons behind this. It could be due to the selection of the wrong broker, not having trading planning, following the wrong strategy, etc.
So how much a does a forex trader make a year?
The average forex trader doesn’t make money at all. The new forex traders enter the market with the dream of making millions of dollars overnight. Making millions through Forex trading is possible, but one needs to have patience and the right strategy. If a forex trader makes 20% a month (1% a day) 11 months out of the year on a $100k trading account they would make around $619,173.64 excluding any fees and spreads.
When you have the right trading strategy, better knowledge about the market, and good risk management skills, you can make between $60,000 to $600,000 a year. This is figure is just to provide you a rough idea. Depending upon the market conditions & sentiments and how you trade, it may vary.
Suppose, a person living in the United States buys a product from France. In this transaction, the person has to pay the amount in Euros and not in US dollars. In this process of exchange between two parties of different counties, the forex plays a crucial role. Because without paying the amount in Euros, the person won’t get the product he wants.
How Do People Make Money Through Forex Trading?
Do you know people are making millions through forex trading? The major reason behind the success in forex is having the right plan or strategy. If your trading strategy and the trading plan are not good, you are not going to succeed in this market.
Don’t worry, you don’t need to have a huge amount of money in order to make money through trading forex. Depending upon your budget, you can get started with a small trading account. If you don’t want to risk a huge amount, you can open a mini or micro forex account, with very little balance. Getting started with a mini or micro forex trading account is a good way to learn for newbies.
In the forex market, people buy and sell currencies. The margin between buying and selling of two currencies it the profit of forex traders. In order to make money on the forex market, you have to buy the currency at a low price and sell that for a higher price. You buy the currency at a low price and when the price increases, you sell it. That’s how forex trading works.
How to Start with Forex?
If you don’t know anything about the forex market, you must be finding a way to enter this market. For a complete beginner, it is essential to have good enough knowledge about the forex industry and have a proper trading strategy.
In the absence of these, the chances of failure would be higher. And, a lack of strategy is the main reason why the majority of traders fail in this market. Here’s how you can start with forex:
1. Basic terminology
The first important thing a new person should take care of is having a clear idea about basic forex terminology. If your basics will not be clear, you will face difficulty understand the advanced stuff. You must be knowing basic forex terminology like base currency, quote currency, exchange rate, long position, short position, bid price, ask price, and spread.
Base Currency: The type of currency you spend is known as the base currency
Quote Currency: The currency you are purchasing is known as the quote currency.
Exchange Rate: It is the value of one country’s currency to another country.
Long Position: If the trader expects the price of a particular currency to go up, the trader will buy it first so he can sell for a high price in the future. This is called a long position.
Short Position: If the trader expects the price of a particular currency to fall down, the trader will sell the currency which he has purchased earlier. This is called a short position.
Bid Price: It is the price the trader is willing to sell the currency pair.
Ask Price: It is the price at which the trader will buy the currency pair.
2. The currency you want to buy & sell
Once you have thorough knowledge about the different basic terminology of forex, the next important thing is deciding about what currency you want to buy and sell. You can decide about this by considering different factors. You need to buy the country currency which is strong. If you think that the economic conditions of a particular country will weaken, you should avoid buying the currency of that country.
3. Brokerage account
If you are a complete newbie and you do not have a forex account, the next important step is to open an online forex brokerage account. There are so many brokers out there in the market. You need to do proper research and find out a reliable and trustful broker. After selecting an appropriate broker, the next step is to fill out paperwork. Once you will do that, your forex account will be opened. And, now you can start trading.
4. Start Trading
Now you have completed all the paperwork and your forex account is opened, now you are all set to start forex trading. Before starting forex trading, you need to make sure you have a proper strategy and plan. In the absence of a trading strategy, you will find difficulty in earning good margins. So, first of all, you need to analyze the present market conditions. You need to do technical analysis, fundamental analysis, and sentimental analysis.
This way, you will get an idea about the present market condition and sentiments. After analyzing the market, you need to determine the margin. And, once you analyze the market and determine the orders, you need to place the order.
The main weakness of the majority of new traders is emotional trading or trading addiction. Make sure you don’t get emotional regarding your trades. Properly analyze the market and based on the market, place your orders.
Forex Trading Yearly Income: Opinions Of Actual Traders
Below we have gathered information from different forums to get opinions on actual traders on making money from the forex market.
We curated this information from different sites and sub reddits only changing grammar/spelling where needed other then that the answers remain the same.
Real Traders Answers
1. Truth “Making profit isn’t as hard as those make it out to be” – Yes, I make a profit on forex every year. It is not as unusual as it appears.
CitiBank used to have a retail forex operation, but that was closed down a couple of years ago due to changes to U.S. law that made the venture not as profitable as their parent CitiGroup thought was prudent.
CitiFx published outstanding materials for their clients. One of which was on the profitability of retail forex traders.
The short answer is that for high net worth clients approximately 40% are profitable.
A far cry from the statistic that 90% are losers. This 90% figure has no basis in fact, but has been repeated so often it is taken to be part of the gospel of retail forex. For Citi clients with lower balances the rate of profitability dropped off so that only 20% were profitable.
There was a post earlier today citing a BBC news article about changes the FCA wants to make to UK brokers. One of the changes is that brokers are to advise that 80% of traders lose money. The obvious implication being that 20% achieve break-even or better. For low dollar accounts this statistic seems to fit with the American data from Citi.
I would suggest that your source data is the flaw. Internet forums are filled with trolls, scam artists, and fantasists. Genuine discussion among long term profitable traders would be very difficult to find. I shall stop there.
2. Tommor “6 months away from full time income for 10 years” – I am about 6 months away from making a full living from trading.
However, I have been 6 months away from making a full living from trading for about 10 years.
Profits from forex have been inconsistent so far but I still believe its possible.
3. Beranga “Making money yes, but making a living is different” – Good point. I think people may be making money trading Forex, but making a living… that is a different thing. Few are able/willing to risk the large capital needed, and the ones who can, probably have a profitable business/job which they like, and will not quit. So it is hard to measure how many could, but will not, make a living off Forex.
I just started trading a few months a go. Trying to learn as much as I can, and working hard at it, but have no plans of quitting my job. Just making some cash off the money I would otherwise have, doing nothing, in my bank account.
4. Mlawson71 “Some making a living” – Yes, there are some people who do make a living out of trading Forex alone. Those people, however, are few and far between. Getting to that point is a long and difficult process and many people do give up in the middle of it. Some of these people were never suited to trading to begin with, others were forced by circumstances to stop. Some do, in fact, get to the point where they’re successful enough to support themselves through trading only. I hope you’ll be one of those.
5. Jonesfam7 “More wins then losses” – I have a small trading account. I do make a small profit from it. I have more wins than loses. You will always have losses and some may be big and some small. It is about patience, time and not giving in to your emotions. The maket constantly goes up and down.
here is my formula: I have it in a spread sheet.
account value * .5 ( I will not use more than 50 of my account balance to base my investment off of.)
determine the cost of my investment: =SUM((E14*1000)/50)D14 = =sum(number of lotslot base by broker)/divde this by the ration (currently I am using 50:1)*my number of lots ( I am at 10 lots currently).
Projected Profit goal: then I take my cost of investment and multiply that by my projected percentage I want to earn; currently I am using 2.5%
then I have a seperate column where I enter in my actual profit for the transaction.
I then have a column that represents the percentage I have actually made compared to what I projected; actual profit / projected profit.
currently I am reinvesting the entire amount as I have a small account.
I have two additional columns:
one that tells me the amount to reinvest (actual profit * .75) as I would like to reinvest 75%
my second column is profit I would take. (actual profit * .25) as my goal is eventually to take out 25% as income.
if you would like I can send you a copy of my spreadsheet.
as I am new to this forum not sure how to give out my contact if you request it. please post here and I will check it often.
Conclusion
The earning in the forex market varies from one trader to another. More than 90% of new forex traders lose their money and end up quitting. The reason why most traders lose their money is that they want to become a millionaire overnight. This isn’t possible when you have no or little knowledge about the market.
To order to make a great amount of money in this market, you need to gain enough knowledge and experience. When a forex trader has a proper strategy & plan and great risk management skills, the trader can make somewhere between $60,000 to $600,000 a year. It varies depending upon the knowledge, experience, and capabilities of the forex trader. In short, if you want to become a successful forex trader, you need to focus on learning new things and getting more & more experience in the field.
It is tough to find good forex mentors online that aren’t just trying to make money off you via some MLM scheme. I have joined those myself and had some success learning. I would suggest starting free with websites like babypips.com and youtube. Then once you are ready to start getting serious about demoing then actually pay someone to learn. I have found the New Paradigm trading by Steve Gregor to be most beneficial and able to implement on any strategy. There are many others out there that are great. A free group and trading strategy is TNT that is taught be Eric Garrison.
