People trade Forex for various reasons. Some may want to improve their short-term trading skills, others may want to find more assets to invest in the long-term. However, the ultimate intention of the participants is to make profits from this market.
So, the question is: How much money can a trader make every month?
To answer this question, we need to consider many factors. One of the most important factors is the risk level at which you are trading. By identifying your right risk level, you can decide whether it’s worth investing in the Forex market or not.
Think in Percentages, And Do Not Trust False Advertisements
The internet nowadays is flooded with false advertisements. Here are some examples:
· Make over $145 per hour trading Forex with us
· Make $10,000 per month with our signals
· Earn $560 daily with our automated trading services
There are 2 major reasons why these claims are false. First, if they could make that much money, they would certainly keep their techniques secretly. Secondly, the monthly profits you can make are proportional to your trading capital’s value. That’s why it’s necessary to think of FX profitability in percentages.
Ascertain Your Tolerable Risk Level
Forex is a highly volatile market, and that’s one of the reasons why it attracts people, as high volatility can bring many opportunities. However, the flip side is that high returns also come with high risk because of high leverage forex brokers. Since Forex brokers allow you to use high leverage (1:400, 1:500, or even 1:2000), your gains or losses can be far more than your actual investment. That’s why you need to identify the risks.
If you are young and adventurous, you may want to risk 4% to 5% on a single trade. If you find yourself hating risk, then risking 0.5% to 1% isn’t a bad idea. However, professional traders advise that you shouldn’t risk over 2% of your account balance on each trade.
Choose Your Trading Approach
Your trading approach is one of the factors affecting your average returns. Therefore, it’s necessary to identify which trading approach best suits you.
If you are confident enough and have much time to trade, then short-term approach may be suitable for you. Scalping and day trading can bring huge profits if you have a good trading system.
Mid-term and short-term approaches often match traders who don’t have much time to trade. In this case, their potential profits can be less than profits from day trading, but their risk also decreases.
Don’t Forget Compounding Gains
The more money you can make initially, the more compounding profit you can make in the future. Your potential profits will be bigger and bigger if you achieve consecutive returns over a long period of time.
Understand The Path of a Trader
Below are the realistic returns that Forex traders can expect:
1. Entry: The harsh reality for newcomers is that they may not attain any profits at first. The early stages of FX trading are often difficult, and that’s why beginner traders should have low expectations.
2. Intermediate: Once traders’ knowledge and experience advance – usually after they burn their first or second deposit – they can start to expect for the return of at least 1% monthly. The expected returns shouldn’t be over 5% per month.
3. Expert: After achieving consecutive profits, traders can target a high dollar value on returns. That goes along with a higher capital. You will make $4,000 per month with a capital of $100,000 if your monthly return is 4%.
The Bottom Line
Having realistic expectations for your potential profit is necessary in Forex trading. As you can see, there’s no fixed number for how much you can earn monthly trading Forex. Your potential profits are proportional to your trading capital and also depend on many other factors, including your experience and knowledge. Once you progress, the opportunities for profit will increase substantially.