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Is Forex Trading Profitable?

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Want to jump straight to the answer? The best forex broker for most people is definitely FOREX.com or IG.

You may have seen ads about forex trading and how easy it is to get involved in trading currencies using an online broker. While getting started trading forex is now easier than ever, and brokers eagerly want to attract new clients, the hard part about forex trading is making a profit on a consistent basis.  

Trading forex profitably takes time, education, coming up with a winning strategy, sticking to it in a disciplined manner, maintaining the right trading mindset and a bit of luck. Read on to find out more about whether forex trading is profitable and how forex beginners can get started. 

Simply Put: Will Forex Trading Make You Money?

The simple answer is that forex trading can make you plenty of money if you get in on the right side of the market and then take your profits in a timely manner. 

Of course, you can also lose money just as easily by being on the wrong side of the market and cutting your losses or by letting a winning position turn into a losing one before you get out of it. 

Understanding Forex

To make a forex transaction, you agree to trade or exchange one currency for another at a particular level known as an exchange rate. Those currencies make up a currency pair, and the exchange rate of that pair fluctuates up and down depending on supply, demand and the market’s expectations of what relevant news means for that pair. 

The 1st currency in a currency pair is known as the base currency, while the 2nd currency is called the counter currency. If you buy or sell a currency pair, then you respectively go long or short the base currency against the counter currency. 

To forex traders, a dealing spread is the difference between the exchange rate you can buy at and the exchange rate you can sell at. The tighter that spread, the more competitive a broker is. 

You can profit from a currency trade by either buying in a rising market or selling in a falling one. Fortunately for traders, many currency pairs show substantial market volatility or fluctuations. While these movements can mean profits or losses, depending on how they are positioned, it does at least provide the opportunity to make a profit if your market forecasts are typically accurate. 

To make market forecasts, traders typically use 2 types of analysis. The 1st is technical analysis, which focuses on levels and movements in exchange rates and other market observables. This method seems especially useful for making short-term market forecasts. 

The 2nd is fundamental analysis, which seems better for making longer term forecasts. Fundamental analysts focus on examining news events and other information about economic and financial factors related to currencies and assessing their likely impact on the forex market. 

Who Can Trade Forex?

The forex market used to be very exclusive. The ability to trade forex was largely accessible to major banks, corporations, fund managers and high net worth individuals who typically dealt in millions of dollars. 

Fortunately for smaller retail traders, the rise of online forex broking over the past decade means that virtually anyone with a relatively modern computer or mobile device and access to the internet can now open up an account with an online forex broker. 

This opportunity now allows virtually anyone to trade currencies in the forex market electronically via one of the many forex platforms available, with many traders choosing the popular MetaTrader platforms from MetaQuotes. Retail traders can also access competitive dealing spreads at many online brokers. 

How to Profit From Forex Trading

As with trading in virtually any financial market, determining in advance what side of the forex market you should be on is the true challenge for a forex trader. You can increase your odds of determining the correct future market direction by doing a fundamental or technical analysis before entering or exiting a position. 

You can also increase your chances of making money overall by taking advantage of a timely correct market call and by having the discipline to minimize your losses in case your view turns out to be wrong. Many swear by using sound money management techniques and having the right trading mindset to support profitability. 

Forex Trading Strategies

Many successful strategies for trading forex exist, but not all of them are suitable for every trader. You will want to select one that best suits your particular situation, including your available time, personality type and risk tolerance. They will be covered below based on the typical time horizon involved, ranging from short to long term. 

Scalping and Day Trading

Both of these short-term trading strategies are usually followed actively during a particular trading session and generally do not involve taking overnight positions. This can be an advantage due to the reduced exposure to notable market movements while the trader is asleep or not closely focused on their trading screens. 

Day traders establish positions during a particular trading session and exit them before that session ends. The forex market trades around the clock from Sunday evening to Friday afternoon EST, so you need to decide what trading session to operate in. 

Scalpers are day traders who focus on taking multiple small profits on positions with an extremely short duration. They typically enter and exit trades in seconds or minutes, which is a very fast-paced activity that doesn’t suit everyone. 

They usually trade while looking at price charts, need very quick reaction times, as well as tight dealing spreads and virtually instantaneous deal executions — so your choice of broker is very important. For example, a scalper might look for patterns with predictive value on very short term tick charts like the one shown below for EUR/USD to help inform their trading decisions. 

Tick chart for EUR/USD beside a trade entry box. Source: MetaTrader 5

Swing or Momentum Trading

Swing trading, sometimes called momentum trading, is a medium-term trading strategy that typically requires holding overnight positions. Swing traders can establish positions both in the direction of and against the underlying market trend. 

This strategy generally focuses on getting into and out of trades based on technical indicators that provide a sense of market momentum and show buy and sell signals. You can use momentum indicators to identify overbought or oversold markets to sell or buy into, respectively. You could also try to buy ahead of support and sell ahead of resistance levels that appear on exchange rate charts.

Examples of popular momentum indicators could include the Moving Average Convergence Divergence (MACD) histogram or the Relative Strength Index (RSI). The 4-hour candlestick chart below shows the MACD and RSI displayed in the indicator boxes below the exchange rate for EUR/USD. 

Shown is a 4-hour chart for EUR/USD with MACD and RSI indicators. 
Source: MetaTrader 5

Trend Trading

This popular longer-term forex trading strategy involves following the prevailing trend or directional movement in the market for a particular currency pair. Trend trading often involves buying on pullbacks in up trends or selling on rallies in down trends. 

Once a position is established, you could then hold it until your objective for the trend is seen or the trend shows signs of reversing. Many traders use trailing stop loss orders to protect profits in case the trend shows a significant reversal.

Trend trading typically includes technical analysis and review charts to determine what direction the underlying trend is moving in, and then aim to trade along with it. The monthly candlestick chart below for EUR/USD shows an upward trend in progress after a significant decline. 

Monthly chart for EUR/USD showing a down trend followed by an up trend. Source: MetaTrader 5

Best Forex Brokers for Trading

If you think forex trading is right for you, and you want to get started right away, then you can check out any of Benzinga’s top picks for forex brokers below and start the process of opening an account today. You can also open a demo account to try the broker out and practice trading before committing any real funds. 

Account Minimum
$100
Pairs Offered
80+
Get started securely through FOREX.com’s website
Account Minimum
$100
Pairs Offered
80+
1 Minute Review

FOREX.com is a one-stop shop for forex traders. With a massive range of tradable currencies, low account minimums and an impressive trading platform, FOREX.com is an excellent choice for brokers searching for a home base for their currency trading. New traders and seasoned veterans alike will love FOREX.com’s extensive education and research center that provides free, informative forex trading courses at multiple skill levels. While FOREX.com is impressive, remember that it isn’t a standard broker.

Best For
  • MetaTrader 4 users
  • Beginner forex traders
  • Active forex traders
Pros
  • Impressive, easy-to-navigate platform
  • Wide range of education and research tools
  • Access to over 80 currencies to buy and sell
  • Leverage available up to 50:1
Cons
  • Cannot buy and sell other securities (like stocks and bonds)
Best For
Forex Execution
Overall Rating
Get started securely through IG Group’s website
Best For
Forex Execution
N/A
1 Minute Review

IG is a comprehensive forex broker that offers full access to the currency market and support for over 80 currency pairs. The broker only offers forex trading to its U.S.-based customers, the brokerage does it spectacularly well. Novice traders will love IG’s intuitive mobile and desktop platforms, while advanced traders will revel in the platform’s selection of indicators and charting tools. Though IG could work on its customer service and fees, the broker is an asset to new forex traders and those who prefer a more streamlined interface.  

Best For
  • New forex traders who are still learning the ropes
  • Traders who prefer a simple, clean interface
  • Forex traders who trade primarily on a tablet
Pros
  • Easy-to-navigate platform is easy for beginners to master
  • Mobile and tablet platforms offer full functionality of the desktop version
  • Margin rates are easy to understand and affordable
  • Access to over 80 currency pairs
Cons
  • U.S. traders can currently only trade forex
  • Customer service options are lacking
  • No 2-factor authentication on mobile
Account Minimum
$50 USD
Pairs Offered
55
get started securely through CedarFX’s website
Account Minimum
$50 USD
Pairs Offered
55
1 Minute Review

Billing itself as the world’s 1st eco-friendly broker, CedarFX makes it easy to trade and give back to the planet. You can choose a 0% Commission Account or an Eco Account — or open multiple accounts to meet all your needs. 

CedarFX offers access to a wide range of tradable securities, including stocks, futures, major and exotic forex pairs, cryptocurrencies and more. Though CedarFX could introduce a few additional educational resources, the broker remains a unique option for traders invested in giving back.

Best For
  • Forex investors
  • Investors interested in 0% commission or eco conscious trading
  • Investors looking for 24/7 customer service
Pros
  • Allows users to offset their carbon footprint
  • 0% commission investing
  • Offers demo account access
  • 24/7 customer service available through live chat
  • Eco Account Option (10 trees planted for each lot traded)
  • Fast deposits/withdrawls with Bitcoin
Cons
  • Limited number of educational resources for new investors
Account Minimum
$50 USD
Pairs Offered
47
Get started securely through eToro’s website
Account Minimum
$50 USD
Pairs Offered
47
1 Minute Review

Though Australian and British traders might know eToro for its easy stock and mobile trading, the broker is now expanding into the United States with cryptocurrency trading. U.S. traders can begin buying and selling both major cryptocurrencies (like Bitcoin and Ethereum) as well as smaller names (like Tron Coin and Stellar Lumens).

eToro offers traders the opportunity to invest their assets into premade portfolios or cryptocurrencies, similar to services offered by robo-advisors through traditional brokers. Though eToro isn’t a one-stop-shop for everything an investor needs, its easy-to-use platform and low spreads is a great way to enter the cryptocurrency market.

Best For
  • International Forex/CFD Traders
  • New cryptocurrency traders looking for an easy-to-use platform
  • Traders who want to buy and sell cryptocurrencies on-the-go
Pros
  • Simple platform that is easy to master
  • CopyTrader feature that allows new traders to copy the same strategies used by professionals
  • Virtual dummy account that gives you $100,000 to practice trades
Cons
  • U.S. traders currently limited to cryptocurrencies
  • Only 15 major coins available to trade
Account Minimum
$100 USD (or equivalent)
Pairs Offered
69
Get started securely through HYCM’s website
Account Minimum
$100 USD (or equivalent)
Pairs Offered
69
1 Minute Review

HYCM is 1 of the world’s leading forex brokers, offering investors access to over 69 unique currency pairs. However, forex isn’t the only thing the broker offers — HYCM also offers high rates of leverage, stock and ETF trading, commodity investing and much more. Getting started with HYCM is quick and easy, and most investors can open an account in as little as 10 minutes.

HYCM offers a varying fee structure, which allows investors to choose the spread option that’s best for them. A wide range of educational and investing tools are available, which can be equally beneficial to both experienced and novice traders. Though HYCM isn’t currently available in the United States, it can be a great choice for residents of the other 140 countries where it offers service. 

Best For
  • Investors who want a customizable fee schedule
  • Traders comfortable using the MetaTrader platform
  • Islamic traders who need swap-free accounts that don’t build interest
Pros
  • Wide range of currency pairs available
  • Excellent selection of educational tools
  • $0 deposit and withdrawal fees
Cons
  • Not currently available to traders based in the U.S.
Account Minimum
100 EURO
Pairs Offered
50+
Get started securely through AvaTrade’s website
Account Minimum
100 EURO
Pairs Offered
50+
1 Minute Review

A fully regulated broker with a presence in Europe, South Africa, the Middle East, British Virgin Islands, Australia and Japan, Avatrade deals with mainly forex and CFDs on stocks, commodities, indexes, forex, cryptocurrencies, etc. This brokerage is headquartered in Dublin, Ireland and began offering its services in 2006. It offers multiple trading platforms and earns mainly through spreads.

Best For
  • Beginners
  • Advanced traders
  • Traders looking for a well-diversified portfolio
Pros
  • Controlled by regulatory agencies of multiple countries
  • Choice offered in terms of trading platforms
  • Support available in 14 languages and trading platforms in 20 languages
  • Practice/demo account available for trying out
  • Breadth of trading assets
Cons
  • Does not accept customers from the U.S. as it isn’t regulated in the U.S.
  • Transferring funds to the account may take up to five days; withdrawals could take up to 10 days

Is Forex Trading Right for You?

Forex trading certainly has its risks and rewards. The currency market has made millionaires out of paupers and helped others lose their fortunes. Since most currency traders lose money, trade only with risk capital you can afford to lose completely. 

Also, make sure to do everything in your power to learn how to trade and analyze the markets, develop a winning strategy and cultivate a successful trading mindset. 

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets plus spot metals with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.

Looking for a Highly Rated Forex Signals Provider?

ForexSignals.com offers a highly rated platform with mentors who have 80 years of combined experience in the trading pits. They’ll help you decode real-time daily live streams using market analysis, trade signals and more. ForexSignals.com doesn’t stop there. You can access hundreds of educational videos and workshops and even individualized private sessions with mentors. Never trade alone! Join ForexSignals.com now.