Develop your trading strategy and start long term forex trading with the best forex brokers.
The thought of making money from your home has likely crossed your mind, but is it possible to make a career from trading forex? Numerous people have tried, and the short answer is yes, you can.
However, while the short answer is yes, it is not possible for everyone, and many people have tried and failed to trade the forex markets successfully. To become even slightly successful takes a lot of time and effort.
Let’s look into some critical factors to achieve a long-term trading career in the forex market.
How Much Capital Should You Start With as a Forex Trader?
One of the key aspects of becoming a full-time forex trader is having sufficient capital. It can be vital to ensure you have enough money to make a consistent and worthwhile income. However, the funds needed may vary from person to person.
For example, traders can begin trading with tiny amounts, but the return, in most cases — if there is one at all — will usually be minimal.
For the potential to make a living from trading, experienced traders say that you will likely need a starting capital of between $5,000 and $20,000. Even then, that may not be enough. A good rule is not to risk more than 1% of your capital on one trade. For example, a trader with a starting capital of $5,000, risking 1% in a trade with a 2:1 profit/loss ratio, will only net a return of $100. If you do that enough times per month, it could provide a decent living wage, but you need to consider your hit rate and how many trades you make per month.
For example, at a 100% hit rate — which is probably impossible over a sustained period — you would need to make 20 trades during the month to make $2,000 (assuming you risk 1% of your starting capital on every trade for that first month). This return doesn’t suggest the luxurious life many online gurus advertise. For reference, many traders have a hit rate of around 50% to 60%, which makes it even more challenging.
Many risk a lot more per trade to make more significant returns. But to stay in the game for the longer term, risk management is critical, and taking a considerable risk on every trade increases your chances of being wiped out.
In addition, a capital increase will lead to more money at risk. Thus, it is essential to trade with money you are willing to lose.
How Much Money Do Forex Traders Make?
If you begin trading as a paid employee for a professional trading firm, according to ZipRecruiter, the average salary for a forex trader can amount to $124,907 per year. However, for retail traders, it can be quite different.
The salary for forex traders can vary, and it will likely rely on your skill level and experience. Many individuals fail because of significant losses, lack of knowledge, poor risk management and insufficient capital. The first rule is to stay in the game long enough to learn and understand how it works, as it may take considerable time before you begin to see profits.
There is no set amount of money you can earn trading forex. Your earnings depend on experience, risk level, level of capital and win rate. The success rate for a trading career is low because of how tricky and mentally challenging it is.
Advantages of Trading Forex for a Living
It's essential to weigh the advantages of such a high-risk role as trading forex. Although it may be a difficult road, the benefits of developing a career in the foreign exchange market are enormous. Take a look at some of the advantages of forex trading below.
The commissions when trading the fx markets are low. You will not be charged for having an account; thus, your costs can be kept as low as possible.
Brokers make money off the spreads on each trade you choose to enter or exit. This feature benefits all traders as it requires minimal capital, and hidden fees will not eat away at your profits. Check the broker fees beforehand you sign up for an account.
No Central Exchange
Forex is an over-the-counter product with no central exchange. Instead, currencies can be traded freely. The forex market includes banks, hedge funds, businesses and retail traders.
Having no central exchange benefits traders as it leads to fewer restrictions in place. In addition, forex traders are given the freedom to enter and exit trades at all times, unlike the stock market.
Traders are also able to benefit from high liquidity. For example, the forex market is considered the most liquid market in the world because of the high volume of trades being taken every day.
This feature benefits traders as high liquidity can reduce the risk of spillage, execute orders faster and offer tighter bid-offer spreads. All these factors help traders considerably and are backed by higher liquidity.
The flexibility of trading is apparent right from the start. Markets are open 24 hours, and you are essentially your own boss. As a result, you can dictate your trading style and patterns and work at the time that best suits you.
Creating a routine may be ideal, and you can trade forex to best fit your schedule.
Disadvantages of Trading Forex for a Living
The forex market does present challenges, and the majority of retail traders do fail. This is why it is essential to consider the drawbacks of forex trading before jumping straight into the deep end.
The market is precarious to trade. The success rate is relatively low because of the difficulty of predicting future prices. Many have and will succeed in the field, but you must consider the risk each time you enter the market.
The forex market has the highest liquidity, making it vulnerable to sharp movements in price action. And high volatility is dangerous to trade as the risk of prices going against you increases. With billions of dollars moving the market daily, volatility may be detrimental to your trading.
Lack of Transparency
The lack of transparency in the market can negatively impact any trader. Traders do not always control how their orders are fulfilled, which can affect profits or losses over time. With no central exchange regulating the market, transparency is lacking in forex, and forex brokers can drive the market.
Complicated Price Determination Process
FX markets are influenced by outside factors that dictate the economy. As a result, multiple factors can arise, which can send exchange rates plummeting. Therefore, it is difficult to analyze each individual aspect and draw reliable conclusions, which can ultimately cause significant losses if you are not careful in your analysis or if factors outside your control affect a trade.
6 Tips for Trading Forex as a Career
Your forex strategy is not all plain sailing and will require discipline to succeed. These tips can help you get started on your forex career.
Tip #1: Take Your Time
Many individuals jump the gun when starting their trading careers. Most people want to make significant cash quickly and achieve financial freedom. However, this feat is difficult and nearly impossible to achieve; taking your time at first will benefit you later.
Potentially begin with a demo account to learn how the foreign exchange markets move and grow your knowledge and skill through practice.
Tip #2: Learn to Read Charts and Recognize Patterns
Learning to read and understand chart movements is essential to enhance your skills. Before you begin trading, you must shake out mistakes or inconsistencies in your game. Recognizing chart patterns will help you develop a better understanding of the foreign exchange market you are watching. Pattern recognition is crucial, and this skill comes from hours of studying charts.
Tip #3: Learn to Trade from Professionals
You are not the only person attempting to trade forex; the market has continued to create successful traders worldwide. You can tap into opportunities to learn from the very best. You can access help from professionals through courses or content they have produced. However, beware that there are many fake gurus out there. Try to listen and read content from proven money managers.
Tip #4: Try Different Strategies
The beginning stages can be challenging in forex, and it may take some time before you find the right market that works. Therefore, it is essential to experiment and try different strategies to see which one you feel most comfortable in and where you see the best results.
Tip #5: Work with a Reputable Broker
Working with a reputable forex broker is a must for any trader. You want to know you can trust your broker, so ensure it is regulated and safe. It is your money that you are risking, and if you value your funds, this is an essential safety precaution.
Tip #6: Act Like a Business Owner
Treat forex trading like a business. You are the business owner, and you are responsible for all the associated factors. Trading FX requires dedication and taking the markets seriously if you wish to achieve long-term success rather than painful losses.
After experimenting and trying different strategies, commit to a trading plan.
Develop Your Trading Strategy and Discover the Profit Potential
One of the biggest advantages of long-term currency pair trading is that it allows traders to ride out market fluctuations and avoid reacting to short-term price movements that may be misleading. It also gives traders the opportunity to make informed decisions based on fundamental analysis.
However, traders must also understand the potential risks associated with long-term trades, such as large market fluctuations and unexpected news events. This is why it's essential to have a solid risk management strategy in place to minimize losses. Traders need to continually educate themselves on the market, staying up-to-date on news and events that may affect their trades.
Long-term forex trading can be a profitable forex strategy for those who have the patience and discipline to see it through. By understanding the market and implementing a strong risk management plan and forex trading strategy, traders can take advantage of fundamental analysis and ride out market fluctuations to achieve success in the long run.
Best Forex Brokers for Long-Term Traders
If you have been trading the forex markets for a while, you know having a broker you can trust is essential. You can find a comparison of the best forex brokers below.
- securely through Forex.com's websiteBest For:Forex Trading in and Outside the U.S.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
- securely through IG Markets's websiteBest For:Forex Execution
For USA residents: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Be advised that CFDs are not available in the U.S. from this provider.
Outside of the USA: CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.
- securely through eToro Forex's websiteBest For:Demo Accounts
CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Frequently Asked Questions
Can you make a living with forex trading?
It’s possible to make a living trading forex. The markets have made it possible for millions of people to trade forex and earn money. It is important to keep in mind that a variety of factors determine whether you are one of the few who can successfully make a living from the forex markets. Forex trading comes with high levels of risk and requires a lot of discipline and hard work. There is never a guarantee of success.
Is it worth it to trade forex?
Trading forex can be worth it for anyone looking to invest. However, don’t expect to get rich overnight. Forex markets are the most liquid markets in the world, which means you have the opportunity to become a major player and make immense profits. Trading is easily accessible and available, no matter your level of expertise. Trading forex is only worth it if you go into it with the right mindset, take the time to learn the trade and use discipline in your trading.
How much money do forex traders make?
The amount of money forex traders make can vary greatly depending on various factors such as their trading strategy, risk management, market conditions and experience level. Some traders may make consistent profits and earn a substantial income, while others may struggle to generate consistent returns. It is important to note that forex trading involves significant risk, and the potential for both profits and losses is high.
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 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.