With so many Instagram influences, YouTubers and B list celebrities getting into forex trading, it is attracting a whole new audience outside of classic investors. This is great for brokers and great for the industry but as so few traders are honest about their earnings, it can leave you wondering, how much can I actually make trading forex?
The answer is simply most traders will lose money trading forex and make absolutely no money. The 10-30% of forex traders that don’t lose money, will average around 3-5% gain per month when profitable. This doesn’t sound like a lot, but there are funding opportunities and ways to make the most out of your trading. Let’s find out more…
How Much Money The Majority Of Traders Make
When looking at how much money we can make trading the forex markets, it helps to look at how well everyone else in the industry is doing. This handy graphic from ForexIllustrated shows that between 60-90% of retail forex traders are losing money in the markets over the long term.
This is quite worrying for a lot of newbie traders coming into the industry. It’s important to know that the majority of ‘traders’ don’t utilise risk market, don’t have a trading plan, any kind of fundamental knowledge and don’t really even take it too seriously.
To sum these findings up, the majority of forex traders don’t make money in the markets. It’s not so much about how much they’re making, it’s the fact that they aren’t consistently able to make any money at all, leading to losses, frustrating and even poorer risk management decisions. But what about the 10-40% that don’t lose money?
How Much Money Profitable Forex Traders Make
Now we know how many traders are losing, how much are the winning traders making? You’ve probably seen ‘traders’ with fancy cars, expensive watches and always trading from their phones which paints the picture that all traders are making serious money – sadly it’s not like that.
An average, consistent monthly return for a profitable trader would be around the 5% mark, risking around 1% per trade. For risking 2% per trade this would sit around the 10% mark, on average. Therefore the amount of money traders make really depends on the amount of trading capital they have at their disposal. These marketers are gurus telling you that it’s possible to double your account in a month, or 10x your capital in a few months are always trying to sell you something and you’ll notice they NEVER prove any results on a third party site like MyFxBook.
In short, a good ballpark number is 5% per month average is how much traders are making in the forex market.
How To Earn More From Your Forex Trading
Let’s say you’re a profitable forex trader and you’re able to get an average return, risking 1% per trade, of 5% per month. This is fairly average for a consistent trader – nothing too exciting but very attainable. If you’re coming into the markets with £10,000 you’re still only going to be netting £500 per month from your efforts – which is not enough for anyone to even consider trading full time. This is where prop firms come in…
Companies like MyForexFunds and FTMO are actively funding forex traders that can prove profitability in a challenge. If you pass, you will be awarded a large amount of capital (up to $400,000, depending on which challenge you select), for you to trade. You will receive a profit split averaging 70%.
Let’s take this hypothetical scenario:
- You’re a profitable trader, making 5% per month on a £2000 account – not enough to take trading seriously.
- You purchase a $50,000 MyForexFunds account, which INSTANTLY funds you with the money.
- You continue averaging 5% per month, for the next 6 months.
Without prop firms you would earn £680 profit. By utilising the prop firms, you would earn £14,400. This is the BEST way to maximise how much money you can earn in the forex markets. We have a list of the Best Prop Firms in the industry, so feel free to check them out.
Factors To Consider
There are a huge amount of factors to consider when looking at someones profitability and ability to earn within the markets over the long term. Even if I learn the exact same trading strategy as another trader, from the same mentor, our results could still be vastly different over the course of a few months.
1. Win Rate
Win rate plays a big factor in how much you could potentially earn in the markets. If you’re winning 1/10 trades taken, you’re most likely going to be losing money in forex. However, if you’re winning 6/10 trades, you’re likely, with good risk management, to be making good money out of those trades. With this being said, you don’t want to be focusing solely on win rate and ignoring other important factors like risk/reward, just for the sake of having a higher win rate.
Risk to reward ratios play a huge factor on how much you can earn forex trading. This, in short, means how much you’re willing to risk on a trade, compared to the amount of potential profit you could get if the trade wins. It’s CRUCIAL to come into the trade with a fixed stop loss and fixed profit target to effectively manage your risk, or you will just be gambling. It’s known in the industry that if you have a risk:reward ratio less than 1:2, meaning you win double what you could lose, it’s extremely hard to be consistently making profit.
When people come into the retail forex industry, the majority of the time they don’t have any classical investing knowledge so they will be thinking in terms of money, rather than percentages. People tend to want to make X amount of money per week, X amount of money per trade etc. This is absolutely fine in principle as of course, we are looking to make money from the markets. However, it’s important to think in percentages as this is the best way, psychologically, to consistently manage your risk in the markets and not get attached to the floating profit and loss money you can see.
The volume of trades you take is going to massively effect how much you can make in the forex markets. If you’re taking just 1 trade a year, chances are, unless it’s a once in a lifetime kind of trade, you would be making more money if you were trading a few more times per year. This screenshot is from a 30M timeframe setup – something that happens every single day in the major and minor pairs offered by most brokers.
Compared to a 1W chart here, where a setup like this is only going to happen a handful of times per year, across all of the pairs you could trade.
This doesn’t mean you should trade on the 1 minute time frame, to get the most you possible could – it just means that it’s worth looking at your style, how many hours you could dedicate to the charts and finding something that works for you. For me personally, I work best on the Daily/Weekly/4H charts – anything less than that, although it would earn me more potentially, it’s possible.
In Summary – How Much Money Will You Make?
In conclusion, you are most likely to make no money at all trading forex. If you’re one of the 10-40% that manage to not lose money, you’re likely to be averaging around 5% per month, risking around 1% of your trading capital. This is quite far from the dream that Instagram traders sell you, but it’s still hugely profitable!
If you have any comments or questions about this article please do leave a comment down below, I’d be interested to hear your opinion.