How Much Money do Trader Make from Forex Trading in HotForex

Jan 23, 2023 711 0

Beginner traders commonly ask, “How much money can you make in Forex trading?”

$500 per month? $2,000? $10,000 or more?

Theoretically speaking, the answer is “As much as you can handle”.

Sounds good? Well… not quite.

You see, in practice this question has little significance because a trader’s monthly income is rarely consistent.

So… How Much Can You Make Trading Forex?

For illustrative purposes, let’s assume an average monthly profit of 3%. This equates to a monthly $300 income for every $10,000 capital in the trading account.

Trading Capital	3%/mo
$5,000	$150
$10,000	$300
$20,000	$600
$50,000	$1,500
$90,000	$2,700

For performance bench-marking, 3% is a reasonable estimate.

But in terms of practical results, this estimate will likely deviate from your actual month-to-month performance. Why?

Because there are too many factors that can influence your actual monthly performance.

You see, unlike a regular job where your income is fixed, there is no such guarantee in trading.

Think of yourself a village fisherman who fishes for food. Is it realistic to say that you’ll catch 10 fishes on your own, every day?

Of course not.

On good days you may catch 20 fishes. On bad days you may catch just a few.

In a week, you may catch a total of 70 fish, averaging 10 fishes a day. But in practical terms, there are some days where you may go hungry even though on average, you’re catching 10 fishes a day.

Think about what this means for your trading.

When trading for a living, your profits are uncertain while your daily/monthly expenses are fixed.

You have a mortgage to pay for. Water and power needs to be kept running at home. You have to put food on the table. There are expenses you will incur, regardless of whether you make a profit or loss trading that month.

The Real Question

So you see, it’s not really a question of “How much money can you make in Forex trading?”, but rather, “what’s the minimum you have to make, so you won’t starve?”

Ahh. Now we’re getting somewhere. Now we’re talking about real life application, not theoretical averages.

So…

How much money can you make in Forex trading?

How Much Money do Trader Make from Forex Trading in HotForex

If I had to make a stab at an estimate, I’d say that to comfortably trade for a living you’ll need an account size at least 30 times your monthly expenses.

So if your expenses are $3,000 per month, you’ll need an account of minimum $90,000 to sustain that level of income from trading (assuming, of course, that you have the skills and knowledge to trade profitably).

This gives you an approximation of the amount of capital you should be looking to handle in the future.

Of course, I recommend that you start with a smaller account for practice purposes, especially if you’re new. But keep this approximation at the back of your head – this is the minimum amount you should have in your account, to be trading for a living.

Or A Better Alternative

If you have less than $50,000 in trading capital (or you’re relatively new to trading), I’d suggest that you don’t look towards full-time trading.

In fact, a much better alternative would be to trade part-time.

Stay in a job to secure a stable income, start an account with a few thousand dollars and grow it over time to make a few hundred dollars per month.

This buys you time to hone your trading skills, deepen your understanding of the market, and build your trading account. You’ll be in a much better position to handle a $50,000 account if you grew it from $10,000, than if you started immediately with $50,000.

Main important metrics in trading

This is the expectancy, called as a combination of both of your win rate and risk in rewarding for determination your probability in a long run. Mathematically this is proved as;

E=[1+(W/L)xP-1

Where;

W=size of your average wins

L= size of your average loss

P=winning rate

Let’s realize this through a small example!

Just imagine that you are having 20 trades, where 12 are winning and 8 are losing. So, 12/20 or 60% is your win percentage. If those 12 trades brought you $6000 profits, your average win is $6000/12= $500. And your loose is $3200 and average loose is $3200/8= $400. When applying those data into the above formula;

E= [1+(500/400)]x0.6-1= 0.35 0r 35%

So, your trading strategy is 35%, and then you return 35 cents for every dollar trading over a long term trade.

Also, there is another common theory, where you have to play more in order to win more. This can be simply illustrated by the casino industry. You know that casinos are opened every day throughout the year. Have you noticed it, and have you questioned it? This is the same theory where they apply, more you play, more you win. This theory is the same as to your business. It means, if you can increase more trades, there is an expectancy of more currency you can make. So, the frequency of the trades is an important factor, but this does not mean the amount of money you can have through this. There are few other factors which determine this.

You may have heard that some traders have started in minimum accounts and grew it into millions in a short period of time. But the unveiled truth is, for every trader who tries this; many of others blow up their trading accounts. So, do not think that is a quick rich one, where you have to grow steadily over time.

Have you heard the saying, ‘the bigger you risk, the higher your returns’?

Let’s assume that you have a positive expectancy and creates a return of 20% per year. And also, you have $10000 trading account too. So, the amount you can make from depends on how much you are risking per trade. If you risk $1000, you can make an average of $20000 per year. If you risk $3000, you can make an average of $60000 per year. Also, if you risk $10000, you can make an average of $200000 per year also. This is why we have mentioned earlier, profits can be gained through this is depending on account size and its risks. So, you will accept that truth of the more you risk, more your gets. Because, every success Forex trader has successfully managed their risks, as it is a vital element of ongoing profitability.

Also, if you are a full-time Forex trader, other than part-time users, you can earn a lot. But, in this case, you have to take money for your daily needs. If you are trading as a part-time, you do not have to make withdrawals and compounds returns in your account. So, you must have a good idea about what you want out and how withdrawals affect your trading.

So Don’t Quit Your Job Just Yet

I reckon most people will need at least 1-2 years of profitable trading before they should consider trading full-time.

Based on personal experience, I’d venture to guess that even if they had the option, most retail traders would actually NOT WANT to trade full time… because it gets pretty lonely and boring being at the computer all day.

Part time trading enables anyone with a few thousand dollars to start their trading journey. (If you don’t have a few thousand dollars in savings, you have bigger issues than learning how to trade.)

So start small and build up your account. If you can, don’t withdraw your trading profits. Keep re-investing them into your account and let the money roll.

If you have a proper trading approach and don’t screw up too badly, your few hundred dollars of profit will soon enough turn into a few thousand… and continue to grow.

Final Words

Trading any market successfully is a long-term endeavor. It takes years, not months or weeks, to become consistently profitable.

Armed with that information, it becomes much easier to take things slowly. Keep bets small and focus on quality setups, rather than attempting to trade every day.

If someone claims their trading strategy or system earns 30% or 40% every month, run and don’t look back. While such profits are possible, they aren’t sustainable and will likely lead to a blown account.

I learned years ago that it’s far better to focus on the trading process. That includes things like risk management, having the patience to wait for quality setups and drawing accurate levels among other things.

As long as you master the process of trading well, the profits will follow. In other words, let the money you earn from Forex become the byproduct rather than making it your motive.

If you must aim for a specific monetary figure, make it a conservative one. Don’t make the mistake of shooting for 30% or 40% profit per month.

A goal somewhere between 5% to 15% per quarter is reasonable yet still quite attractive, especially for those with larger accounts.