Forex trading is a trendy and well-known type of trading on markets. I’m sure most people on social media have seen ‘forex-trading gurus’ claiming they’ve made millions from forex trading!
Many people are looking to increase their stream of income by starting to trade forex. If you’re starting any new investment or business venture, of course, you’re going to want to know how much money you’re going to make.
And of course, they claim all you need to do to earn as much as them is buy their trading guides and tutorials! If you’re familiar with forex trading, you’ll understand that these types of returns are not realistic for most retail traders.
Social media forex traders usually exaggerate their returns for you to buy their tutorials. So how much can you realistically earn from forex trading as an average retail trader?
Unfortunately, it’s a bit more complicated than a straightforward figure for everybody as it depends on many factors. However, knowing a realistic figure for how much you can make is very important, especially if you’re looking to trade forex for a living.
To help you understand how much money you can make, we’ve put together some data and information that will help you understand what affects how much money you make and what returns are realistic for beginners and average traders.
A Marathon Not a Sprint
Many people that enter the forex trading business are thinking about it in the wrong way. Because of all the exaggerating information about forex trading and social media influence- it’s easy to think that forex trading is just a get-rich-quick scheme.
You will hear people telling you that they make a 40% return a month when forex trading. These figures are not realistic, and it is improbable that you will consistently have these types of returns.
You will have good months where you manage to reach a 40% return in one month. But, even the best traders in the world won’t be able to carry on doing this month after month.
In your trading journey, you’ll experience a mix of good months and bad months. In some months, the market is in your favor, and you’ll make a lot of money from your trades. But in other months, you will struggle and maybe even make a loss on your trading.
Just like any other business, money isn’t guaranteed. The amount of money you can make from forex trading won’t be a monthly set figure as a salary. You’ll be making different amounts of money each month, so you should be focusing on small, consistent gains.
Unfortunately, it’s not likely that you can quit your job and live off a £1000 trading account!
You should treat forex trading like any other type of business- businesses like Apple and Amazon didn’t start making billions in a few months. It took years of slow and consistent growth, and this is the same for trading.
Professional traders are professionals not because they can double money in a few days but because they can generate consistent returns and minimize risk. Professional traders return around 1 to 10% per month.
Stick to the Process
In forex trading, it’s easy to get distracted and focus on the profits only. Of course, this is expected as you see your money going up or down with each trade. It’s natural to focus on the money you’re going to make in the next month.
To be a successful and consistent trader, you need to focus on the process and how well you execute it rather than how much money you’ve made this month. It’s even more helpful to think about how much money you’ve lost this much rather than made.
If you trust your trading process and minimize your losses, then you will make money.
It can be tempting to take more risks as you start to make money. Let’s say you make a lot of money on the GBP/USD pair in one position. You may be inclined to open more positions on that pair to try and make as much money as possible.
By ignoring your planned trading strategy, you’re more likely to lose a lot more money. If you take the risk to open more GBP/USD positions doesn’t pay off. You’ll be set out to lose money and even wipe out the money you made from the first position.
Focusing on making a set amount of money a month is not very helpful either. Trying to reach an unrealistic target of 40% a month will force you into making poor decisions and risk more of your capital. If you carry on trading like this, you’ll wipe out your account very quickly.
The tiny details are an essential part of making consistent returns. Instead of hitting a return target, be patient and wait for good signals and make sure your strategy is safe and reliable.
Instead of searching desperately for-profits, be patient and let the profits find you by sticking to the process.
Set Realistic Goals
Only focusing on a process and getting better at it can be difficult in the long run. If you’ve taken the time to research forex trading and are risking capital, it’s comforting to know a figure that you can achieve realistically.
Before you set targets, remember that the best way to reach these targets is through following your strategies and processes- try and stay disciplined.
If you’re swing or day trading, the most effective targets are monthly targets. Some people set daily or weekly targets, but unless you’re very experienced, that is not enough time to have a consistent and realistic goal.
The amount of money you make in a month is likely to be a lot more consistent than the amount you make in a day. With the fluctuation of markets, if you’re looking at daily goals, it’s likely on most days, you’ll either be a lot lower or higher than the target.
Remember to keep your targets relatively small. It may be tempting to set yourself a 20% target just because you made 30% in your first month of trading. But considering professionals aim for around 1-10% a month- 20% is pretty optimistic!
A target of 2%-5% is probably more realistic if you are an average retail trader. If you’re thinking about it from a salary perspective, if you have a £1000 trading account at a 5% monthly return- that’s only £50 in the first month.
This shows how most people’s understanding of forex trading is unrealistic. A 5% monthly return rate is excellent, but you will only profit £50 in your first month. To live from forex trading, you need to be very experienced and have a much larger trading account.
Although it might look like you’re doing very well if you set a target of 5% and hit 30% in a month, try and stick as close to your target as possible. If you’re hitting a 30% monthly return, you’ve likely risked too much capital and not stuck to your process.
Can you make a living from Forex?
You can still make quite a lot of money from forex, but it’s not easy. Many people are already profiting with forex but don’t feel rushed to enjoy these lovely profits.
Your forex trading journey will be a very long one. If you stay disciplined and consistent, it’s still possible to build yourself a £100,000 account instead of a £1000 account.
If you have a £100,000 account and you can average 5% returns a month, that’s around £5000 a month. If you’re very successful, you could even reach a £1 million account and generate £50,000 a month. You can live very comfortably with this amount!
Remember that growing a £1000 account into a £100,000 or £1 million account won’t take weeks or even months. You will have to be doing disciplined forex trading for years before you reach these numbers.
Most professional traders will have been trading for many years before they reach any large profits.
If you’re looking to make a living from trading forex, you should look at it as a long-term business, not just a way to make quick money.
Take it slowly and improve your trading strategies. By mastering a trading process and strategy, you will make consistent profits and better your skills.
Don’t start trading thinking you’re going to be profiting 40% a month because that simply isn’t going to happen. Set a realistic target at around 2% to 5% a month.
If you stick to these targets and strategies, you can grow your account to a more significant sum. If you have a £1,000,000 trading account, even a 1% monthly return is very attractive.
Growing your account will take time and dedication. Only after years of consistent trading will you be able to make a consistent living from forex trading. It will not be easy, but it is certainly possible, and many successful forex traders have completed this journey.