What are the realistic Average Returns for Average Forex Traders?
How much capital can a professional currency trader build up per month? This question is, perhaps, one of the most discussed topics on various Forex - forums and other resources of the corresponding subject matter. However, unfortunately, there is not so much really valuable information.
And it is not surprising - experienced market participants are not in a hurry to share their secrets, let alone disclose the size of the sums made trading online. Not as an example for beginners in currency trading, who are often willing to share their achievements, but the profit and loss ratio of such traders is not very attractive.
What Is Respectable Performance for Forex Traders?
If we talk about the actual state of affairs, we agree that trading is a tool for making a quite decent Forex returns monthly. Constant training and application of basic rules of a trader allow making this process the main source of income. However, in most cases, inexperienced people lose the deposit made by them. The probability of such a development is quite high for a beginner trader because this method of earning contains many nuances and pitfalls that can lead a beginner to a complete collapse.
It is necessary to assimilate a simple truth: trading makes rather strict requirements to the traders from the point of view of both psychology and strategy search. It is usually not easy for a beginner to find complete information, allowing to achieve regular success. The very process of trading can be compared with ordinary business. The essential difference is that while conducting his own business, a person is engaged in a specific, familiar to him sphere of activity. In the process of trading, one has to manipulate financial instruments, without deep knowledge of which it is impossible to get a stable profit.
The amount of income of different traders fluctuates and largely depends on the initial capital. For this reason, it makes no sense to consider the possible profit in absolute terms. A more correct value is the percentage of profit. An important factor affecting the income is the practical experience of the market participant, so they should be divided into several categories.
Beginners
Most old-timers in financial markets are convinced that this category of players is only able to lose their funds, thus ensuring a harmless existence of brokers. Of course, it is impossible to vouch for the reliability of this information. At the same time, statistics is a stubborn thing, and it shows that the lion's share of traders remains at a loss during the first 3-4 months. Many of them leave, but the rest of the people, who managed to finalize the chosen strategy during the year, still go to positive trading balance.
Amateurs
This category has already learned not only to get to break-even point but also to receive a certain income. The period of time it takes to rise to this level is 4-12 months. These figures should not be confused with the time really spent on training. The latter depends on the initial level of a beginner, the ability to learn and other circumstances. One of the determinants of success among amateurs is the trading strategy chosen for them and strict adherence to predetermined rules. The average monthly income ranges from 15-25%. However, some traders prefer to use a strategy, which is characterized by moderate or high risk. In this case, the rate of return increases to 25-50%. Practice shows that higher risks usually have the opposite effect. There are many examples when seemingly successful traders completely lose their deposits in the next few years, having made only 3-4 mistakes with high risk. On average, amateurs with an underlying deposit of $10,000-$50,000 are able to achieve Forex monthly return ranging from $5,000 to $25,000. But such a result requires a good starting capital, initial basic knowledge, and an experienced mentor. Only in this case, we can talk about a successful trader. He receives a solid income and has already appreciated all the advantages of this work.
Professionals
This group of specialists uses trading not only their own capital. Unlike amateurs, investors trust them, giving their investments to management. They are approached by individuals whose financial knowledge is not sufficient for independent trading.
Professional traders carefully choose financial instruments for their investments. Their action must be clear to the professional. Only those assets, which practically did not cause any failures, are taken into account. Any risk can be accepted only if it is fully justified. Such traders consider the monthly income of 2-3% quite acceptable. A significant amount of absolute income is achieved due to large initial investments. These figures also include commissions from investors who have entrusted their funds to a professional.
A Realistic Look at Forex Trading Fees
Trading fees are the sum of costs that a Forex trader has to bear during trading. There are optional expenses for those things that a trader wants to buy: for example, news services, technical analysis services or a better connection - and obligatory expenses that everyone must pay. These expenses vary from broker to broker but usually constitute a relatively small amount. Most often, these are the only trading expenses that you bear. It may sound simple enough, but many traders do not attach importance to these expenses and thus underestimate the difficulty in making long-term profits. It is not always the case that Forex traders do not profit from bad strategies - sometimes bad management or undervaluation of expenses can lead to failure where the results of the trade itself should have led to success. A trader can better manage his money by learning about the major trading costs he will have to bear.
Spreads and Commissions on Forex
The most common expenses in trading are spreads and commissions charged by the broker for each trade. A trader must pay no matter how successful the trades are. Variable spreads. It should also be mentioned that the spreads you will encounter depend on market volatility and the currency pair you are going to trade. A change in spreads is common in markets with higher volatility.
For example, if the market is flat (no special activity and volatility is low), the broker will charge a spread of 2 pips; but if volatility increases or liquidity decreases, the broker may increase it to take into account the risks of a faster and/or narrower market.
Some brokers also charge a commission for processing and executing orders. In such cases brokers increase spread only slightly or do not change it at all, as their main source of income is commission.
There are two main types of commissions at Forex:
Fixed commission - in this case, the broker will charge the same amount regardless of the size and volume of a transaction. Example: a broker with a fixed commission can charge $1 from each trade, regardless of its size. The relative commission is the most common type of commission calculation. The payment to the broker depends on the size of the trade: for example, he can charge "$x for every $1 million in the trade value". In other words, the larger is the trade size, the higher is the commission for it. A broker with relative commission can charge $1 for every $100,000 in a currency pair that is sold or bought. If a trader buys $1,000,000 EUR/USD, the broker receives $10 as commission. If a trader buys $10,000,000, the broker will receive $100.
Other costs to keep in mind
There are also hidden costs when dealing with some brokers. Among those that are worth paying attention to are: inactivity fees, monthly or quarterly minimums, margin costs and additional costs for telephone calls with the broker.
Overnight positions
If a trade is made at night, the trader holding the position also has to pay a commission. These expenses are usually found only in the Forex market and are called night rollover. As a night rollover, different interest rates are added for each currency you buy or sell. The difference between the interest rates of the two currencies that you trade is the cost of holding a position overnight. They are not determined by your broker, but by the agreement between the banks.
Realistic Returns Which are 100% Achievable
In general, any trader with a serious attitude and enough time spent will be rewarded, no doubt. Treating seriously the preparation stage and paying attention to the simplest rules of conservative trading you may anticipate a Forex monthly return of about 10% — 20% monthly. The problem of many novice traders is that they underestimate the level of obligations. They are not ready to do all the work that it takes to become a real trader. Of course, you should keep in mind that any profit fully depends on the starting capital, market conditions, and a trader`s abilities to react quickly and to be flexible. It means that you need to improve your strategy each time it`s needed and to make informed decisions promptly in order not to miss some fantastic opportunities.
How to Achieve Sustainable Forex Profits
Trading on the international currency market is a very promising and profitable business, and the fact that the number of Forex traders is growing rapidly almost every day successfully proves it.
Many people certainly want to get a solid and sustainable profit under such comfortable working conditions, however, given the fact that only a relatively small percentage of market participants achieve significant success, some of those who are interested in trading as a profession, have repeatedly wondered whether it is really possible to get a stable income Forex trader, and how to do it?
The reason why there are not so many really successful Forex traders (if you take into account the scale of the market) is the elementary lack of proper level of preliminary training, and, of course, practice.
In order for trades to bring a stable and significant profit, the market participant must undergo a course of theoretical training, supported by practical exercises on a training (demo) version of the trading account, learn the principles of the market, get acquainted with trading rules and professional software, without which it is simply impossible to trade at Forex, as all trades are conducted remotely in the online mode.
One of the most important points is blocking emotions during the work period, as well as discipline. Carrying out impulse trading should be excluded, the market participant should act only according to a pre-determined plan, which is called a trading strategy.
The strategic model of conducting trades is chosen personally, effective strategic templates at Forex are enough, also it is necessary to assimilate some basic trading rules:
Do not open a position without preliminary analysis of the market and made a forecast of price behavior. Set a limit on the volume of positions. Calculate the income and expense balance. Do not deviate from the strategic plan under any circumstances. Having mastered the basics, strictly following the rules and adhering to the strategy, having taken a preliminary theoretical course, a market participant will be much more confident in his abilities, will achieve the desired result faster and will minimize the risk level leading to losses.
Keeping Realistic Overall Profit Expectations
As per seasoned traders, a key to successful trading is your seriousness and desire to progress. Let`s say the USD is expected to soar on Friday because the NFP forecast is twice better than the previous month. The main thing here, to getting a notable profit lies not just with monitoring charts and rates on the terminal but also with staying on top of what is going on the markets and the world itself. Overall, if you are able to follow all of the above-mentioned recommendations, an average Forex trading returns of 10% — 20% will be both obtainable and straightforward to manage, giving that you can persistently practice conscious self-control and follow your working trading strategy.
Conclusion
It is quite possible that with this article we ruined someone's dream to trade a million on a $100 deposit for a couple of months. There's a lot of people like that, but we can't see the results.
In order to make a decent Forex return, it is not enough to be able to trade profitably. To do this, you need to invest an impressive amount of money in the deposit (and no, even super skill does not guarantee their losses, because the risks in Forex are very high) or find investors for this.
What does it mean? It means that trading on Forex is a serious business, where a good financial return requires a substantial investment. But, unfortunately, most traders are not interested in it at all. Everybody wants easy money - more and faster, and the rules of money management are remembered only when they lose the entire deposit.
But the stories about mega-profits on Forex forums and blogs simply cannot be recounted. Of course, you can make a profit which will be measured in thousands of percent. Such cases are based on minute luck and opportunity, but they have absolutely nothing to do with serious and, most importantly, profitable trading.
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