Forex trading is profitable, but not for all.
4 min read
One reasonable question that comes up a lot is: Is Forex trading profitable?
So many times this question comes from traders or people that want to get into the Forex market.
That’s because only 5% of traders are successful.
The others cannot find any success with their tradings. Maybe they are not able to recognize the right approach
When we say “trading approach”, we don’t just mean their trading strategy.
Your trading approach is much more than a trading strategy and we will cover that later.
The brief answer is yes. Forex trading is profitable.
The trading in the Forex market is profitable but chances are you won’t make any money.
If you do not understand the risk or you don’t know how to manage your trades in the right way, you will lose.
Let’s say, if you are risking too much per trade to resist a series of losing trades, you will be out of trading faster than you can imagine.
If you continue to move your stops to avoid a loss, you will finally lose your account. Only your broker will be happy.
You have to know that trading forex is not a shortcut to instant wealth.
You can become a profitable Forex trader but it depends on several factors. Some of those you can control, and others you can’t.
Everyone comes to the forex market for a reason. Some come solely for entertainment, the others to become a professional trader.
However, the good news is that there are things you can do to speed up the process. In other words, you can learn from other traders mistakes.
Is Forex trading profitable?
The fact is that many investors haven’t had the success trading Forex they had imagined. Their experiences cast a bit of doubt on its viability as an investment choice.
Nevertheless, for a market that trades around $5 trillion daily in volume, it stands to reason that there are traders profiting from Forex trading. Otherwise, the Forex market would have become unpopular. But it is not.
The right question to ask is how to trade Forex profitably and how to be systematically gain a profit in Forex.
So, Forex trading is profitable if you know how.
So, how to make money trading Forex?
In the forex market, you buy or sell currencies.
Placing a trade is simple. The modus operandi of trade is very similar to other financial markets, for example like the stock market. So, if you have any experience in trading, you should be able to set it pretty quickly.
The aim of forex trading is to exchange one currency for another in the expectation that the price will change.
Most popular currency pairs
More concretely, that the currency you bought will increase in value compared to the one you sold.
If you are applying the trading plan in a consistent way, you should be able to receive the rewards from your trading plan.
Will you always win?
You will take a loss and many in a row. You will see your account vary. It can be depressing to see sometimes.
The vision of your trading system is what should keep you fixed to your trading plan even when an equity curve going down.
Yes, you will have losing days.
These are the facts of trading.
If you are asking about being profitable over the long run, the answer is yes. But only if you are trading a positive outlook trading strategy.
One month of not being profitable does not make for the trading fiasco.
It is assumed.
You must predict to lose, and also, you have to believe that you will face the biggest loss of your trading work in the future.
Expect that a multiple of risk loss is just around the corner.
It will remind you that the biggest trading job is to protect your trading capital.
You must have 3 things on your mind. Always.
1) Forex isn’t a get rich quick opportunity
Opposite to what you’ve read, Forex trading is not going to take your $5,000 account and turn it into millions. The volume we can earn is defined by the sum of money we are risking.
The old saying “It takes money to make money” is exactly what Forex trading related.
Of course, that doesn’t mean it is not a profitable venture.
You know, there are many successful Forex traders that trade for a living.
How do they do it?
They have gradually improved over time and increased their account to a level that can create a sustainable income.
Have you heard about traders that are targeting 50%, or 100% profit per month?
Yes, but the risk they are taking on is going to be pretty comparable to the profit they are targeting.
In short, in order to attempt to make a 50% profit in a month, you have to be prepared to see a loss of around 50% of your account.
Even if you trade with an edge. Your return should be positive, but without leverage, it is going to be a small amount.
Forcing leverage into the mix is how traders attempt to target extreme gains. In turn, it is how traders can produce extreme losses. Leverage is beneficial up to point, but not when it can turn a winning strategy into a loser.
2) The leverage as a winning strategy to lose money
Extreme leverage can ruin a profitable strategy.
Most novices minimize the possibility that loss leverage can ruin their accounts.
Understanding leverage enough to know when to use it and when not to use it is important to your performance!
Leverage is a very great tool but some traders use it to damage their trading capital. It is because they take its destructive force too easily or ignore it completely.
Anyway, high leverage is a favorite selling point for most forex brokers.
They tell that you can make a huge gain using huge leverage. One pip is important to them.
But you have to know that you could easily be destroyed by huge leverage also.
Let’s say you have a coin that may earn $4 if it hit the heads. But when tails are hit, you will lose $2.
Would you like to flip that coin?
We guess you would flip that coin.
You’d want to flip it over and over. When you have a 50/50 chance between making $4 or losing $2, it’s an opportunity that you’d accept.
Let’s see a different example.
Let’s say you placed the trades by following some other trader’s acting.
And she or he ended up with higher equity relative to you.
That trader’s net profit/loss (P/L) was positive while your P/L was negative.
There are two main points.
When you have a losing trade, high degrees of leverage destroy your capital base. Moreover, it is forcing you to change your future trade sizes or deposit more funds.
When using conservative amounts of leverage, your equity P/L tracks your net pips P/L.
Though you place trades in hopes of it working out in our favor, you must be prepared if it doesn’t.
Part of that preparation is a result of managing an appropriate amount of leverage.
3) Using sentiment can shift the odds in your favor
Actually, we are talking about using the Speculative Sentiment Index (SSI). There are so many articles about this topic.
You can find that it is the best tool ever used. And it a part of almost every trading strategy that experienced traders use.
SSI is a free tool that tells us how many traders are long compared to how many traders are short each major currency pair.
What does it mean?
It means to be used as a contrarian index where you want to do the opposite of what everyone else is doing.
Using it for your trades you can turn around your work as a trader and become more successful.
The bottom line
When you ask if Forex trading is profitable, you must have all of this on your mind.
If there is one word to describe the best trader, it would be – consistency.
Trading currencies are all about to implement a trading plan. With consistency. Traders that do everything in a consistent way are holding to a proven edge.
It is difficult to find the right way if you are constantly switching speed.
Once again, Forex trading is profitable.
Don’t waste your money!