How much can a forex trader earn? The Internet is replete with articles that Forex is a gold mine, only carry money. In fact, to make a profit of even $ 1000 per month, you need solid investments and skills.
The Internet, at least its Russian-language segment, is replete with announcements of easy and quick money in the Forex currency market. All kinds of training programs are available to absolutely anyone – from free video lessons and forex literature to courses of traders in the offices of dealing centers.
Ok, the beginning trader got all the necessary knowledge – the fundamental analysis does not look scary anymore, the trained eye determines the trends, the rules of money management are clearly understood, and the trader’s diary is looking forward to the first record. How much can such a trader earn on Forex?
WE CONSIDER THE PERCENTAGE PROFIT
There is a very good joke on how to please the humanitarian with the news about salary cuts – to tell him that his salary has increased 0.9 times. Accordingly, we will evaluate our potential profit by two values - comparative and quantitative.
To begin with, we will evaluate the percentage of the trader’s trading. For example, let’s go to one of the sites offering the services of the so-called exchange of traders.
As you can see, the top 5 traders show returns from 99 to 224%. This is a very, very good result for trading. However, do not rush to sew bags for money. Along with the percentage of profitability, it would be very nice to know for what period the trader shows such profitability.
As you yourself understand, the monthly profitability as a percentage may vary greatly. In one month it can be + 200% and for the next two months + 5%, or even all -10%. We did not come to Forex for a month, therefore, it would be advisable to find out how much interest you can increase your deposit, for example, in one year.
Let’s not guess, but let’s see how much money professionals earn in the foreign exchange market. Hedge funds are considered leaders in this area. And this is not about 224% of profit, but “only” about 15-20% annually. The best of hedge funds operate with values from 30 to 40% of annual profit. The stock market literature also describes hedge fund returns in the range of 20-70%.
Recall that we are talking about professionals who have been “in the market” for decades, behind which there is a whole staff of analysts, information groups and the ability to operate with impressive financial flows.
Despite the fact that an ordinary trader does not have his own analyst (one can’t recall the Billions series here), and he draws information from ordinary sources, in theory, his profitability can be from 20 to 100% per year with very reasonable risks.
What does the profitability of traders look like in reality? Here, for example, statistics on the profitability of traders from one of the Russian forex brokers. Statistics for 2011, but it is unlikely that in the next years there will be any significant changes in it.
The data is arranged in the form of a histogram, which is laid out along two axes:
- abscissa axis – profitability;
- ordinate axis – the number of traders with such a return.
What does this statistic tell us:
- There are many more unprofitable traders than traders trading with profit. Indirectly, this confirms the opinion that only 5-10% of traders earn on Forex.
- About half of traders lose more than 20% of the deposit, which can be considered a rather serious loss.
Needless to say, the annual profit of 100% of the deposit is a very good result?
WE COUNT THE PROFIT IN MONEY
So, with the percentage profitability sorted out. But interest is a relative value. For example, during the year you increased your deposit by 80%. If your initial deposit was $ 100, your annual profit would be $ 80, and if the deposit was $ 10,000, then the same 80% will turn into quite tangible $ 8,000.
Most ordinary traders, for whom, in fact, this article was written, trade on a deposit of several hundred dollars. It’s easy to calculate that, even trading fairly well, at the end of the year you will make a profit of the same several hundred. Such profits can hardly be called serious.
We continue to bore the reader with math for elementary school. To earn $ 1000 per month on Forex, you must have an annual return of 100% and an initial deposit of $ 12,000.
At the same time, it is necessary to take into account that it is unlikely to consistently earn 100% per year – this is an average value. Your trading strategy in one year can show a return of 200%, and in the second – only 25%.
DESTROYING THE DREAM OF QUICK AND EASY FOREX EARNINGS
It is possible that with this article we destroyed someone’s dream of selling a million on a deposit of $ 100 for a couple of months. There are plenty of such people, but something is not visible.
In order to earn decent money on Forex, it is not enough to be able to trade profitably. To do this, you need to invest an impressive amount on the deposit (and no, even super skill does not guarantee their losses, since the risks at Forex are very, very high) or find investors for this.
What does it mean? And this means that Forex trading is a serious business where impressive financial investments are needed for good financial returns. But, unfortunately, for most traders, this is completely not interesting. Everyone wants easy money – bigger and faster, and they only remember the rules of money management when the entire deposit is drained.
But the stories about mega-profits on Forex forums and Forex blogs simply can not be counted. Of course, you can make a profit, which will be measured in thousands of percent. Such cases are based on momentary luck and luck, but they have absolutely nothing to do with serious and, most importantly, profitable trading.