Forex 10 percent a month

The blueprint that follows will help you be one of the few traders who can make a living off day trading, potentially pulling returns of 10 percent or more out of the market each month.

See how win-rate and reward:risk are linked? If you only win 40 percent to 50 percent of your trades, try to bump it up to 50 percent or more by making small changes to your strategy. Alternatively, you could try to reduce risk slightly or increase your reward slightly to improve your reward:risk. Slight adjustments could push this break-even or losing strategy toward being a profitable one.

How to get a 10 percent monthly return day trading

Raphye alexius / getty images

For most people who start day trading, the ultimate goal is to quit their job and be able to make a living off of the markets. There are two ways to make a living from day trading.

You could start with a large amount of capital and make a small percentage return to produce a decent monthly income. This requires more capital but less skill.

The other option is to start with a smaller amount of capital, say $10,000 to $30,000, and generate higher returns in order to make a living. This requires less capital, but much more skill.

Below is a blueprint for ramping up your returns to 10 percent or more per month. That way, even if you are starting with $10,000, you'll be making at least $1,000 per month, and that income will grow as your capital and/or returns grow.

Whether you day trade stocks, forex, or futures, align your trading process around the tactics discussed below. With hard work and practice, over the course of six months to a year, you just may be able to become one of the few traders (relative to those who try) who make a living from day trading.

Day trading success and how long it takes

Before you can day trade for a living, know what you are up against. Day trading lures throngs of people, yet most of these people won't make a profit, let alone a living. Most people who attempt day trading will lose most, or all, of the money they deposit into their trading account.

Less than 4.5 percent of day traders who try will be able to make a living from day trading. The chance of making a great living is much smaller. For the 4.5 percent that makes a living from the markets, it typically takes them six months to a year—dedicating full-time hours (about 30-40 hours per week) to education, practice, and trading—before they reach that level.

The blueprint that follows will help you be one of the few traders who can make a living off day trading, potentially pulling returns of 10 percent or more out of the market each month.

Day trading success reduced to four numbers

Create or follow a strategy that allows you to keep these numbers in the target zones, and you will be a profitable trader. Successful trading can be reduced to four factors: risk on each trade (position size), win-rate, reward-to-risk and how many trades you take.

Understanding these four numbers will help you reach your goal of day trading for a living. All the components/numbers work together. Here's how:

Capital at risk per trade

To be successful, control the risk on each trade. Risk a maximum of one percent of your account on each trade. For example, if you have a $10,000 account, risk up to $100 on each trade.

Place a stop loss order to make sure you don't lose more the one percent of your account. Once you know your entry price and stop loss level, calculate your position size (how many shares, lots or contracts you take in the stock market, forex market or futures market).

One percent may not seem like a lot to risk, but, as I'll explain in the next section, our winning trades should always be bigger than our losing trades. While we only risk one percent, we strive to make 1.5 percent to three percent on our winners, risking $100 to make $150 to $300, for example. Only risking one percent also means that even if you hit a losing streak of five to 10 trades, you haven't lost much capital. A few winning trades and you have made that loss back. Risk more than one percent though, and a losing streak can decimate your account.

Reward:risk

The reward:risk is how much you make on winning trades relative to how much you lose on losing trades. If you are always risking one percent of your capital, then your reward-to-risk should at a minimum be 1.5:1. That means you are making 1.5 percent (or more) on your winning trades, and losing one percent on your losing trades.

To accomplish this, place a profit target that is a greater distance from your entry point than your stop loss is. For example, if you buy a stock at $10 and place a stop loss at $9.95 (this risk would represent approximately one percent of your account capital, based on your position size) then your target would need to be placed near $10.08. If you lose, you lose $0.05 per share, but if you win, you make $0.08. That is a reward:risk of 0.08:0.05, or 1.6:1. Reward:risk is interlinked with the win-rate.

Win-rate

The win-rate is how many trades you win, expressed as a percentage. If you make 100 trades in a demo account and win 53 of them, your win-rate is 53 percent. Win-rate is interlinked with reward:risk.

Day traders should strive to keep their win-rate near 50 percent or above; that way, if the reward:risk on each trade is 1.5:1 or above, you will be a profitable trader.

Assume you are able to maintain a 1.5 reward-to-risk over 100 trades. You are adding 1.5 percent to your account on winners, and losing one percent of account capital on a loss.

If you win 50 percent of your trades, you are in good shape: 50 x 1.5 percent = 75 percent - (50 x 1 percent) = 25 percent. You increase your account capital by 25 percent over those 100 shares. If you win 40 percent of your trades, then you don't make any money: 40 x 1.5 percent - (60 x 1 percent) = 0 percent.

Number of trades

From the numbers above, your goal is to win more than 50 percent of your trades and make 1.5 percent or more relative to the one percent you are risking. If you can do that, the more trades you take that still allow you to maintain those statistics, the better.

If you make one trade per day, that is about 22 trades per month. If you win 50 percent with a 1.5 reward:risk, you make 11 x 1.5 percent - (11 x 1 percent) = 5.5 percent. If you make two trades per day, you win 22 trades and lose 22 trades, but your percentage return increases to 11 percent for the month.

If you only trade a two-hour period—which is all that is required to make a living from the markets (this is the end result, at the beginning you will want to put in at least several hours per day of study and practice)—day traders should be able to find between two and six trades each day that allow them to maintain the statistics mentioned above. Note that some days produce no trades because conditions aren't favorable, while other days may produce 10 trades. At an average of four trades per day, if you maintain the above stats, you'll generate a return of 22 percent on your capital for the month.

Don't take trades for the sake of taking trades though; this will not increase your profit. All trades taken must be part of a strategy that allows you to win 50 percent or more, with a 1.5:1 or greater reward:risk. If you take trades with a poor probability of winning, or where the reward doesn't compensate for the risk, this will drag down your statistics, leading to a lower return or a loss.

Tying all the statistics together

If any of these statistics get out of whack, it will hurt your results. It's a razor-thin line between profitable trading and losing. Over 100 trades, winning 50 means a nice income, while winning only 40 means you break even or lose money when accounting for commissions.

A slight drop in win-rate or reward:risk can move you from profitable to an unprofitable territory. Risking too much on each trade can decimate your account quickly if you hit a losing streak. Winning 50 percent of your trades doesn't mean you will always follow the pattern of win, lose, win, lose, win. Wins and losses are distributed randomly. Some days you may lose all the trades you take, while other days you may win them all. There is no specific number of trades you should, or need, to take each day. However, over many days, it should average out to at least two trades or more a day if you want to eclipse the 10 percent-per-month return mark.

The only way to know if a strategy can produce the numbers above (or better) is to test that strategy out in a demo account. Take hundreds of trades, and if the strategy produces the results above (or better) then you have some assurance—but no guarantees—that the strategy can produce those figures in the future. Small adjustments may be required over time to keep the strategy aligned with the numbers above. If a strategy produces those numbers, then only trade that strategy. Don't trade any strategy that is untested, as untested strategies typically drag down your win-rate and/or reward:risk.

Which market to day trade

The statistics above apply whether you trade stocks, forex or futures—the main day trading markets. Your percentage returns will be similar in each if you create or follow a strategy that maintains the statistics above. Which market you choose shouldn't be based on return potential, as they all offer similar returns. Rather, base your decision on which market you are most interested in and the amount of starting capital you have.

To day-trade stocks, you need at least $25,000. If you have less than $25,000 in trading capital, save up more capital, or day trade futures or forex. For day trading futures, start with at least $7,500. For day-trading forex, start with at least $500. Your initial trading capital is a major determinant of your income. If making 10 percent per month, with a $25,000 account you will make $2,500 in income (less commissions). With a $500 account, you will make $50 (again, less commissions).

Choose the market you are most interested in that allows you to trade with the capital you have available. The less capital you have, the longer it will take to build up your capital to a point where you can make a livable monthly income from it.

The more capital, the harder it is to maintain high percentage returns

Making 10 percent to 20 percent is quite possible with a decent win-rate, a favorable reward:risk ratio, two to four (or more) trades each day and risking one percent of account capital on each trade. The more capital you have, though, the harder it becomes to maintain those returns.

If you are trying to day trade millions of dollars, it is much harder to make 10 percent a month than it is for someone trading a $75,000 account. There is only so much buying and selling volume at any given moment; the more capital you have, the less likely it is that you will be able to utilize it all when you want to. This is typically why only individuals or very small hedge funds can generate huge yearly returns, yet these returns are unheard of when discussing traders or hedge funds with very large accounts.

Final word on making 10 percent per month from day trading

The math works, and there are many strategies-freely available—that provide more than two-day trades a day, a greater than 50 percent win-rate, and a reward:risk greater than 1.5:1. Keeping your risk to one percent or less is up to you and should be employed no matter which strategy you use.

The main problem is that while you can see the math works over 10 or 100 trades, while you are in a trade it is very hard to remember the big picture. Most new traders can't stand losing, and so they exit a winning trade with a tiny profit, messing up their reward:risk. They hold onto a loser, not wanting to accept the loss, and end up losing much more than one percent on a single trade. This also messes up the reward:risk, and could potentially decimate the account.

New traders also need to remember that wins and losses are not evenly distributed. You may win or lose several trades in a row. A winning streak doesn't mean you are a phenomenal trader and can abandon your strategy. Likewise, a losing streak doesn't mean you are a bad trader. The only thing that matters is how many trades you win and lose out of 100, which is about how many trades you will take each month. Win more than 50 with a reward to risk of 1.5:1 and you will be a very profitable trader, even if you had a few days in a row where you lost every signal trade you made.

Make hundreds of day trades in demo account using the same strategy to see the win-rate, reward:risk and number of trades per day it produces. Only utilize real capital once you have hundreds of trades worth of data, and the strategy is showing a profit over those hundreds of trades.

How much trading capital do forex traders need?

Accessibility in the forms of leverage accounts—global brokers within your reach—and the proliferation of trading systems have promoted forex trading from a niche trading audience to an accessible, global system.

However, the amount of capital traders have at their disposal will greatly affect their ability to make a living. A trader's ability to put more capital to work and replicate advantageous trades is what separates professional traders from novices. Just how much capital a trader needs, however, differs vastly.

Key takeaways

Traders often enter the market undercapitalized, which means they take on excessive risk to capitalize on returns or salvage losses.

Leverage can provide a trader with a means to participate in an otherwise high capital requirement market.

The leverage a trader requires varies, but if a trader is making consistent trades, the leverage required is simply enough that the trader is able to profit without taking unnecessary risks.

Considering leverage in forex trading

Leverage offers a high level of both reward and risk. Unfortunately, the benefits of leverage are rarely seen. Leverage allows the trader to take on larger positions than they could with their own capital alone, but impose additional risk for traders that do not properly consider its role in the context of their overall trading strategy.

Best practices would indicate that traders should not risk more than 1% of their own money on a given trade. While leverage can magnify returns, it's prudent for less-experienced traders to adhere to the 1% rule. Leverage can be used recklessly by traders who are undercapitalized, and in no place is this more prevalent than the foreign exchange market, where traders can be leveraged by 50 to 400 times their invested capital.

A trader who deposits $1,000 can use $100,000 (with 100 to 1 leverage) in the market, which can greatly magnify returns and losses. This is considered acceptable as long as only 1% (or less) of the trader's capital is risked on each trade. This means that with an account size of $1,000, only $10 (1% of $1,000) should be risked on each trade.

While difficult in practice, traders should avoid the temptation of trying to turn their $1,000 into $2,000 quickly. It may happen, but in the long run, the trader is better off building the account slowly by properly managing risk.

Respectable performance for forex traders

Every trader dreams of becoming a millionaire by making intelligent bets off of a small amount of capital. The reality of forex trading is that it is unlikely to make millions in a short timeframe from trading a small account.

While profits can accumulate and compound over time, traders with small accounts often feel pressured to use large amounts of leverage or take on excessive risk in order to build up their accounts quickly. When factoring fees, commissions and/or spreads into return expectations, a trader must exhibit skill just to break even.

Simply being profitable is an admirable outcome when fees are taken into account. However, if an edge can be found, those fees can be covered and a profit will be realized. A trader that averages one tick per trade erases fees, covers slippage and produces a profit that would beat most benchmarks.

Are you undercapitalized for making a living in forex trading?

The high failure rate of making one tick on average shows that trading is quite difficult. Otherwise, a trader could simply increase their bets to five lots per trade and make 15% per month on a $50,000 account. Unfortunately, a small account is significantly impacted by the commissions and potential costs mentioned in the section above. I

N contrast, a larger account is not as significantly affected and has the advantage of taking larger positions to magnify the benefits of day trading. A small account by definition cannot make such big trades, and even taking on a larger position than the account can withstand is a risky proposition due to margin calls.

If the goal of day traders is to make a living off their activities, trading one contract 10 times per day while averaging a one-tick profit may provide an income, but is not a livable wage when factoring other expenses.

There are no set rules on forex trading—each trader must look at their average profit per contract or trade to understand how many are needed to meet a given income expectation, and take a proportional amount of risk to curb significant losses.

How much money can I make forex day trading?

Julie bang @ the balance 2021

Many people like trading foreign currencies on the foreign exchange (forex) market because it requires the least amount of capital to start day trading. Forex trades 24 hours a day during the week and offers a lot of profit potential due to the leverage provided by forex brokers. forex trading can be extremely volatile and an inexperienced trader can lose substantial sums.

The following scenario shows the potential, using a risk-controlled forex day trading strategy.

Forex day trading risk management

Every successful forex day trader manages their risk; it is one of, if not the most, crucial elements of ongoing profitability.

To start, you must keep your risk on each trade very small, and 1% or less is typical. this means if you have a $3,000 account, you shouldn't lose more than $30 on a single trade. That may seem small, but losses do add up, and even a good day-trading strategy will see strings of losses. Risk is managed using a stop-loss order, which will be discussed in the scenario sections below.

Forex day trading strategy

While a strategy can potentially have many components and can be analyzed for profitability in various ways, a strategy is often ranked based on its win-rate and risk/reward ratio.

Win rate

Your win rate represents the number of trades you win out a given total number of trades. Say you win 55 out of 100 trades, your win rate is 55 percent. While it isn't required, having a win rate above 50 percent is ideal for most day traders, and 55 percent is acceptable and attainable.

Risk/reward

Risk/reward signifies how much capital is being risked to attain a certain profit. If a trader loses 10 pips on losing trades but makes 15 on winning trades, she is making more on the winners than she's losing on losers. This means that even if the trader only wins 50% of her trades, she will be profitable. Therefore, making more on winning trades is also a strategic component for which many forex day traders strive.

A higher win rate for trades means more flexibility with your risk/reward, and a high risk/reward means your win rate can be lower and you'd still be profitable.

Hypothetical scenario

Assume a trader has $5,000 in capital funds, and they have a decent win rate of 55% on their trades. They risk only 1% of their capital or $50 per trade. This is accomplished by using a stop-loss order. For this scenario, a stop-loss order is placed 5 pips away from the trade entry price, and a target is placed 8 pips away.

This means that the potential reward for each trade is 1.6 times greater than the risk (8 pips divided by 5 pips). Remember, you want winners to be bigger than losers.

While trading a forex pair for two hours during an active time of day it's usually possible to make about five round turn trades (round turn includes entry and exit) using the above parameters. If there are 20 trading days in a month, the trader is making 100 trades, on average, in a month.

Trading leverage

In the U.S., forex brokers provide leverage up to 50:1 on major currency pairs. for this example, assume the trader is using 30:1 leverage, as usually that is more than enough leverage for forex day traders. Since the trader has $5,000, and leverage is 30:1, the trader is able to take positions worth up to $150,000. Risk is still based on the original $5,000; this keeps the risk limited to a small portion of the deposited capital.

Forex brokers often don't charge a commission, but rather increase the spread between the bid and ask, thus making it more difficult to day trade profitably. ECN brokers offer a very small spread, making it easier to trade profitably, but they typically charge about $2.50 for every $100,000 traded ($5 round turn).

Trading currency pairs

If you're day trading a currency pair like the USD/CAD, you can risk $50 on each trade, and each pip of movement is worth $10 with a standard lot (100,000 units worth of currency). therefore you can take a position of one standard lot with a 5-pip stop-loss order, which will keep the risk of loss to $50 on the trade. That also means a winning trade is worth $80 (8 pips x $10).

This estimate can show how much a forex day trader could make in a month by executing 100 trades:

Gross profit is $4,400 - $2,250 = $2,150 if no commissions (win rate would likely be lower though)

Net profit is $2,150 - $500 = $1, 650 if using a commission broker (win rate would be like be higher though)

Assuming a net profit of $1,650, the return on the account for the month is 33 percent ($1,650 divided by $5,000). This may seem very high, and it is a very good return. See refinements below to see how this return may be affected.

Slippage larger than expected loss

It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

Slippage is an inevitable part of trading. It results in a larger loss than expected, even when using a stop-loss order. It's common in very fast-moving markets.

To account for slippage in the calculation of your potential profit, reduce the net profit by 10% (this is a high estimate for slippage, assuming you avoid holding through major economic data releases). This would reduce the net profit potential generated by your $5,000 trading capital to $1,485 per month.

You can adjust the scenario above based on your typical stop loss and target, capital, slippage, win rate, position size, and commission parameters.

The final word

This simple risk-controlled strategy indicates that with a 55% win rate, and making more on winners than you lose on losing trades, it's possible to attain returns north of 20% per month with forex day trading. Most traders shouldn't expect to make this much; while it sounds simple, in reality, it's more difficult.

Even so, with a decent win rate and risk/reward ratio, a dedicated forex day trader with a decent strategy can make between 5% and 15% a month thanks to leverage. Also remember, you don't need much capital to get started; $500 to $1,000 is usually enough.

The balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

How much do forex traders make per month?

How much do forex traders make per month? What is the monthly earnings potential of the average forex trader? If you’re reading this article, you’re probably fairly new to forex trading, so I don’t want to misguide you.

In fact, I’m going to tell you some hard truths that you probably don’t want to hear, but they are absolutely necessary to learn if you ever want to become a successful forex trader. Your initial reaction may be discouragement, but there is a light at the end of the tunnel.

Please fight the urge to roll your eyes and move on to something more uplifting. Sometimes the truth hurts, but I will absolutely guarantee that if you don’t listen to what I’m about to tell you, you will NEVER be a successful, long-term forex trader.

So how much do forex traders really make per month?

This question is a little misleading for a couple of reasons:

Most forex traders are not profitable

No profitable trader in any market makes the same percentage of profit each month

These are the questions you NEED to ask:

Why are most forex traders unprofitable?

Despite what you may have heard about how easy it is to make money in the forex market, the truth is that most traders fail. It is also true that you will probably fail at trading, but you don’t have to. The real reason traders fail is probably not what you think.

This is why traders actually fail:

Greed

Most new forex traders have unrealistic profit expectations. They think it will be possible to make 25% – 50% or more month to month. They have dreams of turning their small account into a very large account in just a few years.

This is totally unrealistic. If it were possible we would all be doing it. Most successful traders make a much lower average monthly profit (3%-7% is common). If you’ve averaged 10% or better for more than a year, you’re a rockstar in the trading world.

Take this into consideration:

If you could sustain a 10% average monthly gain, you would more than triple your account every year.

By averaging 6%, you would more than double your account every year.

Starting with $5,000, and averaging only 3% per month, your account would grow to over $170,000 in 10 years.

Warren buffet became a billionaire trader averaging only 30% per YEAR!

I’m not saying it’s impossible to make 25% or more in a month. I’ve done it, and many others have done it. I’m saying its impossible to MAINTAIN such a high average monthly gain. In order to shoot for such a high goal, you will be pressured to take bad trades, overtrade, and overleverage (which brings me to my next point).

Overleveraging

Poor money management is one of the worst account killers for new traders. This goes back to greed, because traders typically overleverage while shooting for unrealistic profit targets.

You should be risking a small percentage of your account on each trade, and you should be risking the same amount on each trade. I recommend never risking more than 2% per trade. Many successful forex traders risk 1% or less per trade, and some very successful and experienced traders risk 3%.

Risking more than a small amount per trade is a death sentence for your trading account because all trading systems go through periods of drawdown. If you’re risking too much during one of these periods, you will, at least, wipe out much of your progress, if not completely wipe out your account.

Consider these two examples:

If you lost 10 consecutive trades, risking 2% per trade, your account would be down about 18%. You would need to earn about 22% of the remaining account just to get back to your starting balance.

If you lost 10 consecutive trades, risking 10% per trade, your account would be down by more than 65%. You would need to earn nearly triple the remaining account (187%) just to get back to your starting balance.

Not only does responsible money management help preserve your capital during losing streaks, it also helps to keep you trading your edge mechanically. That’s because losing 1% or 2% on a trade does not sting nearly as much as losing 5%, 10%, etc….

It’s easier to deal with the losses, psychologically speaking. You’re more likely to pull the trigger on the next trade, and let your edge work itself out over time. And that’s exactly what you need to do, if you know you have a profitable trading method working for you.

Insufficient testing

I cannot stress this point enough. Testing is the backbone of a successful trading program. Most new traders are too impatient and undisciplined to thoroughly test new strategies. I think this, again, goes back to greed, because we all want to fire our bosses as soon as possible. You want to get that account snowballing quickly, but this is a costly, rookie mistake.

The problem is that, without sufficient testing of your trading system or any new trading setup, you’re not going to know how it will hold up during changing market conditions. You need to know if your trading system can stay profitable through increasing/decreasing volatility, growing/shrinking average daily range, impactful news events, etc….

I would not even consider a new trading strategy unless it had proven itself to be profitable after, at least, a couple hundred backtesting trades – either through my trading platform or using a backtesting software, such as forex tester 3.

Next, I would forward test (with a demo or micro account) the new strategy for, at least, a few months. The more time you spend doing this the better off you will be down the road because you will have absolute confidence in a system that has proven to be profitable over time.

Knowing exactly what your system is capable of, and proving to yourself that your trading system is profitable over months or (preferably) years worth of different market conditions will go a long way in helping you to mechanically trade the edge that your system gives you – even when you’re experiencing a losing streak.

Lack of discipline

I’ve mentioned discipline a few times already, and it’s an import factor in profitable trading. It’s another psychological aspect of trading that can either make you or break you. Most new traders lack discipline in every aspect of their trading, from testing to execution.

It takes discipline, as well as patience, to properly test a new trading strategy. Most traders don’t have the discipline to do any manual backtesting at all. They simply learn a new trading method, and demo trade it for a week or two, or worse, they go straight to live trading.

It takes discipline to keep trading when you’re losing. If you’ve done your due diligence, then you already know for sure that you’re trading a consistently profitable trading system. With discipline, you will be able to keep pulling the trigger on the next trade and let your edge play out over time.

Sometimes you just have a bad feeling about a trade, although it meets your criteria. It takes discipline to mechanically trade every setup that comes along, but it’s a must. As soon as you start trading subjectively, you’ve abandoned your edge and you’re gambling.

Note: there is limited room for some subjectivity in some aspects of trading when you become much more experienced, but you should strive to trade as mechanically as possible even then.

Lack of discipline can also lead you into catastrophic behaviors, such as overleveraging (which I mentioned above) and revenge trading. Revenge trading is when you re-enter the market because you’re trying to earn back money that you’ve just lost – not because your trading system has provided another quality entry trigger.

Overtrading could be mentioned in the same breath. Successful, disciplined traders trade less, because they only take the best trade setups. They have the discipline to wait for the market and their trading system(s) to provide them with quality setups, rather than trying to force bad setups to meet some unrealistic profit target.

System hopping

If you’re a new forex trader, it’s absolutely necessary to find a consistently profitable trading system to start testing. As of right now, there are three profitable trading systems reviewed on this website that I have personally traded and recommend. However, I mostly use day trading forex live now.

Note: read my full reviews of these trading systems to see which one will fit your trading style and schedule, as each of these systems are completely different.

If you’ve been trading for a year or two, the truth is that you’ve probably already traded a few profitable trading systems. You just were not confident enough in them, or disciplined enough to let their edge play out over time.

You probably didn’t test long enough, started trading your hard earned money, lost a bunch of it, blamed the trading system you were using, and moved on to the next system. This is a constant, destructive cycle that a large majority of unsuccessful traders are trapped in.

There is no “holy grail” in trading. The point is to find a system that makes sense to you, and test it to see if it actually works. Just as importantly, you need to test it to prove to yourself that it will be profitable in the long term.

You’re looking for something that will provide you a verified edge in the market. You need to have an unwavering belief in the trading system that you are using. Once you do, you simply have to continue to trade the edge that your system provides for you with discipline.

Many traders unwittingly give up on profitable trading systems because they don’t trade them long enough, or with enough discipline, to let the edge work out for them. Even the best traders in the world lose lots of trades, but they have the discipline to let their edge play out.

What is a realistic average monthly profit expectation for a successful trader?

This question is more in line with the way you should be thinking, although its answer may be just as discouraging: it depends on the trader, their trading system, the market, etc….

Successful traders simply trade the edge that their trading system(s) give them, and take what they can get. They don’t set goals and they don’t force trades to meet those goals.

A really good year for a successful trader might look like this:

January +5%
february -2%
march +9%
april +12%
may +3%
june +9%
july +15%
august +20%
september +7%
october -4%
november +5%
december +5%

A trader with this record, if no money was withdrawn from the account along the way, would have earned over 120% – more than doubling their starting balance! Their average monthly profit percentage would be 7%.

Even as I’m writing this I can picture the amateur traders saying to themselves, “that’s not enough! I’ll never be able to do this for a living at that rate.” that is greed and impatience doing what they do to every inexperienced trader.

You could make more than what is depicted in the example above, but if you don’t change your attitude and expectations, you will most likely make much less. Instead of asking yourself, “how much can I make per month as a forex trader?” you should be asking yourself, “am I willing to do what it takes to become a successful forex trader?”

Are you still looking for a profitable trading system? I recently changed my main trading system after testing a new one for over a year. Come see why I switched to day trading forex live.

Realistic returns for a forex trader

We've all heard stories of a person who perhaps came from a lower-class background, who began trading and was able to achieve success, earning millions in the process. Often these stories are heartwarming and inspirational, and teach us that all you really need to succeed is hard work, determination, and perseverance. The types of stories will also teach us that we have to be extremely focused on our goals, to learn as much as possible every day, and that in the end, all the hard work will eventually pay off.

Real-life stories like this are, of course, extremely rare. There is also another type of story. The story of a professional trader who made millions trading for a few days, then lost everything because they were convinced they had found the ''holy grail'', perhaps through some specific forex strategy – when in fact, they just had beginner's luck. Unfortunately, we cannot expect the stars to always align in our favour. It's important to understand that random events, like 'luck' are unreliable.

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Effort, focus, and determination

Suppose that you owned a company, what you would do with your own company? When you decide to start a company, you do not just invest in the first idea you hear about, right? No, a sensible investor shops around first, and considers various options before committing to anything. Once you're running your business, you probably won't just go with the flow of things either. To make your firm operate effectively, you need to plan, set targets, check progress regularly, and set budgets.

The same principles apply to trading. As with fulfilling your life goals, in meeting your forex goals, you need to really apply yourself, with a great deal of effort, focus, and determination. As vince lombardi once said, "the only place success comes before work is in the dictionary". When you google something like "forex monthly return", you may stumble into some outlandish account statements, or claims of people that are supposedly making millions per hour.

Don't forget that with every story of extremely successful and rich traders, there is usually a catch.

You might hear a story about a wall street trader making 10 million USD a year, and it may even be true. But, what the story may not mention is that the traders manages billions of USD. Those 10 million USD are less than one percent of the total account that the trader manages. Compare that to a 1,000 USD account, it then amounts to a return of just 10 USD a year!

Before you attempt any form of trading, it is recommended that you do so first within a risk-free trading environment, via a forex demo account. This will allow you to try out different strategies, techniques, and timeframes, without putting your capital at risk.

Most stories don't make that fact evident – sometimes deliberately – so ordinary people get the wrong impression. The actual results of this magnitude are very rare. If you doubt the rarity of successful large-scale wall street trades, ask yourself, how many times you have seen a wall street trader publicly display his or her results? Of course, there are exceptions, but 90 percent of the most successful traders won't share this information, because they simply aren't performing at that level.

Back to reality

There are a lot of traders who believe that a combination of proper capital management and correct strategy application can lead to high returns. But most traders may also sustain considerable losses because they have do not have enough initial capital to get them through to the potential next win. For the majority of professional traders, the average forex monthly return is between 1 to 10 per cent per month.

Remember: you won't get anywhere near a return on your investment if you don't put sufficient efforts into educating yourself and learning how to utilise the different types of analytical and high quality trading tools that professional traders use.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

What is a realistic return on investment?

It is truly laughable when I see forex promotions that pain this picture of a little money being able to produce 1,000% or even 10,000% returns. I give you an example below taken from a forex online forum:

Of course the fellow’s membership was revoked by the owners of the online forum who did not want some scammer tainting their image.

$35 to $10,000 in one month? Wow!

Usually, the products used to advertise these ridiculously high returns on investment are expert advisors. Due to the fact that these forex robots open positions using strategies and risk percentage levels not known to the traders who buy these products, the vendors pitching these products are able to mask the true risk profile that these products subject the trading account to, and it is not long before such accounts get blown as this testimony here attests to:

This brings us to the question: what is a realistic return on investment? I have done a lot of research in this area and I have come to the conclusion that returns on investment in forex or any other financial market for that matter are not usually too far-fetched from what obtains in any other offline investment vehicle. Of course, there will be individual variations in the figures, but the results will tend to cluster within a range.

Professional traders who work in hedge funds and investment banks know this. Indeed, the only times when there are really huge returns is when there are contrarian trades that go against the general market trend, such as those set by john paulson and michael burry when they bet against the subprime housing market with huge returns. But even michael burry will readily tell you that his hedge fund had to endure a terrible period of drawdown in which his co-investors readily questioned his decisions and tactics, before things turned around. But the fact is that such opportunities for huge returns are rare and come by only once in a while.

What are realistic returns on investment? Let’s look at some examples…

So realistically speaking, what returns on investment should traders pursue in forex? To get a proper answer to this question, let us review the returns of investment from some hedge funds which are active in the forex market.

– soros fund management, the hedge fund owned by george soros, made 22% returns in 2013.

– ex-goldman sachs trader david tepper made 42% annual returns from his biggest hedge fund.

– the S&P500 stock market rose 32% in 2013, fuelled by the fed’s tapering program.

– steven cohen’s SAC capital made just 19% in 2013, but at a value of close to 2.3billion US dollars, his relatively low return outperformed most other hedge fund traders in the market.

– john paulson’s recovery fund earned 63% last year, even though some of his gold-based holdings took a hit due to a fall in gold prices.

– carl icahn’s investment fund earned 31% returns in 2013.

– james simons made 19% from his holdings in citadel.

– larry robbins’ glenview capital hedge fund returned 43% net in 2013.

From the results we see here, we can see that returns on investment from hedge fund traders, who typically represent the institutional traders in forex, range from 15% to 50% annually, with majority being clustered around the 25% to 35% mark if we follow the gaussian distribution pattern.

If these are the kinds of returns on investment made by hedge funds, why would individual traders get sucked into these unbelievable headlines which promise traders returns of up to 10,000% on small amounts of money? Surely this is not possible.

Factors affecting returns on investment

Returns on investment are affected by:

B) risk assumed per trade

Account size

Hedge fund traders typically command large amounts of money. George soros has over $29billion in his hedge fund, and his returns on investment for 2013 earned him $280million. The larger the account a forex trader has, the more that trader is able to cut his risks to the barest minimum as to be able to command good returns in the market.

Risk profile

Trading is all about assuming risk. The trouble has always been: how much risk is safe to assume? A risk profile of 2-3% exposure for all trade exposure in the market is generally accepted as the standard which promotes safe returns. The lower the risk, the more assured the returns.

Conclusion

So what is the realistic return on investment in forex? Traders should realistically aim for returns between 25% and 35% per annum. This is assuming that they employ the same long term investment goals that the hedge fund traders adopt.

I personally advocate two strategies to this:

A) if you are targeting to pull money from your account every month, you can get more aggressive by using few trades (not more than 6 or 7 trades) on a daily chart, picking out trades that have a risk-reward ratio of 1:3 minimum. Aim to start trading with at least $10,000.

B) if you are going to be compounding for the long term, then you should ideally aim to compound your profit and capital by a rate of return of 15% monthly, stepping down to 10% in year two and 7.5% in year 3. Starting capital for this venture should not be less than $10,000.

If you do not have as much as $10,000, then your goal should be to work offline to raise this amount. Reserve your micro accounts for training and re-training yourself on a live account.

More about adam

Adam is an experienced financial trader who writes about forex trading, binary options, technical analysis and more.

How much money can I make forex day trading?

Julie bang @ the balance 2021

The following scenario shows the potential, using a risk-controlled forex day trading strategy.

Forex day trading risk management

Every successful forex day trader manages their risk; it is one of, if not the most, crucial elements of ongoing profitability.

Forex day trading strategy

While a strategy can potentially have many components and can be analyzed for profitability in various ways, a strategy is often ranked based on its win-rate and risk/reward ratio.

Win rate

Risk/reward

A higher win rate for trades means more flexibility with your risk/reward, and a high risk/reward means your win rate can be lower and you'd still be profitable.

Hypothetical scenario

This means that the potential reward for each trade is 1.6 times greater than the risk (8 pips divided by 5 pips). Remember, you want winners to be bigger than losers.

Trading leverage

Trading currency pairs

This estimate can show how much a forex day trader could make in a month by executing 100 trades:

Gross profit is $4,400 - $2,250 = $2,150 if no commissions (win rate would likely be lower though)

Net profit is $2,150 - $500 = $1, 650 if using a commission broker (win rate would be like be higher though)

Slippage larger than expected loss

It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

Slippage is an inevitable part of trading. It results in a larger loss than expected, even when using a stop-loss order. It's common in very fast-moving markets.

You can adjust the scenario above based on your typical stop loss and target, capital, slippage, win rate, position size, and commission parameters.

The final word

How much trading capital do forex traders need?

Key takeaways

Traders often enter the market undercapitalized, which means they take on excessive risk to capitalize on returns or salvage losses.

Leverage can provide a trader with a means to participate in an otherwise high capital requirement market.

The leverage a trader requires varies, but if a trader is making consistent trades, the leverage required is simply enough that the trader is able to profit without taking unnecessary risks.

Considering leverage in forex trading

Respectable performance for forex traders

Are you undercapitalized for making a living in forex trading?

Today's forex performance leaders

Bullish trends

Bearish trends

Stocks: 15 20 minute delay (cboe BZX is real-time), ET. Volume reflects consolidated markets. Futures and forex: 10 or 15 minute delay, CT. Market data powered by barchart solutions. Fundamental data provided by zacks and morningstar.

Forex performance leaders lists forex contracts with the highest and lowest percent change (the difference between previous close and the last price). This page can help you identify the crossrates with the most price movement from the close of the market yesterday.

The page is initially displayed using the chart view, which graphs top performance leaders as green bars (highest percent change), followed by bottom performance leaders as red bars (lowest percent change) and shows the 30 top/bottom crossrates. Hover over any of the green or red bars to view the last, change, high, low prices, plus last trade time.

Hint: use the main view to see the top 10 specific forex contracts that appear on the chart view, along with their percent change.

The contracts that appear on the performance leaders page are re-ranked every 10 minutes. During active trading, you will see new price information on the page, as indicated by a "flash" on the fields with new data. Please note that prices on the chart view are static, and not updated as you see on the other views. Forex prices are delayed 10 minutes, per exchange rules, and trade times are listed in CST.

What is a realistic return on investment?

Of course the fellow’s membership was revoked by the owners of the online forum who did not want some scammer tainting their image.

$35 to $10,000 in one month? Wow!

What are realistic returns on investment? Let’s look at some examples…

– soros fund management, the hedge fund owned by george soros, made 22% returns in 2013.

– ex-goldman sachs trader david tepper made 42% annual returns from his biggest hedge fund.

– the S&P500 stock market rose 32% in 2013, fuelled by the fed’s tapering program.

– steven cohen’s SAC capital made just 19% in 2013, but at a value of close to 2.3billion US dollars, his relatively low return outperformed most other hedge fund traders in the market.

– john paulson’s recovery fund earned 63% last year, even though some of his gold-based holdings took a hit due to a fall in gold prices.

– carl icahn’s investment fund earned 31% returns in 2013.

– james simons made 19% from his holdings in citadel.

– larry robbins’ glenview capital hedge fund returned 43% net in 2013.

Factors affecting returns on investment

Returns on investment are affected by:

B) risk assumed per trade

Account size

Risk profile

Conclusion

I personally advocate two strategies to this:

If you do not have as much as $10,000, then your goal should be to work offline to raise this amount. Reserve your micro accounts for training and re-training yourself on a live account.

More about adam

Adam is an experienced financial trader who writes about forex trading, binary options, technical analysis and more.

So, let's see, what we have: here is a blueprint for how to make a living off of day trading by generating returns greater than 10 percent per month. At forex 10 percent a month