How to make money online forex

Below are a few tips on how to find a good trader to follow. The following tips will help you land the perfect trading pro:

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For beginners, the forex market can be hard to navigate. There is a lot of jargon that you have to wrap your head around in order to be able to make any reasonable profits. The problem is, it takes a lot of time to master all the crucial skills that are required to qualify as a professional. Often times, many novice traders give up without making a dime.

But do you really have to trade to make money on forex? What if there was a way to invest profitably without actually having to trade? The good news is, there is a way. It is called forex copy trading.

What is copy trading ?

As the name suggests, copy trading is a form of forex trading where you copy or replicate the trading patterns of other traders. This is a trend that emerged in the early 2000’s and has over the years proved to be a real savior for inexperienced traders. With copy trading, also known as mirror trading or sometimes social trading, you can make profits as a forex trader even with minimum skills.

The only skills you require is to understand the whole concept of copy trading, that is mostly, how to choose a good trader to follow. You should, however, keep in mind that forex trading, in general, is risky and high returns are not guaranteed. Although copy trading gives you an opportunity to make profits without investing in research and having to understand the ins and outs of forex, the risk is still there and a lot of caution is required.

In most cases, forex copy trading can backfire because of a poor choice of traders to follow. That is why it is important that you carefully analyze your potential “masters” using the stats provided by the copy trading platform of your interest to make good money.

Below are a few tips on how to find a good trader to follow.

How to find A good trader to follow

The following tips will help you land the perfect trading pro:

Discover the most followed traders

The number of followers often point to the credibility and prowess of that particular trader. If a potential professional is followed or copied by many traders, it usually means that they have consistently recorded outstanding performance.

Analyze their followers/copiers

Sometimes followers can be fabricated. That is why you should critically analyze the followers to ensure that they are real humans. Another reason for this is to ensure that the follower base is consistently growing. If the number of traders copying your potential professional grows and suddenly drops, it may mean a drop in good performance. However, if the followers are ever increasing, you should add that investor to your list.

Should have consistent monthly performance

Your search for the perfect trader should not end with the most followed. Sometimes, they might have a lot of traders copying them, but the balance between profits and losses is not promising. That is why it pays to dig deeper and unearth trading gurus who have posted good and consistent monthly performance.

Number of trades and time on a platform

Traders who have been on the platform for a long are most preferred. They are usually more experienced and know their way around trading. The number of trades conducted is also another indicator. The person you wish to follow should have done a good number of trades with consistent profits.

You might not find the perfect trader to follow, but as you gain more useful skills, you will be able to make more constructive analysis and choose wisely. The type of copy trading platform you choose also matters. A lot of seasoned traders use credible forex brokers and you will hardly see them on new platforms or those with a bad reputation.

Benefits of forex copy trading

Copy trading presents a lot of good opportunities for both those who copy others and those who are copied.

You gain invaluable trading skills from professionals you follow

There is a lot of transparency as the trading history of the trader is publicly disclosed to followers

You can make passive income without actively trading

You don’t have to understand all the aspects of forex trading

With forex copy trading, you can make good money without having to actively trade. The point is to choose the right trader to follow by carefully analyzing their profiles and utilizing the stats provided by the various platforms.

How to make money online by trading forex in 2021 [A beginner’s guide]

To make money online trading forex is simple and effortless to do. So far, you have basic knowledge of how the foreign exchange market works. With just your smartphone or laptop, and knowledge about forex trading, you are good to go.

Even if you are a beginner who knows little or nothing about forex trading, this article will expose you to steps on how to start making money online by trading forex.

What is forex trading and market all about?

The foreign exchange market which is shortened to forex deals with the selling and buying of currency pairs after using different techniques and strategies to make decisions. The foreign exchange market is quite huge and is estimated to turn out over US$5 billion every day.

The forex trading market is an international market that allows everyone to trade irrespective of their certifications. This means you can make money online trading forex without even having any certificates or formal qualifications. If mastered well, forex trading can make you huge and legit money quickly.

Below is the complete list of steps for any beginners to make money online trading forex.

Steps to make money online trading forex as A beginner

1. Take training or lessons on forex trading

Before you start trading forex, you should take the time to learn about how forex trading works. You should make effort to learn about different forex trading terminologies, keywords, strategies, and analyses.

This is to reduce the risk of blowing your money up before you start making gains. To do this, you can search for courses online to take or even learn from a known and trusted expert.

2. Choose A trusted forex broker

After learning forex and understanding the principles behind the foreign exchange market well enough. The next thing is to choose a good and trusted forex broker.

In case you do not know how to go about this, you can search online for reviews on different forex brokers. You can also seek the advice of the person you are learning from or ask in a forex community.

In all you do to choose a broker, just ensure they do not have withdrawing or fraud issues. You should also consider their friendliness and customer care services. The provisions of forex trading tools like charts, financial calendars, educative materials, leverage types, and others should also be assessed.

Considering these factors will help you in choosing the right brokers for your trading.

3. Practice with demo account

One of the advantages of choosing a reliable forex broker is the provision of demo accounts for beginners to trade with. Some forex brokers do provide demo trading account for amateur forex traders to start practicing with.

A demo trading account is a virtual account similar to a real account, which is used in trading. The money in there is just for you to practice until you are good enough to start trading with your money. Demo account helps forex traders to start trading without any pressure or fear of losses.

4. Understanding trends

With the constant practice of forex trading with a demo account, you will be able to understand and gather more knowledge about the foreign exchange market. You will be able to figure out and know what currency pairs are favorable to sell or buy at a particular time. You will learn to identify different pairs including USD/JPY, GBP/USD, and so on.

With practice, you will understand how financial analysis, the study of economy and events in countries affect the forex trading market. You will be able to predict using charts and trends(technical analysis) to know whether to sell or buy a pair.

Once you understand and master all these, it means you are ready to start trading with your money and making money with it.

5. Start trading with your capital

After mastering all the above-mentioned techniques and strategies, the next step to make money online by trading forex is to create a real account with your capital. Start selling and buying different currency pairs you deemed profitable.

Whenever you want to start trading, we advise you to focus on a currency pair at once especially if you are a beginner. Do not also use emotions in trading but your knowledge and facts. Don’t make the mistake of leaving a trade you ought to close for a long time because you think it can make you more profit. It can lead to a total loss if care is not taken.

Conclusion

Forex trading is a profitable online business for everyone irrespective of their education level. All you need to have is to master the act of trading forex well. We hope you find our guide on how to make money online trading forex helpful.

How to make money in forex: A beginner’s guide

Would you like to know how to make money in forex? That question is asked by day traders every single day.

Forex is the biggest financial market in the world. When you look at the market, you’ll find that it’s run by large corporations and day traders like yourself.

The difference between the corporations and the day traders? Only 4% of day traders make money. The others lose money and quit trading.

As a beginner trader, you’re going to need to know how you can escape the bottom 96% of traders and make it into the upper echelon of day traders.

Keep reading to learn the basics of forex and top strategies used by the pros.

What is forex?

Forex stands for foreign exchange. It’s also known as FX in trading circles. That’s how currencies from all over the world are traded.

You might have traded on forex and not even known it. Have you ever traveled outside the country? You probably had to exchange money, whether for a euros, pounds, or dollars.

That’s part of forex trading and there are $5 trillion traded every day.

When you exchange money, you sell the currency you have and you buy another currency. Everything is bought and sold in pairs.

The value of each currency fluctuates and depending on the timing of your trades, you can either make money or lose money.

For example, if you think the US dollar is going to decline further, then you can sell it now and exchange it for a currency you think will increase, like the euro. This trade will show up as USD/EUR, wince they’re in pairs.

Forex trading goals

If you want to know how to make money in forex, you have to start with your trading goals. After all, if you don’t set goals, forex is just another expensive hobby.

When you first start out, don’t set dollar amounts. Since there’s so much to master in the process, set goals according to learning different processes.

Once you get more experience, then you can set goals based on financial results.

You need a good broker

In order to start trading, you need to sign up with a broker or financial institution. They’ll have the trading platform available to make trades in forex.

When you pick your broker, you need to have 24/7 access to the trading platform. Forex is always running and trades are always being made. Remember, it’s always 5 pm somewhere.

The trading platform you choose is going to play a big role in your ability to learn how to make money in forex.

It’ll be different from trading cryptocurrency software, and there are plenty of platforms to try out. Most brokerages do have demos to test, and it would be wise try out a few before settling on one.

You’ll want to be sure that you choose a broker that offers the types of accounts you want, how you can withdraw money and what the deposit is.

Some brokers offer no deposit bonuses, where you don’t need to make a deposit, but you’ll get a small bonus if you meet certain requirements. You can find out more about that here.

Learn different forex trading strategies

Once you have your broker account set up, you’re going to want to practice and play with different trading strategies before you start trading for real. These are the most common forex trading strategies that you’ll hear other traders talk about.

#1. Analysis trading

Analysis trading is the process of looking at and analyzing data to try to predict currency trends. There are two ways to analyze data: technical analysis and fundamental analysis.

With technical analysis, you look at currency trends. If a currency has been slowly going up, you determine if it will stay on that runes or not. With this type of analysis, you assume that traders buy on emotional factors rather than data.

A fundamental analysis looks at the economic fundamentals of a country. The unemployment rates and GDP are typical indicators traders will use to see if a currency is overpriced or not.

#2. Momentum trading

With momentum trading, traders will examine the ups and downs in a currency. They’ll look at the number of trades and the price of the currency.

If a currency is trading up or down, a trader will assume that momentum will continue. If that momentum starts to shift then the trader assumes the trend will reverse.

#3. Position trading

If you want to make a long-term trade, position trading is for you. You take your fundamental and technical analyses and figure out a currency’s trend over several months or several years.

This is all about the long game. Currencies go up and down several times a day and you will if you be patient and wait through down moments where you’d be tempted to sell.

Pick your account type

When you start trading on forex, you have three account options. They are standard trading accounts, mini trading accounts, and managed trading accounts.

You’ll need to know what the risks are for each account type. Some are better in situations where you’re going to spend a lot of time trading, and others are good if you plan to invest small amounts of money on the market.

The success mindset

If you want to make money trading in the forex market, you’re going to need the right mindset for it. Anything revolving around money can be emotional for people, and it’s not uncommon for people to buy and sell solely on emotion.

How do you take the emotions out of trading? Have a system in place that you can stick to. Know how much you can trade, how much risk you can take, and how much loss you can withstand.

When you make a trade, you have to know why your strategy and goals are and stick to them.

Otherwise, you might as well be playing slot machines at the casino.

How to make money in forex

Learning how to make money in forex is one of the skills traders would love to have.

It doesn’t happen overnight, but with time and practice, you can be a skilled forex trader. You need to know the strategies in play and when to apply them.

For more great tips on making money online, check out our blog.

How to make money in forex trading: A complete guide for beginners

The foreign exchange market is the world’s most liquid market, with more than 5-trillion a day exchanging hands. The market is liquid 24-hours a day, 5-days a week, opening in the evening on sunday during north american trading hours and closing at 5-pm on friday evening during the same time zone. If you are a beginner and just dipping your toe into trading the forex markets, you should consider following the market and increasing your understanding of why exchange rates move before risking your hard-earned capital.

Learn about the financial markets

The financial markets allow investors, businesses, governments and central banks a place to transact in an open market, exchanging their risks to meet their financial needs. A corporate treasurer might need to exchange profits in euros into dollars, just as a speculator believes that the EUR/USD will rise. There are thousands of reasons why exchange rates and prices moved over a short-period of time, generating noise as participants look for an optimal price to enter or exit a position.

Before you start trading, you should learn about the different types of markets available to trade, and which one you are most interested in following. In addition to trading forex, you can also consider trading commodities, indices, and shares. The best way to learn about a market is to read about why others believe it’s moving and the different catalysts that might drive the price or exchange rate in a specific direction. For example, you might start with looking for a style of analysis that is generally provided by reputable brokers such as alpari. Your goal is to see what type of analysis they offer and what type of actionable ideas come from the analysis they provide. You can also look through a broker’s education section and see if they provide information about why the markets move. In addition to looking at a broker’s education section, you can scan the markets for websites that focus on financial markets education.

Learn to do your own analysis

There are two main types of analysis that forex traders generally focus on, which include fundamental and technical analysis. Fundamental analysis is the study of macro events that will alter the course of a currency pair. Technical analysis is the study of price action, including looking at momentum, trends and reversal patterns.

Fundamental analysis

The fundamentals surrounding the forex markets is based on the interest rates markets of each of the currencies that make up an exchange rate. For example, if you plan on trading the EUR/USD you want to have a gauge of where interest rates are likely going in the eurozone as well as the united states. In general, the stronger an economy, the more likely the central bank is to raise interest rates, which help drive up market interest rates. The reverse is also the case for a weaker economy where the central bank and market forces will likely drive interest rates lower.

The best way to determine if an economy is strong is to be able to evaluate countries financial information. This could include their employment information, their GDP, as well as inflation information such as the consumer price index. Most reputable brokers will provide you with a forex economic calendar where you can see what economists expect relative to history as well as the actual release. What is important about fundamentals is that each new piece of information can alter the direction of an exchange rate. If the economic data is greater than or worse than expected, an exchange rate will move to reflect the new information.

Technical analysis

Technical analysis is the study of historical prices. Although the past is not always a predictor of the future, different changes following specific studies can give you a gauge of where prices might move in the futures. Some of the more popular technical analysis studies include evaluating momentum. Momentum is the acceleration or deceleration of price changes. If you are interested in learning about technical analysis, you can look at your broker’s education section, or follow their technical analysis forecasts. There are also several websites that will provide you with education on different types of technical analysis tools. Some of the more popular include the MACD, the RSI, and stochastics.

Find good broker

Your forex broker facilitates the execution of transactions. While this is their most important function, there are many features a broker like alpari brings to the table which you should be aware of prior to depositing funds at that broker. First, do some due diligence. Look up reviews by your prospective broker and make sure there are no red flags. Fraud alerts or issues with withdrawing funds are the most important. You also want to make sure there is efficient customer service. You do not want to frustrate yourself by finding a broker who will not answer questions.

The next step is to evaluate the platform. Does the broker have an education section or generate technical analysis forecasts? Additionally, you want to make sure that your broker offers clients a financial calendar. Additionally, you want to find out about the leverage they provide to clients. Higher levels of margin will provide you the option to generate more revenue.

Start with a demo account

Most reputable brokers will offer you real-money accounts as well as demonstration accounts. A demo account is one where you are trading paper money, not real capital. Most good demonstration accounts offer nearly all the products that are available to trade will a real-money account. The prices will likely be in real-time or close to real-time. In addition, you will have access to most of the education and forecasting information your broker provides to real-money clients. Once you feel like you’re ready for a real-money account you can make the switch from a demo account to real funds.

Summary

There are several steps you should take before you start transacting in the forex market. You need to first learn about the financial markets and the type of information you can learn about prior to trading. Try to learn about both fundamental and technical analysis. Find a forex broker that you believe is trustworthy and provides a plethora of information. Lastly, use a demo account before you begin to risk real money.

How to make money online by trading forex in 2021 [A beginner’s guide]

Even if you are a beginner who knows little or nothing about forex trading, this article will expose you to steps on how to start making money online by trading forex.

What is forex trading and market all about?

Below is the complete list of steps for any beginners to make money online trading forex.

Steps to make money online trading forex as A beginner

1. Take training or lessons on forex trading

This is to reduce the risk of blowing your money up before you start making gains. To do this, you can search for courses online to take or even learn from a known and trusted expert.

2. Choose A trusted forex broker

After learning forex and understanding the principles behind the foreign exchange market well enough. The next thing is to choose a good and trusted forex broker.

Considering these factors will help you in choosing the right brokers for your trading.

3. Practice with demo account

4. Understanding trends

Once you understand and master all these, it means you are ready to start trading with your money and making money with it.

5. Start trading with your capital

Conclusion

How to make money in forex trading: A complete guide for beginners

Learn about the financial markets

Learn to do your own analysis

Fundamental analysis

Technical analysis

Find good broker

Start with a demo account

Summary

Forex trading and making money online

Some tips on approaching forex trading

Is earning money online trough forex trading really possible? Well - it is - but it is not that easy. You cannot enter the financial market expecting to become a millionaire within a few days. But if you are willing to put some time in it, using a few simple techniques you could earn a fixed income over a long period of time.

In the following sections, we gathered the best tips on how to approach to forex trading (and trading in general), in order to earn money online.

Establish safe and strong strategies

Your strategy in forex trading is considered to be your strongest armor, and it can make the difference between successful and unsuccessful trading. There should be a well-thought-out trading strategy that considers the risks you can afford related to your investment. Your trading strategy should always include the stop-loss and take-profit orders to protect you when the market turns in an unfavorable direction.

After what being said about trading strategy, at the end of the day it comes secondary to the most important thing, which is doing your mental preparation first. It does not matter how strong your strategy is, it just becomes completely irrelevant without the right mindset. Trading is a very emotional practice - and you must always be aware of that. Perhaps the most important skill in trading is the ability to regulate your emotions. Not sticking to the strategy and acting on one's emotions is where most of the traders fail. Accept that both loss and profit are inevitable part of trading - this will help you to make profit on the long run.

Never stop learning

You can never get it done. Never stop learning new trading methods online, even after you think you are an expert in the field. In the past, forex traders traveled long distances and paid big prices just to attend courses or seminars, but with the progress of technology and the internet, there is an endless amount of educational resources, some of them are free.

Use of the abundance of resources available to you, including trading tools, market analysis and trading signals. Most forex brokers provide you with these tools, usually for free. These tools are highly beneficial in helping you expand your knowledge.

Like any other activity, you should always strive to learn more. In order to be more successful, you must always find new ways to educate yourself and keeping track of what is going on in the markets.

Practice makes perfect

Before your start trading, it is highly recommended to start with a demo account, so that you can practice first. Only after that you can start trading with a real account and apply your skills in the real market. Many traders make the mistake of switching to a real account too fast, without experimenting and testing strategies on a demo account. As a result, they often lose money, because they didn't take the time to test their strategy and finding possible flaws in it.

How to make money online trading forex

Forex is the world’s largest market trading over $4 trillion in foreign exchange daily.

I’ve been trading for more than a year now and I would like to share with you how you can start trading today.

I can write about this topic for 1 whole month and still will not be able to cover it all but in this post, I will focus on covering the basics of what forex is and how you can start for FREE using a demo account.

Before we proceed, I would like to clear some misconceptions or myths surrounding trading. Dispelling these myths will help you not only on increasing the chances of success in forex but also gives you a better understanding of how it works and what to expect from it.

Myth #1: forex is a get-rich-quick vehicle

Truth: this is perhaps the biggest myth in the general public’s mind. When you ask a random stranger what they think about forex, they will most probably tell you something about fast cars, quick profits, luxury chateau etc.

Having these expectations will surely lead the beginning traders to wipe their accounts faster than they thought. The truth is for you to make money in forex, you need to focus on NOT LOSING MONEY (capital preservation).

Yes, you heard it right. Focus on not losing money and the profit will eventually follow. How fast? Depending on the risk appetite of the trader but on my experience, a 50% return annually (yup annually, not those fancy 20% daily. I will bet my bottom dollar that those are false claims) and consistently will put you in a position of a professional trader.

Myth #2: you have to be super smart to excel in trading

Truth: trading isn’t a rocket science that only the elite, geniuses can participate. In fact, being over-analytical can actually put the trader on a disadvantage.

Trading is 90% mental game and 10% skills. Some even say that trading is the ultimate anti-thesis of normal human behavior and as you go along your journey in forex trading, you’ll realize how true that statement is.

Myth #3: you need a lot of money to earn big in trading

Truth: A good trader can make money regardless of account size. Sure you can earn money faster if you have a larger capital but if you don’t know what you’re doing, you may also lose that money faster.

Myth #4: trading is gambling

Truth: traders who play for entertainment and mostly rely on luck are gamblers. Traders who treat the game as a business are professionals. Having the odds in your favor before you execute your trade requires proper education and mental fortitude.

Myth #5: trading is a high risk game

Truth: as the oracle of omaha once said: “risk is not knowing what you are doing”. This holds true to many aspects of life. It’s best to focus on not losing money (treat yourself as a risk-manager) so that when big waves of opportunity come, you are prepared and ready to jump in the trend.

Now, what is forex?

It is the most liquid market in the world averaging to over $4 trillion exchange daily. The market is open 24hours a day, 5 days a week and exchanges are made over the counter with no central marketplace where orders are processed, unlike stocks.

How can you make money in forex?

You make money for the difference. As an example, if you think the dollar will rise against the yen (USD/JPY), you will buy the dollar low then sell it at a higher price. An advantage in forex is that it doesn’t have the bullish bias, meaning you can earn if you buy and can also earn if you sell a particular currency pair.

Advantages of trading forex

the market is the most liquid, enabling you to get in and out of a position easily.

Unlike the stock market, forex is open 24 hours a day which opens at 10 PM GMT on sunday and closes at 10 PM GMT on friday with its main trading centers located in london, new york, tokyo and sydney.

Fewer currencies to focus on which can be advantageous compared to hundreds and thousands of stocks to choose from.

With the advancement of technology, you can open a live account for as little as $100 and start trading today.

There’s no commission fee for every trade you make (commissions are in the form of spread). Some brokers who offer ECN has very small commission fee and the overall transaction costs are way lower than stocks and commodities.

Another advantage is the fact that there’s no market bias in forex. You can make money in both rising and falling of markets.

You can trade no matter where you are. You just need a laptop/mobile phone and an internet connection.

How to start trading?

First is to open an account with a broker. I have personal experience opening accounts with several brokers but one of the fastest in execution and withdrawal is XM broker.

Once the account was created, I highly suggest for you to start trading DEMO account first for at least a few weeks just to get the hang of it. Once you’re ready to put your skills and mental fortitude to a test, create a live account by funding it thru your broker of choice.

Things to note:

it’s very important to open a demo account first. This will help you a lot to get the feel of how the market behaves and to also have yourself be comfortable in using the broker platform (usually metatrader 4).

Study the technical and fundamental analysis. I started in the school of babypips

Find a strategy and stick to it. Like what was mentioned earlier, success in forex accounts to 90% mental mastery and 10% skills.

Plan your risk/reward strategy. If there is one thing I want you to fully understand, it is risk management. You can make money in forex even with ZERO knowledge and skills as long as you have a good risk management strategy.

No matter how good you think you are, you will occassionally have streaks of losses and that is absolutely natural. What’s important is to stick to your strategy and execute it as planned. You need to have the patience to execute your strategy over and over again for you to realize the power of risk reward.

Before you execute each trade, you need to decide how much money you are COMFORTABLE with losing. Having this expectation set before clicking the order button will remove any unwanted actions and worries while the trade is active. How will you know how much you are comfortable losing on each trade? If it lets you sleep peacefully at night without having the urge to check your platform at every possible chance.

P.S: if you really are serious in succeeding in the forex market, I highly recommend the book written by the greatest author of trading psychology, mark douglas : trading in the zone. The book focuses on the mental faculty of trading rather than strategy because again, trading success is 90% mental ability and 10% strategy.

If you have questions about making money online thru forex trading, please drop a comment below and let me know your thoughts.

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.

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