Exploring Forex Trading Profitability: Can You Make Money with Forex?

Let’s begin this blog post by stating something pretty obvious: Forex trading is remarkably popular. It comes with good reason that Forex has become the world’s largest and most liquid trading market: it is incredibly accessible and appeals to all levels of expertise, from stone-cold newbies to seasoned investment killers.

This is a market where kitchen-based amateurs with only a basic grasp of trading can ‘dabble’ alongside highly experienced bankers working out of executive suites. Anyone can trade, and everyone can make money, although, of course, many don’t.

Being so popular, accessible, and liquid, one of the most commonly asked questions we receive here at InvestinGoal HQ, in one form or another and pretty much on a daily basis, is can you make money trading Forex? This is a question that shows no signs of abating as more and more people each year venture into a jargon-rich world of cross-currency, points, long, short, and leverage.

Rise of the Forex Guru

But we have noticed something recently. There is a lot of bad advice out there pertaining to that specific question, and that makes us feel a little uncomfortable.

With various social media channels promoting Forex get-rich-quick schemes (complete with obligatory images of teenagers sipping champagne next to their new Lamborghini), and with the growth of YouTube gurus touting poorly constructed ‘how to succeed in Forex’ courses, lots of people are entering this market assuming guaranteed success, based on a weak foundation.

As already noted, there are no guarantees – but then, you probably already know that. The simple truth is that with 75-90% of Forex traders losing money, the chances of failure are greater than the chances of success. But there is a valid, obvious reason why so many people fail in this market, and we believe we can help you to avoid falling into that category simply by explaining a few basic things and dispensing a little advice.

Advice which, in our opinion, could prevent many people from failing if they took heed of it and demonstrated a little caution instead of rushing in unprepared.

Today, however, we are going to explore the question: is forex trading profitable, and can you make money with Forex? We shall redress the balance and dispel the myths, free of any bias, based on our wealth of experience in this market. But first, for the uninitiated, what exactly is Forex?

What Is Forex, Exactly?

The chances are, you have already ventured into the world of Forex trading without even realizing it. If you have ever exchanged one currency for another at a bank or currency exchange, you are a Forex trader ‘defacto’ – in the loosest possible terms, that is. Forex trading simply involves the buying and selling of currencies on the foreign exchange market with the aim of profiting from changes in exchange rates.

We already have a comprehensive article explaining Forex, so we will spare you a detailed explanation in this particular blog post, but basically, the essence of Forex trading is as simple as that: buying one currency and selling another currency in order to make a profit based on the fluctuations in their exchange rates.

Can You Make Healthy Forex Profits?

The short answer is yes, you can. But the answer comes with plenty of caveats that you must be aware of before venturing into the endeavor.

Basically, there are no limits to the Forex profits you can make. $500 can become $3000 in mere microseconds. By the same token, $3000 can become $0 in the same amount of time.

As mentioned, the majority of people are, unfortunately, in the losing camp, but many of these people could have avoided losses by following a few basic principles. Many novices are led to believe that trading Forex is simple to grasp and easy to profit from. Owing to that, a large number of these same people will commence aggressive trading without suitable preparation and knowledge.

The premise is simple, really. By taking the time to truly learn the market and understand all aspects of trading, you stand a far greater chance of success. So, assuming you have done so, what sort of profits can you expect?

As with anything in the world of financial trading, that is an extremely difficult question to answer in terms of specifics. Various factors enter the fold, such as your experience, knowledge, budget, commitment to the cause, and a general understanding of the market.

Typical Traders

That said, we can suggest some averages for you.

Excluding full-time professionals who are employed as Forex traders (for an institution or brokerage firm), the ‘typical’ Forex trader working under their own steam can expect to make anywhere from 3% to 10% profit per month on their trading capital.

That is quite a conservative estimation, by the way. It wouldn’t be too much of a stretch to lean towards 5% to 15%, but we prefer to be a little more grounded. Also, It is important to note that these numbers can vary significantly and are by no means guaranteed, even for those who have become extremely adept at trading.

Using those percentages, the math is simple. Your ‘average’ Forex trader who has a trading fund of around $10,000 can expect to make between $300 and $1000 profit per month. A larger fund of $50,000 capital will possibly result in around $3000 to $10,000 profit per month. And so on, and so forth.

Again, we ask that you take this figure with a huge pinch of salt; we are talking about averages here only. Please remain mindful that most people lose money trading Forex, and we are talking averages pertaining to the 20% or so who make money.

So, the larger percentage of traders lose money. A far smaller percentage of traders are making incredible, life-changing profits in the millions and millions. Somewhere in between those two extremities are your average successful traders who are making between three and ten percent profit, conservatively.

Can You Make a Living Trading Forex?

It is possible to make a living from forex trading, however it requires time, skill, experience, and dedication.

In fact, we should talk about the allure of financial freedom that comes with Forex trading. That is, after all, why so many people enter this market. While it is true that many people make a living solely from Forex, we need to approach this topic with a healthy dose of realism.

The road to success demands a level of skill, experience, and dedication. You don’t make a living in this arena merely through luck – it takes practice and a willingness to learn. Relying solely on Forex trading for income is far from a guaranteed path to prosperity. It’s a risky business that requires careful consideration.

But don’t lose hope because many people do indeed make a living from Forex trading. However, successful Forex traders often diversify their income sources or slowly and patiently accumulate capital over time, balancing their Forex trades with other ventures.

This approach maximizes their chances of success while minimizing the risks involved. In time, it might be possible to pull the trigger and venture into Forex trading as a sole endeavor, but more realistically, it is better not to have all of your eggs in one basket, so to speak – at least for the first year or so.

What Does It Take to Become Successful Trading Forex?

Unleashing your inner forex trading genius requires more than just luck. So, what does it truly take to conquer the forex market?

Education

First and foremost, continuous learning is the name of the game. Forex markets are a dynamic battleground where trends come and go rather fleetingly. To emerge victorious, you must be committed to relentless, perpetual education.

This means staying up-to-date with the latest market trends, strategies, and analysis techniques. A successful Forex trader is an eternal student, always hungry for knowledge. Books are useful – read as many as you can, and don’t stop reading.

Cool Heads Prevail

But it is not just about acquiring knowledge; mastering your emotions plays a huge part in success. Fear, greed, and impatience can turn even the most seasoned trader into a failure. Emotional control is an absolute must.

If you find yourself experiencing a bad day with the market throwing punches at you left and right, you must remain calm, cool, and collected. By sticking to your meticulously crafted trading plan and remaining unfazed by the drama, you will avoid decisions based on emotion and stand a better chance of success.

Safeguarding Your Capital

Let’s not forget about risk management, which is a prerequisite for success. This is the shield that safeguards your capital and serves to protect you from huge losses.

Effective risk management is an art form that you will develop a sixth sense for over time. Creating stop-loss orders, using appropriate position sizing, and diversifying your investments are just a few examples of sound risk management.

Riding the Waves

Markets can be unpredictable, but successful traders have the uncanny ability to adapt to ever-changing market conditions, born largely out of experience. The trick is to know how to analyze market trends, identify patterns, and make informed decisions regarding your strategy accordingly.

Flexibility is key here, enabling you to ride the waves of unpredictability and hopefully emerge successful.

How Long Does It Take to Become Consistently Profitable in Forex Trading?

This is another ‘how long is a piece of string’ question. The time it takes to become consistently profitable in Forex trading varies. It depends on factors mentioned previously, such as dedication, commitment, ability, and capacity to learn – and then applying that knowledge effectively.

Becoming consistently profitable typically requires months, if not years, of dedicated learning, practice, and gaining experience. There is no fixed timeline, and it is essential to approach Forex trading with a long-term perspective, focusing on continuous improvement rather than quick gains.

It is impossible to cite stats with any accuracy here, but of the 80% who fail, you can be certain many of them did not apply those key elements and rushed into trading, only partially informed. Demonstrate less initial haste, learn the ropes with greater gusto, and you will stand a far better chance of avoiding that unfortunate group.

Are There Any Risks Involved in Forex Trading?

Through this post, we have made it abundantly clear that Forex trading is a risky endeavor. While it is possible to negate those risks by taking time to learn and understand the market, there are some risks that even seasoned professional traders are exposed to. Let’s take a look at a few.

Volatility

Forex markets are notorious for their high volatility, causing rapid price fluctuations that can either bring significant gains or substantial losses.

Leverage

The use of leverage in Forex trading increases both profits and losses. While leverage can and should increase potential gains, it also increases the risk of the opposite extreme: substantial losses.

Economic and Geopolitical Factors

As with most financial markets, currency prices can be greatly influenced by news, economic events, political changes, and general sentiment. These factors have the potential to trigger sudden shifts in the market, which, in turn, can sometimes result in losses for Forex traders.

Lack of Regulation

One of the main appeals of the Forex market is the fact it is decentralized, allowing greater market freedom free of external government influence. This same decentralization increases the risk of fraud and manipulation by other traders and brokers.

Pros & Cons Of Trading Forex

There are plenty of both. The main points, however, can be broken down as follows:

Pros

• Flexibility and control: Trading gives you the freedom to make your own trading decisions, including choosing the best strategies, timeframes, and currency pairs that align with your trading goals and preferences.
• Potential for profits: This one is pretty obvious, really. Successful Forex trading can lead to life-changing profits, enabling financial freedom and (hopefully) wealth accumulation.
• Accessibility: Forex is arguably the easiest market to enter, with an abundance of trading platforms available requiring as little as $1 to enter.
• Leverage: Forex trading offers higher borrowing power than stocks.

Other aspects of Forex trading that would be described as positives include higher liquidity, low trading costs, and less complicated tax laws, in addition to 24/7 trading hours and practically zero overhead to manage the project.

Cons

• High risk: Forex trading involves elements of risk, and there is a possibility of losing a substantial portion (or even all) of your capital.
• Time commitment: Successful Forex trading requires time and effort for analysis, research, and monitoring of the markets, often involving long hours in front of the computer.
• Leverage: A double-edged sword in Forex trading, it can amplify both profits and losses, making it both an advantage and a risk for traders.
• Volatility: While it attracts short-term traders, dealing with volatility can be challenging.
• Patience is required: Successful trading demands patience. Traders often need time to adapt to the market and find their own rhythm for profitable trades. Novice traders with limited experience can benefit from practicing in a demo account.

Can I Trade Forex Part-Time and Still Make a Living?

Absolutely you can. Actually, most traders don’t trade all day long to avoid stress and potential losses due to inevitable fatigue. There are enough hours in the day to work a full-time job and manage Forex trading on the side – just about.

You can even use automated trading brokers to make it more manageable. By being selective with your trades and leveraging automation, you can increase your chances of making a living from Forex while maintaining employment or other business ventures.

Bottom Line

Can you make money trading Forex? The short answer is yes, although it is not easy. You need to be disciplined, constantly learning, and emotionally in control. However, if you put real effort into learning the ropes, you can legitimately earn a living from this.

Trading Forex part-time alongside other income sources is a smart move, initially. Just remember, Forex trading comes with risks, so only invest what you can afford to lose. As far as golden rules are concerned, this one is in a red bold font, underlined, and in capitals, metaphorically speaking.

Stay focused, stay patient, and stay educated. With the right mindset and strategy, you can make a living from Forex. It’s a tough game, but with the right approach and a good platform, you can find success in the Forex market.