Is Forex Trading Profitable?
Updated: Apr 18, 2019
So, you have heard about all the wonders that the Forex Market holds for adventurous investors and your thinking that, once your a millionaire, over the next week or two, you would rather have your Ferrari in the traditional red!
Whoa, whoa, whoa, let's just take a reality check here! There are so many people out there who would have you believe that you can pop some money in a trading account and before you know it your financially free - this, sadly, is not the case.
Now, can Forex Trading be profitable - absolutely! otherwise, the largest hedge funds in the world wouldn't bother with it, and they all do! It is just the case that, like any pursuit in which you want to be successful, you are going to have to work for it!
The best traders have several qualities and tools in common:
First, they have a strategy, or several strategies, to be able to trade various market conditions - these strategies have been learned, adjusted and developed over time with testing and back-testing to establish the most effective.
Second, they have discipline - The discipline to stick to their strategy and not let the emotional roller coaster, that comes from being in the Forex Markets, allow them to deviate from the strategies that they know work.
Lastly, they have focus - They are like Mr Spock when trading the markets! Completely unemotional and with a linear concentration that coalesces all their energy on their Fx Trading!
Of course, these tools and qualities come with practice and experience of trading in the markets. Now, it's not necessarily going to take years to get to a place where you are making decent money out of the markets, but it is going to take investing in your knowledge, perseverance and capital.
Yes, the amount you can make out of the Forex Market is only a percentage of your capital - it is a general consensus that you should only ever risk 1% of your capital. Major Hedge Funds, in a fairly good year, will average 20-30% annual profits from the Forex Market - and they use relatively aggressive trading styles!
So, as you can see, there is a huge difference between the amount you can earn if you have $100 worth of capital compared to the amount you can earn if you have $10,000 worth of capital. Now, this should not discourage you from trading if you don't have this sort of capital yet.
Successful Fx Traders focus on their skill-sets and knowledge before the money - this is because the money will invariably come, in any financial pursuit, when you have the knowledge and skill. So, whilst you are putting money away each month to build up your capital, you should be busily reading and investing in every resource you can, to build up your knowledge. Make sure you also begin trading regularly, with minimal risk, with the capital you have, to gain experience!
In Fx Trading it is not the amount of money you make on a trade that is important, it is the amount of pips that measures whether you are successful or not - if you have the capital to place $1/point on a pair (based on 1% risk) and you gain 200 pips - your profit is nearly $200. Very nice! However, if you have the capital to place $10/point on a pair (based on 1% risk) and you gain 200 pips - your profit is nigh on $2,000! Even nicer!
in conclusion then, it is absolutely possible to be profitable with Forex Trading! However, it is not going to make you a millionaire over night. You are going to have to put hard work into gaining the knowledge, skills and tools required to be successful and you are going to have to stop focusing on the money and focus on the pips!
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