The idea of making money from your home has probably crossed your mind, but is it possible to have a career in forex trading? Many people have tried it, and the short answer is yes, you can.
However, while the short answer is yes, it's not possible for everyone, and many people have tried and failed to successfully trade the forex markets. To succeed even slightly, it takes a lot of time and effort.
Let's look at some critical factors for a successful long-term career in the forex market.
How much capital should you start with as a Forex trader?
One of the key aspects to becoming a full-time forex trader is having sufficient capital. Making sure you have enough money to earn a consistent, worthwhile income can be vital. However, the funds needed may vary from person to person.
For example, traders can start trading with small amounts, but the return, in most cases – if there is any at all – will usually be minimal.
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| Can you have a long-term career in Forex trading? |
To be able to make a living from trading, experienced traders say that you will probably need starting capital of between $5,000 and $20,000. Even then, that may not be enough. A good rule of thumb is not to risk more than 1% of your capital on a trade. For example, a trader with a starting capital of $5,000, risking 1% in a trade with a profit/loss ratio of 2:1, will only earn a return of $100. If you do it enough times a month, it could provide a living wage, but you need to consider your success rate and how many trades you make per month.
For example, at a 100% success rate – which is probably impossible over an extended period – you would need to make 20 trades during the month to earn $2,000 (assuming you risked 1% of your capital starting point on each transaction for this first month) . This return does not suggest the luxurious life advertised by many online gurus. For reference, many traders have a success rate of around 50% to 60%, which makes it even harder.
Of course, many are risking much more per trade to earn bigger returns. But to stay in the game for the longer term, risk management is key, and taking considerable risk on every trade increases your chances of being wiped out.
Also, a capital increase will lead to more money at risk. Thus, it is essential to trade with money that you are prepared to lose.
How Much Money Do Forex Traders Earn?
If you start trading as a paid employee for a professional trading firm, according to ZipRecruiter, the average forex trader salary can be as high as $124,907 per year. However, for traders it can be very different.
The salary of forex traders can vary widely and will likely depend on your skill level and experience. Unfortunately, many people fail due to large losses, lack of knowledge, poor risk management and insufficient capital. The first rule is to stay in the game long enough to learn and understand how it works, as it can take a considerable amount of time before you start seeing benefits.
There is no fixed amount of money you can earn in forex trading. Your winnings depend on experience, risk level, capital level and win rate. The success rate of a trading career is low due to its difficulty and mental challenge.
Benefits of Forex trading for earning a living
It is essential to weigh the benefits of such a risky role as forex trading. Although it can be a difficult road, the benefits of developing a career in the forex market are enormous. Take a look at some of the benefits of forex trading below.
Fees
Commissions when trading the forex markets are low. You will not be charged for having an account; thus, your costs can be kept as low as possible.
Brokers make money from the spreads of every trade you choose to enter or exit. This feature benefits all traders as it requires minimal capital and the hidden fees will not eat away at your profits. Check brokerage fees before signing up for an account.
No central exchange
Forex is an over-the-counter product with no central exchange. Instead, currencies can be exchanged freely. The forex market includes banks, hedge funds, corporations, and retail traders.
The lack of a central exchange benefits traders as it results in fewer restrictions in place. Additionally, forex traders have the freedom to enter and exit trades at any time, unlike the stock market.
High liquidity
Traders can also benefit from high liquidity. For example, the foreign exchange market is considered the most liquid market in the world due to the high volume of transactions carried out every day.
This feature benefits traders because high liquidity can reduce spill risk, execute orders faster, and provide tighter bid-offer spreads. All of these factors greatly help traders and are supported by higher liquidity.
Flexibility
The flexibility of trading is evident from the start. The markets are open 24 hours a day and you are essentially your own boss. As a result, you can dictate your trading style and patterns and work when it suits you best.
Creating a routine can be ideal, and you can trade currencies to suit your schedule.
Disadvantages of Forex trading for a living
The forex market presents challenges and the majority of retail traders fail. That's why it's essential to consider the downsides of forex trading before jumping straight into the deep end.
High risk
The market is precarious to trade. The success rate is relatively low due to the difficulty of predicting future prices. Many have succeeded and will succeed in the field, but you need to consider risk every time you enter the market.
High volatility
The forex market has the highest liquidity, which makes it vulnerable to large price fluctuations. And high volatility is dangerous to trade because the risk of the price going against you increases. With billions of dollars moving the market daily, volatility can be detrimental to your trading.
Lack of transparency
Lack of market transparency can have a negative impact on any trader. Traders don't always control how their orders are executed, which can affect profits or losses over time. With no central exchange regulating the market, transparency is lacking in forex and brokers can rule the market.
Complicated pricing process
Forex markets are influenced by external factors that dictate the economy. As a result, several factors can arise which can cause exchange rates to fall. Therefore, it is difficult to analyze each aspect individually and draw reliable conclusions, which can ultimately lead to significant losses if you are not careful in your analysis or if factors beyond your control affect a trade.
6 Tips for Trading Forex as a Career
Forex trading is not all that simple and will require discipline to be successful. These tips can help you kick-start your forex career.
Tip #1: Take your time
Many people take the leap when starting their trading career. Most people want to earn money quickly and achieve financial freedom. However, this feat is difficult and nearly impossible to achieve; taking your time in the beginning will benefit you later.
Potentially start with a demo account to learn how the forex markets move and build your knowledge and skills through practice.
Tip #2: Learn to read charts and recognize patterns
Learning to read and understand chart movements is key to improving your skills. Before you start trading, you should eliminate any errors or inconsistencies in your game. Recognizing chart patterns will help you develop a better understanding of the forex market you are watching. Pattern recognition is crucial, and this skill comes from hours of studying maps.
Tip #3: Learn to trade from professionals
You are not the only person trying to trade forex; the market continued to create successful traders around the world. You can exploit opportunities to learn from the best. You can access help from professionals through courses or content they have produced. However, beware that there are many fake gurus out there. Try listening to and reading content from proven fund managers.
Tip #4: Try different strategies
The first steps can be difficult in forex, and it can take a while to find the right market that works. Therefore, it is essential to experiment and try different strategies to see which one you feel most comfortable with and achieve the best results.
Tip #5: Work with a reputable broker
Working with a reputable broker is a must for any trader. You want to know that you can trust your broker, so make sure they are regulated and safe. It's your money you're risking, and if you value your funds, this is an essential security precaution.
Tip #6: Act like a business owner
Treat forex trading like a business. You are the owner of the business and you are responsible for all associated factors. Forex trading requires dedication and taking the markets seriously if you want long-term success rather than painful losses.
After experimenting and trying different strategies, commit to a plan.
Best Forex Brokers for Long Term Traders
If you've been trading the forex markets for a while, you know that having a broker you can trust is essential. You can find a comparison of the best brokers below.
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CedarFX is not regulated by any major financial agency. The brokerage is owned by Cedar LLC and is based in St. Vincent and the Grenadines.
Frequently Asked Questions
Q:Can you make a living trading forex?
A:It is very possible to make a living by trading Forex. Markets have enabled millions of people to trade currencies and earn money. It is important to keep in mind that a variety of factors determine whether you are one of the few who can make a successful living in the forex markets. Forex trading involves high levels of risk and requires a lot of discipline and hard work. There is never a guarantee of success.
Q:Is it worth trading forex?
A:Forex trading can be worthwhile for anyone looking to invest. However, don't expect to get rich overnight. Forex markets are the most liquid markets in the world, which means you have the opportunity to become a major player and earn immense profits. Trading is easily accessible and available, regardless of your level of expertise. Forex trading is only worth it if you go into it with the right mindset, take the time to learn the trade, and can be disciplined in your trading.
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