Can you make money out of forex trading

Note that the bloomberg numbers were cited just two months before an unexpected seismic shock in the currency markets highlighted the risks of forex trading.

Huge forex bonuses

Can Forex Trading Make You Rich, can you make money out of forex trading.

On jan. 15, 2015, the swiss national bank abandoned the swiss franc's cap of 1.20 against the euro that it had in place for three years. as a result, the swiss franc soared as much as 41% against the euro on that day. seasoned forex traders keep their losses small and offset these with sizable gains when their currency call proves to be correct. Most retail traders, however, do it the other way around, making small profits on a number of positions but then holding on to a losing trade for too long and incurring a substantial loss. This can also result in losing more than your initial investment.

Can forex trading make you rich?

Can forex trading make you rich? Although our instinctive reaction to that question would be an unequivocal "no,” we should qualify that response. Forex trading may make you rich if you are a hedge fund with deep pockets or an unusually skilled currency trader. But for the average retail trader, rather than being an easy road to riches, forex trading can be a rocky highway to enormous losses and potential penury.

But first, the stats. A bloomberg article in nov. 2014 noted that based on reports to their clients by two of the biggest forex companies at the time—gain capital holdings inc. (GCAP) and FXCM inc.—68% of investors had net losses from trading currencies in the prior year. While this could be interpreted to mean that about one in three traders does not lose money trading currencies, that's not the same as getting rich trading forex.

Key takeaways

Many retail traders turn to the forex market in search of fast profits.

Statistics show that most aspiring forex traders fail, and some even lose large amounts of money.

Leverage is a double-edged sword, as it can lead to outsized profits but also substantial losses.

Counterparty risks, platform malfunctions, and sudden bursts of volatility also pose challenges to would-be forex traders.

Unlike stocks and futures that trade on exchanges, forex pairs trade in the over-the-counter market with no central clearing firm.

Note that the bloomberg numbers were cited just two months before an unexpected seismic shock in the currency markets highlighted the risks of forex trading. On jan. 15, 2015, the swiss national bank abandoned the swiss franc's cap of 1.20 against the euro that it had in place for three years. as a result, the swiss franc soared as much as 41% against the euro on that day.

The surprise move from switzerland's central bank inflicted losses running into the hundreds of millions of dollars on innumerable participants in forex trading, from small retail investors to large banks. Losses in retail trading accounts wiped out the capital of at least three brokerages, rendering them insolvent, and took FXCM, then the largest retail forex brokerage in the united states, to the verge of bankruptcy.

Unexpected one time events are not the only risk facing forex traders. Here are seven other reasons why the odds are stacked against the retail trader who wants to get rich trading the forex market.

Excessive leverage

Although currencies can be volatile, violent gyrations like that of the aforementioned swiss franc are not that common. For example, a substantial move that takes the euro from 1.20 to 1.10 versus the U.S. Dollar over a week is still a change of less than 10%. Stocks, on the other hand, can easily trade up or down 20% or more in a single day. But the allure of forex trading lies in the huge leverage provided by forex brokerages, which can magnify gains (and losses).

A trader who shorts $5,000 worth of euros against the U.S. Dollar at 1.20 and then covers the short position at 1.10 would make a tidy profit of $500 or 8.33%. If the trader used the maximum leverage of 50:1 permitted in the U.S. (ignoring trading costs and commissions) the profit is $25,000, or 416.67%.

Of course, had the trader been long euro at 1.20, used 50:1 leverage, and exited the trade at 1.10, the potential loss would have been $25,000. In some overseas jurisdictions, leverage can be as much as 200:1 or even higher. Because excessive leverage is the single biggest risk factor in retail forex trading, regulators in a number of nations are clamping down on it.

Asymmetric risk to reward

Seasoned forex traders keep their losses small and offset these with sizable gains when their currency call proves to be correct. Most retail traders, however, do it the other way around, making small profits on a number of positions but then holding on to a losing trade for too long and incurring a substantial loss. This can also result in losing more than your initial investment.

Platform or system malfunction

Imagine your plight if you have a large position and are unable to close a trade because of a platform malfunction or system failure, which could be anything from a power outage to an internet overload or computer crash. This category would also include exceptionally volatile times when orders such as stop-losses do not work. For instance, many traders had tight stop-losses in place on their short swiss franc positions before the currency surged on jan. 15, 2015. However, these proved ineffective because liquidity dried up even as everyone stampeded to close their short franc positions.

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.

Can you really become a millionaire from forex trading?

There are some questions that are frequently asked by novice traders:

Among all the frequent questions, there is one question which is asked by some novice traders more often:

Can I become a millionaire through forex trading?

I have two clear answers for this question and I explain about each of them in details:

Yes, you can.

No, you cannot.

Making lots of money through forex trading is completely dependent on some special conditions.

When someone has the proper conditions, he can make millions through forex trading.

When he doesn’t have the proper conditions, he will do nothing but wasting of time and money.

What are those conditions?

You can increase your wealth and become richer through forex trading and become a millionaire or even a billionaire.

However, if you are among those who want to turn a $500 or even a $5000 account into millions, then I have to tell you that you have to be patient enough.

I am not saying that it is impossible to make millions with forex.

Anything is possible in this world.

However, you have to be patient, because it can’t be done overnight, or even in one year.

You will be faced with some challenges that finding a good broker that doesn’t cheat you is the biggest one.

Many forex brokers (market maker brokers) don’t let you grow your account consistently, because in most cases, your profit is their loss.

Forex is not a get-rich-quick scheme

It is not too easy to make a living through currency trading. Someone has to teach you the right techniques, otherwise you can’t get anywhere on your own.

It is the same with the stock trading and all other kinds of tradings and investments.

To make money consistently through forex trading and maybe to become a millionaire finally, you have to pass some important stages.

There are so many jobs that you can follow and become a millionaire.

It is not the job that has to make you a millionaire.

It is “you” who has to follow the job properly to become a millionaire.

For example, there are so many millionaire real estate agents and brokers in big cities like new york.

However, there are a lot more agents who cannot even cover their monthly expenses in the same cities.

All agents are in the same areas, have access to the same markets and customers, ruled under the same jurisdictions, use the same advertising media and… .

But, how can some of them become millionaires, and most of the others fail to have even one sale per month?

Whatever the reason is, it has nothing to do with the real estate business itself, because it is the same for all the agents and brokers.

The reason is in the agents and brokers behavior, life and work style.

Behavior, life and work style

Forex trading is like that too.

It possible to become a millionaire through forex trading, as it is possible to become a millionaire through stock trading, programming, marketing, importing and exporting, constructing, and…

The more important question is “how?”

There are two things that you have to do to become a millionaire forex trader:

2. You have to develop the trading discipline in yourself.

You can’t become rich through forex trading, without having these two at the same time.

It is not even possible to make a living without having the discipline, whether you master the trading techniques or not.

I’ve never seen even one single retail forex trader who has become able to become rich or millionaire without following the proper techniques and having the discipline it takes.

Even I’ve never seen a forex trader who has been able to make a living like this.

There is no consistently profitable and professional currency trader who doesn’t trades forex with the proper technical analysis methods.

When you have a big capital, you can trade currencies through a bank account, instead of retail brokers. But most people still have to be patient to reach this level.

And, as bank accounts are not leveraged, you will trade with more peace of mind. But you should start small at the beginning.

Those who don’t believe in what I explained above can spend some time and money on forex trading at least through having small live accounts with retail forex brokers.

I am 100% sure that they will remember what I’ve explained above, and will be back to this site after wasting lots of time and money. The reason is that most novice traders start trading with real money before they do the above two things: (1) developing proper techniques and (2) discipline.

How can you become a consistently profitable forex trader?

Unlike what most people think, it is not possible to start making money right after learning the forex trading basics and a trading strategy.

There is something very important that most people don’t consider:

To learn how to trade forex, become a consistently profitable trader and hopefully a millionaire, first you have to find a mentor who teaches you the currency trading techniques and help you to develop the discipline in yourself.

Additionally, you’d better to have an income that covers your expenses and leaves you some free time to sit at the computer and learn how to trade with peace of mind.

You can make any money through forex trading and any other kinds of trading when you DON’T HAVE TO make money and you don’t have financial problems. Therefore, having a source of income is a big help.

False forex success stories

Most people think that they can learn to make money through forex trading within a very short time, and become a full-time forex trader who makes thousands or even millions of dollars.

This is is not true at all.

There are so many false forex millionaires stories over the internet.

Be careful not to be deceived by them.

None of the real millionaires or billionaires, like george soros, have made their wealth through forex or stock trading without following strong strategies. However, they are experienced business people who make a lot of money through several sources of income they have.

Then they invest a portion of their wealth in currency, stock, real estate… markets to increase their wealth: A short term investment strategy that makes you a millionaire

This is how they’ve become millionaires or billionaires. Their increase their wealth through forex or stock trading while they have other sources of income.

Therefore, if you like to become a millionaire, first you have to have a good source of income that makes a reasonable amount of money that not only covers your expenses, but also leaves some money for your trading and investments.

Then you can start learning how to trade.

You have to keep on learning and practicing until you become a consistently profitable trader. That’s why we enable our trading students to develop a source of income too.

The hassles of following too many trading strategies

Some traders the hard way of following too many trading strategies, robots and time-frames, and sitting at the computer for several hours per day.

That is the hard way which can hardly take you to your destination.

The simpler and easier way is learning the forex trading basics, and then a simple and strong trading strategy.

Then you have to master your trading strategy through demo trading.

When you succeed to make profit consistently for 12 consecutive months at least, you can open a small live account and start practicing with it.

If you can make profit consistently for 12 consecutive months with your live account too, the way you could make profit with your demo account, then all you have to do is that you keep on trading with your live account to grow it, or adding some more money to it. But don’t make your account too big. You will be faced with lots of negative emotions when you are still new and you want to trade with a too big account.

A source of income is really good

To become a full-time forex traders who makes money consistently, you have to spend some time. I already explained it above.

If you don’t have an income currently, or if your income is not enough to give you time and mind freedom to learn forex, you should develop a source of income that covers your life and enable you to open a live account in the currency market when it is the time.

You can keep making money with your source of income until you are ready to open a trading account. If your income is enough to trade through a bank account later when you are ready to do it, it will be even better.

Trading through a bank account will have a lot more advantages compared to trading through forex brokers.

The only problem of trading through a bank account is that you have to have a lot of money because banks don’t offer any leverage.

Therefore, to become able to trade through a bank account, you have to have a lot of money already.

That is why I emphasized on having a strong source of income earlier in this article.

If you want to become a millionaire forex trader, you must have a good income and backup.

Turning a small $5000 account into a million dollar account is possible theoretically.

You can do it slowly and surely when you become a consistently profitable trader and you have enough patience. However, you have to be a patient and disciplined forex trader to do it. And, you can’t do it alone. You need the mentors technical and emotional support.

Do it the right way:

You need to become a professional trader through learning the best and most accurate technical and fundamental analysis techniques. This is the only thing that makes you a professional trader who can consistently make profit.

When they become consistently profitable forex traders eventually, they have enough money to open live accounts or even professional live forex trading accounts with the banks to trade professionally and increase the money they make.

This is how they can become millionaire forex traders while they also have some other good sources of income to support their forex and stock trading investments.

So, the answer of this question that whether it is possible to become a millionaire through forex trading is in the facts that I explained in detail above.

Be careful not to be deceived by the scam mentors or brokers. They are there to make money from your losses, not to make you a millionaire.

Can you make real money out of forex trading?

Follow these top tips and increase your chances of achieving success in forex markets

A lot of people get into forex hoping to make a quick fortune and only end up being disappointed. The truth is that forex trading is not a get-rich-quick scheme. But can you make some real money out of it?

The short answer is yes. This article will lay bare some important things you must know and should do if you are interested in maximising your chances of making some serious money out of forex trading.

Be in the know

If you have been thinking that luck alone can make you a tidy sum in forex, you will be disappointed. While it is good to have a hot hand, it will take far more than that to be a successful trader.

Unfortunately, some people do not understand that FX and gambling are two different things. Gambling is a game of chance, while success in forex is mainly dependent on a person’s actions or inactions.

As such, you must have a great understanding of how the industry works. Start by identifying a reliable source of information such as forex academy to have a grounding. The good thing about this website is that it contains almost everything you need to know about forex.

You must also be interested in political or economic events happening around the world because these may have a profound effect on the market.

Keep the emotions out

If there is one thing that could be the ruin of any trader, it is greed. But it isn’t just greed alone - fear can be just as dangerous.

Fear could make you close out a trade before the optimal point, without having realised a reasonable profit, and greed could make you hold on for too long, which could see you suffer a huge loss in the process.

Every decision you make should be guided by reason or knowledge. A common mistake that people make is to count how much they have made and use that as a basis of whether to close out or not. Instead, check out real market signals to determine the direction your trade is likely to take.

For example, if there are new highs being made on consecutive days in an uptrend, it would be advisable to maintain an open position, utilising a trailing stop which would allow the market to automatically close the trade for you when certain parameters are met. On the other hand, if a trend starts to flatten out, it makes sense to exit. However, you should not do so blindly as there are other considerations to make.

Find a reputable broker

While it is indeed possible to trade without a broker, it is not a recommended option, especially for a novice trader. Brokerage firms connect traders with the money market, offer valuable advice and handle withdrawal requests. They also protect their user’s accounts from unauthorized access and address trade disputes.

However, brokers aren’t all cut from the same cloth. Unfortunately, it is not unheard of for a broker to go bankrupt, shutdown or refuse to honour withdrawals, and if you are working with an unregulated brokerage firm you have a slim chance of recouping your investment.

It is therefore imperative to do your due diligence before establishing a relationship with a broker. As the bare minimum, they must be regulated by the FCA . You should also be interested in establishing their withdrawal and funding procedures and ensure that their customer service is excellent.

Practice makes perfect

Mistakes are costly when it comes to forex trading. A single miscalculation can possibly blow out your account. In 1998, george soros - one of the most successful investors in history - made a wrong move and lost $2 billion .

While this might sound scary to new traders, the truth is that forex involves a significant amount of risk. But, thanks to demo accounts, you can learn without losing real cash.

These accounts simulate the real marketplace and allow you to trade just like a conventional trader would. The only difference is that you will not be investing any real money. This will give you the chance to get a taste of how forex trading works and can help you develop a trading strategy.

Again, you will learn the ins and outs of using the software so that you won’t be fidgeting with things when the actual trading is taking place.

Lucrative venture

Forex trading can be a lucrative venture if you take the right approach. Granted, it may seem complicated when you are starting out, but in reality, it doesn't have to be overbearingly difficult.

Find a reliable source of trading education such as forex academy, and you will significantly boost your chances of success.

Scalping: small quick profits can add up

Scalping is a trading style that specializes in profiting off of small price changes. This generally occurs after a trade is executed and becomes profitable.

Scalping requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains the trader worked to obtain. Thus, having the right tools—such as a live feed, a direct-access broker, and the stamina to place many trades—is required for this strategy to be successful.

Read on to find out more about this strategy, the different types of scalping, and tips about how to use this style of trading.

How scalping works

Scalping is based on an assumption that most stocks will complete the first stage of a movement. But where it goes from there is uncertain. After that initial stage, some stocks cease to advance while others continue.

A scalper intends to take as many small profits as possible. This is the opposite of the "let your profits run" mindset, which attempts to optimize positive trading results by increasing the size of winning trades. Scalping achieves results by increasing the number of winners and sacrificing the size of the wins.

It's not uncommon for a trader with a longer time frame to achieve positive results by winning only half, or even less, of their trades – it's just that the wins are much bigger than the losses. A successful scalper, however, will have a much higher ratio of winning trades versus losing ones, while keeping profits roughly equal or slightly bigger than losses.

Scalping: small quick profits can add up

The main premises of scalping are:

Lessened exposure limits risk: A brief exposure to the market diminishes the probability of running into an adverse event.

Smaller moves are easier to obtain: A bigger imbalance of supply and demand is needed to warrant bigger price changes. For example, it is easier for a stock to make a $0.01 move than it is to make a $1 move.

Smaller moves are more frequent than larger ones: even during relatively quiet markets, there are many small movements a scalper can exploit.

Scalping can be adopted as a primary or supplementary style of trading.

Spreads in scalping vs. Normal trading strategy

When scalpers trade, they want to profit off the changes in a security's bid-ask spread. That's the difference between the price a broker will buy a security from a scalper (the bid price) and the price the broker will sell it (the ask price) to the scalper. So, the scalper is looking for a narrower spread.

But in normal circumstances, trading is fairly consistent and can allow for steady profits. That's because the spread between the bid and the ask is also steady (supply and demand for securities is balanced).

Scalping as a primary trading style

A pure scalper will make a number of trades each day — perhaps in the hundreds. A scalper will mostly utilize tick, or one-minute charts, since the time frame is small, and they need to see the setups as they take shape as close to real-time as possible. Supporting systems such as direct access trading (DAT) and level 2 quotations are essential for this type of trading. Automatic, instant execution of orders is crucial to a scalper, so a direct-access broker is the preferred method.

Scalping as a supplementary style

Traders with longer time frames can use scalping as a supplementary approach. The most obvious way is to use it when the market is choppy or locked in a narrow range. When there are no trends in a longer time frame, going to a shorter time frame can reveal visible and exploitable trends, which can lead a trader to scalp.

Another way to add scalping to longer time-frame trades is through the so-called "umbrella" concept. This approach allows a trader to improve their cost basis and maximize a profit. Umbrella trades are done in the following way:

A trader initiates a position for a longer time-frame trade.

While the main trade develops, a trader identifies new setups in a shorter time frame in the direction of the main trade, entering and exiting them by the principles of scalping.

Based on particular setups, any trading system can be used for the purposes of scalping. In this regard, scalping can be seen as a kind of risk management method. Basically, any trade can be turned into a scalp by taking a profit near the 1:1 risk/reward ratio. This means that the size of the profit taken equals the size of a stop dictated by the setup. If, for instance, a trader enters his or her position for a scalp trade at $20 with an initial stop at $19.90, the risk is 10 cents. This means a 1:1 risk/reward ratio will be reached at $20.10.

Scalp trades can be executed on both long and short sides. They can be done on breakouts or in range-bound trading. Many traditional chart formations, such as cups and handles or triangles, can be used for scalping. The same can be said about technical indicators if a trader bases decisions on them.

Types of scalping

The first type of scalping is referred to as "market-making," whereby a scalper tries to capitalize on the spread by simultaneously posting a bid and an offer for a specific stock. Obviously, this strategy can succeed only on mostly immobile stocks that trade big volumes without any real price changes.

This kind of scalping is immensely hard to do successfully because a trader must compete with market makers for the shares on both bids and offers. Also, the profit is so small that any stock movement against the trader's position warrants a loss exceeding their original profit target.

The other two styles are based on a more traditional approach and require a moving stock where prices change rapidly. These two styles also require a sound strategy and method of reading the movement.

The second type of scalping is done by purchasing a large number of shares that are sold for a gain on a very small price movement. A trader of this style will enter into positions for several thousand shares and wait for a small move, which is usually measured in cents. Such an approach requires highly liquid stock (to allow for entering and exiting 3,000 to 10,000 shares easily).

The third type of scalping is considered to be closer to the traditional methods of trading. A trader enters a specific amount of shares on any setup or signal from their system and closes the position as soon as the first exit signal is generated near the 1:1 risk/reward ratio.

Tips for novice scalpers

With low barriers to entry in the trading world, the number of people trying their hands at day trading and other strategies, such as scalping, has increased. Newcomers to scalping need to make sure the trading style suits their personality because it requires a disciplined approach. Traders need to make quick decisions, spot opportunities and constantly monitor the screen. Those who are impatient and feel gratified by picking small successful trades are perfect for scalping.

That said, scalping is not the best trading strategy for rookies; it involves fast decision-making, constant monitoring of positions and frequent turnover. Still, there are a few tips that can help novice scalpers.

Order execution

A novice needs to master the art of efficient order execution. A delayed or bad order can wipe out what little profit was earned and even result in a loss. Since the profit margin per trade is limited, the order execution has to be accurate. As mentioned above, this requires supporting systems such as direct access trading and level 2 quotations.

Frequency and costs

A novice scalper has to make sure to keep costs in mind while making trades. Scalping involves numerous trades—as many as hundreds during a trading session. Frequent buying and selling are bound to be costly in terms of commissions, which can shrink the profit. This makes it crucial to choose the right online broker. The broker should not only provide requisites like direct access to markets, but also competitive commissions. And remember, not all brokers allow scalping.

Trading

Spotting the trend and momentum comes in handy for a scalper who can even enter and exit briefly to repeat a pattern. A novice needs to understand the market pulse, and once the scalper has identified that, trend trading and momentum trading can help achieve more profitable trades. Another strategy used by scalpers is a countertrend. But beginners should avoid using this strategy and stick to trading with the trend.

Trading sides

Beginners are usually more comfortable with trading on the buy-side and should stick to it before they gain sufficient confidence and expertise to handle the short side. However, scalpers must eventually balance long and short trades for the best results.

Technical analysis

Novices should equip themselves with the basics of technical analysis to combat increasing competition in the intra-day world. This is especially relevant in today's markets dominated by high-frequency trading, as well as the increasing use of dark pools.

Volume

As a technique, scalping requires frequent entry and exit decisions within a short time frame. Such a strategy can only be successfully implemented when orders can be filled, and this depends on liquidity levels. High-volume trades offer much-needed liquidity.

Discipline

As a rule, it is best to close all positions during a day's trading session and not carry them over to the next day. Scalping is based on small opportunities that exist in the market, and a scalper should not deviate from the basic principle of holding a position for a short time period.

The bottom line

Scalping can be very profitable for traders who decide to use it as a primary strategy, or even those who use it to supplement other types of trading. Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders.

Can forex trading make you rich?

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This is one of the most common questions aspiring forex traders ask. But the answer is not that straightforward. Becoming rich trading forex depends a lot on your circumstances. While it is possible to make a lot of money from forex trading, it is not as easy as you think. It requires a lot of hard work — first, in educating yourself and acquiring the skills and, second, in implementing your trading plan consistently without allowing your emotions to sabotage you.

Generating profits from the market is not easy, and even when you achieve that, you can lose both the profits and your capital if care is not taken. So, forex trading is not something you dabble into because you read some social media stories of people who bought their dream houses or cars by trading forex.

Success in forex trading takes time, hard work, and money. But above all, you must have a passion for it, if not, you will give up along the line. In this post, you will learn the truth about forex trading and get an idea of what professional traders earn, but we will also discuss the things you need to succeed, how much you can realistically make, and some tips that may help you.

The truth about forex trading

Before you consider getting involved in the forex market, you need to aware of the reality so that you decide whether forex trading is actually for you or not, which is why we are starting with the following points that you should take note of before embarking on your forex trading journey.

Forex trading is not your ticket out of poverty

If you are a low-income earner or unemployed and you’re battling with debts, struggling to pay your bills, and finding it difficult to eat, you should stay away from forex trading because it can’t work for you. Rather than be a ticket out of your poverty, the market will take the little you’re surviving on, and here is why:

To have a chance of succeeding in the forex market, you have to trade with the money you can afford to lose, and the bigger that money is, the higher the chances of making more money. When you’re trading with the money you can’t afford to lose, you will be forcing all your trades to become a winner, and that could mean trading without a stop loss — a mistake that will eventually blow up your account.

You can’t buy that bugatti in 6 months

It’s common to see a picture of a young man or a beautiful lady with the latest luxury cars in front of an oceanfront apartment, who is claimed to have made all the money from forex trading. Naturally, we desire such a life — making a lot of money without having to work for anybody.

While it is possible to make that kind of money from forex, that only happens over a long time (many years) if everything ticks well. You don’t achieve that kind of success in forex trading within a short time. It takes time for the profits to accumulate — forex trading is not a get-rich-quick business. Moreover, your account has to be big enough for you to generate good profits from trading.

You may break your screen

The real work of sitting in front of the computer — or whatever device you use for trading — and analyzing the markets, placing trades, and managing the trades is not easy in any way. It can take a toll on your emotions and leave you mentally drained and exhausted.

Watching the market go against your position and stopping you out, only to turn back and move in the direction you initially expected can be too much to bear. But that’s the reality of forex trading — all your emotions will be tested. If you’re the type that has anger management issues, such situations can make you punch your computer in anger. So, you need to be sure that you’re ready for the emotional battle.

There is a 90% chance of coming out empty-handed

Yes, you heard that right. Research has shown that over 90% of retail traders lose all their initial capital to the market. The reason is mainly due to lack of training, not using a reliable trading strategy, not knowing how to manage risks, and ultimately, lacking the discipline to implement their trading plan well.

So, if you don’t want to be among the 90% ‘also tried’, ensure you get adequately trained before you start trading live. You must be disciplined enough to stick to your plan and trade objectively. But even with all these, you will still have some losing trades and negative months. If you don’t know how to accept losses and can’t handle losing, forex trading may not be for you.

But can you really become rich trading forex?

Now that you know the reality about forex trading, let’s take a look at our question again. Can you really become rich trading forex? Well, it depends on a lot of factors:

How much skills and experience you have

Despite the failure rate, some people still make money consistently from the forex market. These few successful ones are able to do it because they have mastered the skills required to succeed in this market and have acquired years of experience practicing their trade. They have clearly thought-out strategies with an edge in the market, and they know how to manage risk and protect their trading capital.

For these kinds of experienced traders, growing a trading account to a huge amount is very possible. But are you in that category? Do you have a reliable strategy with an edge in the market, and if you do, are you disciplined enough to consistently execute it without fear and greed? Do you have a clear-cut money management plan that would protect your capital?

While all these questions may seem overwhelming, those skills are not out of your reach if you are determined enough to acquire them. It will only require you to work hard enough for as long as it takes to master the skills.

The size of your trading account

Apart from the skills and experience, the size of your trading account matters a great deal. The reason is simple: the size of your account determines the size of your trades and the amount, in dollars, you make in profit per trade.

For example, if you have a $100 account and you’re using a strategy that risks 1% of the account to make three times the risk as profit. Let’s say after all wins and losses, you make an average of 10% of your account size consistently every month. Without any withdrawals, it will take over 10 years to make up to $1 million.

With a $5,000 account, that can be achieved in about 5 years assuming the same conditions. If you are trading a $100,000 account, you may achieve that in about 2 years if all conditions are the same. So, it’s obvious that the size of your trading account can determine how fast you can become rich trading forex, assuming you have the skills and a reliable strategy that consistently makes money.

Your trading discipline

Any trader who has made money in the forex market will tell you that discipline is key. There is no success in forex trading without being disciplined enough to consistently execute your strategy and avoid emotional trading. Trading irrationally, based on how you feel, is a sure way to end up with a $0 balance in your trading account.

Trading with discipline means developing a trading strategy with a verifiable edge in the market and waiting until you see a qualified trade setup before you place a trade and, then, managing the trade according to your trading plan. It means avoiding trade execution errors, such as jumping the guns, chasing trades, risking more than your account size, having bigger stop loss than profit targets, taking profits early, and trying to revenge on the market after a loss.

How patient you are

Aside from having the patience to wait for your trade setups and managing your trades according to your plan, you need patience to grow your account to the level that can make you rich. The only way to become rich trading forex —if you are already profitable — is by reinvesting your profits and leveraging on the power of compound interest to grow your account.

Depending on your average monthly or yearly returns and your trading capital, it may take you several years to grow your account to a level where you can afford all the good things you desire. Hence, to become rich through forex trading, patience is key.

Account growth plan

Just like we hinted above, you can only become rich if your plow, at least, some of your trading profits back and use them to make more money — that is, assuming that you’re already profitable and consistently making profits.

How much of your monthly profits you withdraw and how much you retain to grow your account would depend on your financial situation and growth plan. If you depend on your profits to feed and pay bills, it will take you a longer time to grow your account and accumulate wealth than if you retain all the profits.

How much do professional forex traders earn?

To get an idea of the kind of money in forex trading — for those who have developed the prerequisite skills — let’s take a look at how much professional forex traders earn on average. Professional traders are those highly trained traders that trade for commercial banks and other financial institutions. According to salary.Com, professional forex traders earn about 180,000 USD per annum on average.

Note, however, that the amount is the average salary of professional traders and not what an average retail trader, like yourself, make from forex trading. But the point is that if a trader can be paid that amount as salary, he must have made up to five to six times that amount or more within that period.

So, it is really possible to make a lot of money from forex trading if you have what it takes to pull the money out of the market. But what exactly are those things it takes to consistently pull money from the market? Read on!

What you need to become successful in forex trading

Forex trading is not for the lazy; it requires a lot of hard work plus other factors. To succeed in the market, the following factors need to be in place:

Adequate trading education

A trusted broker

A good trading strategy

Enough practice

Big trading capital

A good source of income

Education

If you want to become a heart surgeon, you must get the necessary education and hands-on training on how to open the thoracic cavity and work on the heart. It is the same way with trading; to acquire the skills that can help you pull out money from the forex market, you need to get the right training.

While you can educate yourself with all the free trading resources you can find on the internet, including books, blogs, and youtube videos, you will learn faster and better if you are trained by an expert who is already successful in forex trading. So, it’s wise to enroll in a trading course like the one offered by pro trading school.

An honest broker

Trading with a dishonest broker is like trying to fetch water with a basket — you won’t get anything out of it. The unfortunate thing is that there are many dishonest brokers out there, and they are the ones that place the most appealing adverts. So, you need to be extra careful not to fall into their hands.

To be sure you are dealing with a trusted broker, make sure that the broker is regulated by any of the tier-1 financial authorities, such as the FCA, ASIC, CFTC, and IIROC. Also, make sure that the broker operates the ECN order-execution model to avoid the risk of a conflict of interest associated with dealing desk brokers. Among all the brokers that meet these two criteria, pick the biggest brand, as they will likely be more concerned in protecting their brand than stealing from clients.

A strategy with an edge in the market

You need to develop a strategy with an edge on the market. By having an edge on the market, we mean a strategy with a good positive expectancy. Expectancy in trading is a parameter we use to gauge whether a strategy can make money in the market. It is the average return for each trade when all the wins and losses are considered. Expectancy is given as:

E = (win % x average win size) – (loss % x average loss size)

A positive value shows that the strategy can make money, while a negative value shows that it is a loser. The bigger the positive value, the more profitable the strategy is. An expectancy of $150 means that on the average, the trader makes $150 from each trade. To confirm that a strategy has a positive expectancy, you need to front-test it and analyze the result.

After creating a potential strategy, you need to front-test it on a demo account to be sure it is a profitable strategy. For this, you record the outcome of every trade and other relevant data, including the amount risked and the amount gained. When you have enough sample size, you use those data to calculate the expectancy.

One more thing, as you’re practicing with a demo account, you are not only testing your strategy but also getting used to your trading platform.

When you’re sure that your strategy can make money and you’re comfortable with the platform, you need to start practicing on a live account to make sure that you can execute the strategy when real money is at stake.

However, to ensure that you don’t put too much money at risk at this stage, it’s advisable to start small and trade with a nano or micro account first. Continue practicing with a small amount until you’ve developed the mindset of a trader — which is to focus on the execution process and not on the outcome.

Adequate trading capital

While you are getting the training and mastering a suitable strategy, you have to start saving enough money for your mission — trading your way to wealth. Remember, all things being equal, the bigger your trading account, the bigger your profits, and the shorter the time it will take you to amass wealth from forex trading.

So, if you’re serious about making enough money from forex trading, start making your savings now. You should target to have more than $10,000 disposable income saved for your trading mission. But as we stated above, you don’t just start trading with all the money once you progress to live trading.

You have to test the waters with a small amount and be sure that you can execute your trading plan properly without your emotions getting in the way. When you are comfortable trading on a live account, start increasing your account gradually until you adapt to the full account size.

A good source of income

There are many reasons why having a reliable source of income can help your cause. Firstly, you would be able to save a sizeable capital for your trading mission. But the more important reason is that it can take care of your bills so that you can retain all your trading profits for the growth of your account.

Apart from helping in your account growth, it will remove a psychological burden from you — the need to make money at all cost — which can make it difficult for you to accept a loss, potentially setting you up for ruins. So, it helps to protect your trading capital from your sabotaging emotions.

How much can you make from forex trading as a retail trader?

The thing about forex trading is that the more you trade the more money you can potentially make. However, does this mean that scalpers and day traders, who take more number of trades, make more money than swing traders? No, it doesn’t work that way. In fact, swing and position traders may be making more money because they get better signals and have bigger profit targets.

What we mean is that, for a given trading strategy and plan, the more you trade, the more money you can potentially make. So, it’s better to trade all your setups that occur in the currency pairs you’re monitoring than trade some and miss some. Statistically, the bigger the sample size, the more your result would be closer to the expected outcome. And arithmetically, that translates to more money, as you can see below:

Potential income = expectancy x trade frequency

Remember that expectancy is the average profit of all trades, including wins and losses. So, for a strategy that has an expectancy of $150, if you trade 100 times in a year, you expect to make about $15,000 in profits, all things being equal. If you trade 50 times, expect $7,500, and if you make 200 trades, you expect $30,000.

Tips that can help you succeed in forex trading

Forex trading is not a child’s play. A great majority of retail traders lose all their money, but if you’re determined and follow all the rules, you can trade your way to good money. Here are some tips that can help you.

Start small: we can’t say this enough — start with a nano account and trade it until your emotional ecosystem is suitable for trading bigger amounts. It is true that you need a big account size to make more profit, but if you enter the market with all your trading capital before your emotions are ready, you stand a chance of losing all of them.

Trade in sample sizes and analyze your trading results thereafter: once you’re executing your strategy well, don’t even bother with the outcome of individual trades. All you should do is to record all the parameters associated with each trade. After you have completed 30 trades (whatever sample size you choose), analyze your trades to see how well your strategy is performing and make the necessary adjustments.

Manage risk and protect your capital: do not risk more than 1% of your account capital in each trade, and make sure you set a hard stop loss. If you’re trading with a true and honest ECN broker, you don’t have to worry about your broker knowing where your stop loss order is.

Stick to your plan: be a disciplined trader; always stick to your trading plan until you review it when you have completed a sample size. Dishing your plan in the middle of a trade will only lead to erratic trading, which is a recipe for losing.

Be patient with your progress: at the initial stage, it will seem as if you are not making any progress, but be patient. Once your strategy has a positive expectancy, just focus on executing it. There will be periods of winning and losing streaks, but over the long term, your account will keep growing.

Leverage the power of compounding: make it possible for you to retain all your profits so that you can grow your account faster. What this means is that you should have another source of income to cover your bills so that you can afford to not touch your profits. As your profits accumulate, your account grows, and soon, you will be able to trade bigger lot sizes while still risking only 1% of your account, thereby generating more profits without altering your money management plan.

Final words

Yes, forex trading can make you rich, but it requires determination, a lot of hard work, and efficient planning. You must learn all there is to learn from those who have done it before you, find an honest broker, save enough capital, create a strategy with a positive expectancy and practice how to execute it, and above all, be making money from somewhere else.

4 simple ways on how to get out of A forex drawdown

Forex drawdown…no trader wants it but if you are into forex trading, you will face it.

Have you ever experienced this situation? No matter what you try, you simply cannot get out of your drawdown?

It seems like the forex market is just against you no matter what you try.

You see a really good trading setup. You take the trade. Price does not follow through, it bounces back and forth until your stop loss is hit.

Or worse case scenario is that you don’t have a stop loss in place and price just keeps going against you.

Now you are staring at a huge paper loss and you just don’t know how to get out of it.

You start believing that the forex market is rigged and may even start making up conspiracy theories that your forex broker is working against you.

Trust me, I get it because I’ve been there. I experience drawdowns too.

Many times, I bust my forex trading accounts because I cannot recover from some of the big drawdowns in my account.

In here I will talk about my experiences of having a drawdown and how I have recovered from them.

Maybe you can learn something from it.

What is A forex drawdown? Definition

Now, I understand that some of you may be completely new in this forex trading business you don’t really know what forex drawdown means.

If you have a $10,000 forex trading account and you lose $5,000. What percentage of you account have you lost?

This is what traders call a drawdown.

So a drawdown by defintion is simply a reduction of your trading capital after you have some losing trades.

So how is drawdown calculated?

Well, you simply get the difference between a relative peak in your capital minus a relative trough and multiply by 100% and that is how you get a drawdown in %.

Image source: babypips.Com

What is A maximum drawdown?

A maximum drawdown (MDD) is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained.

On the chart below, you can see a $5,000 trading account suffered a $2,500 loss which is a 50% drawdown.

Then after some wins the account made a new peak at $10,000 then fell down to $8,000 after suffering some loss, a 20% drawdown.

The first peak to valley drawdown was 50%

The second peak to valley drawdown was 20%.

Therefore the maximum drawdown here is 50%.

18 losing trades in A row

I was in a drawdown of 18%. It happened over 2 week period. Now, 18% drawdown may not cause you to push the panic button but what can cause panic is how you reached that 18% drawdown.

You see, I had 18 losing trades in row! For some, this would be enough to question their trading system and “jump ship” so to say.

No matter what trades I placed, I was losing. Day in day out, every trade I placed, was losing.

It seemed like my losing streak was not going to end.

If you were in this situation, what would you have done?

Would you have stuck with your trading system or jump ship and start looking for another trading system to use?

Or would you have started to increase your lot sizes for a chance to get that “one lucky trade” that will recover all the loses you suffered?

But here’s the thing though: forex trading drawdowns storms don’t last forever. They’ve got to end someday…

However, I knew it would end. I knew I would pull out of it, and when I do, it would happen quickly.

And it did happen…QUICKLY!

In just 1 week of trading I managed to wipe out all my trading loses and made a lot more.

So what did I do? What happened?

Well, when it comes down is, it is all about the risk:reward.

If you make a lot more than you lose in a trade, you will always come out profitable in the end. So that’s what happened.

You are going to lose in forex (that’s A fact!)

The forex industry is kind of spoilt. People go to forex websites and blogs and read about how much money “you can make” blah blah blah…

This breeds this ideas in our heads that ” I’m not going to lose”. Wannabe traders then have these unrealistic expectations that you can make money month after month in forex trading.

And guess what happens when you get into live trading for real?

You start losing…and if your trading loses start to get bigger and you are suffering a big drawdown, you do not make sense of it and do not realize it for what it it.

So what do you think happens?

Overtrading

Taking larger risks per trade

Etc.

And the result always tends to end in disaster.

Volatility

You see, there will be times when the forex market will go through a period of low volatility, which means price will be in range bound.

Price will not see to move much and any moves it makes in that low volatility period will be pretty erratic.

You may see a good trading setups and you’d take a trade but price does not follow through.

This causes lots of losses to lots of traders.

It is during such period that many forex traders simply dump their trading systems and start looking for the next “holy grail trading system”.

Accounts that don’t have proper risk management go to zero.

Accounts that rely on big win/loss ratios suffer tremendously.

Now, I’m not a pro trader, nor do I trade forex for a living but from my experience, at the end of a drawdown period, as long as you keep following your system and money management rules, you will make up the lost ground and propel your forex trading account to new heights.

4 ways on how to get out of forex drawdowns

It is simple, yet difficult, at the same time.

How to make money in forex without actually trading

There is only one sure thing in forex trading. Loss. It is the only sure thing that every open position will eventually be closed with a loss. So how to make money in forex without actually trading it? You definitely can earn a lot of money in forex trading without opening any single position. Here are just two examples of how to make money in forex without actually trading. Every beginner with a goal to trade forex successfully needs to read the below.

1. Be a forex broker

How To Make Money In Forex Without Actually Trading

To be a forex broker means that you earn money by connecting sellers and buyers. In the old days, when computers were just in star trek, brokers needed only a pencil, paper, and phone.

Brokers called from early morning till late afternoon to dealers in banks, trying to find just two with opposite ideas and wishes. And there is hidden the forex broker profit.

The small fraction of trade amount, but without any risk (of course, if we ignore counterparty risk) would be the broker’s fee.

Counterparty risk means, that you still risk that your counterparty will not pay your fees. However, if you work with regulated banks, your risk is pretty low.

Volatility is a friend of every broker

The only thing you need as a broker is volatility. You will praise volatility, you will enjoy any unexpected event which will move markets up or down.

You will not care about direction market moves, and you will care just about if the move is large enough. More volatility, more happy and wealthy you will be.

You will hate holidays and low liquidity. You will hate non-eventful days, stable markets, and peace in the world.

Your day will be much nicer when FED unexpectedly raises rates or decreases them. No matter what FED does, it will definitely help that it surprises forex markets.

What you need as a broker

You needed just a pen, pencil and phone long ago. Nowadays you will need probably a robust IT system and a lot of money.

The competition between brokers is pretty strong. All of them invest a lot in IT infrastructure and marketing.

Fees are going down, and you need more significant amounts to earn the same money as year or two ago. However, still, you do not have any open positions.

You can sleep peacefully. There is no possibility that you come to the office in the morning and all your positions will be in a deep loss.

2. Be a consultant

You do not want to trade your own money, do you? Trading other people’s money can be more pleasant in case you lose them. Be a consultant means that you just give advice and take your fees before anything goes wrong.

You will not risk your money. Great, isn’t it?

What do you need as a consultant?

The primary thing in the consultancy business is reputation. Without a reputation, nobody will hire you.

To earn a reputation is not easy. Basically, you can be a trader who finished his career and your trade log speaks for itself.

The second possible way is to make yourself visible. You have to comment in discussions about forex, write articles about it, do not be afraid telling others what they should do last week.

And you will see that some fool will like your advice and hires you. You know that prediction of future on forex is impossible, so let your partners pay your fees before any of your opinions materialize.

Is it possible to make money in forex without actually trading?

Yes, it is possible to make money in forex without actually trading. We showed you two possible ways how you can win at the forex every time.

We are sure there are other ways we did not mention. But even as a consultant or a broker, you will have to work hard to earn anything.

So, let's see, what we have: forex trading may be profitable for hedge funds or unusually skilled currency traders, but for average retail traders, forex trading can lead to huge losses. At can you make money out of forex trading