Can I get rich trading the forex?
It depends on what you mean by getting rich. Being rich will mean different things for different people. Yes, you can make money trading forex. The amount you can make will depend on your skills as a forex trader.
To make money and grow your wealth in forex you first must have a winning strategy that will allow you to make consistent profit. A winning strategy is like having your own personal cash machine, in which you can get involved in the forex market and extract cash each day. When we talk about a winning strategy we mean that you have more winning trades than losing trade.
For example, if you place 20 trades then you would want at least 11 out of these trades to be winning trades. You will also want to make sure that you have a win loss ratio of at least 3:1 to make money in forex.
If you are trading a small account say $100 then it would take a long time to grow this account. The risk you would use on this account will be higher as well.
Let’s look at an example. Let say you want to place a trade that gives $1 per pip. Normally professional traders only risk 1 – 2% of their account.
In this case a 2% risk on $100 will be $2 ($100 x2%). Based on your risk of $2 you would not be able to place a trade which will give you $1 per pip and stay with your risk management guidelines unless you have a large leverage on your account.
If not, you will have to increase your risk to about 10% in order to place a trade that gives you $1 per point. I would not encourage you to increase your risk to this amount, what I would encourage you to do is to reduce your position size.
That is, instead of you wanting to gain $1 per pip then you would change this to gain .10 cents per pip.
If you place a trade which gives you .10 cents per point then if the trade moves in your direction by 60 point you will only make $6.
At this rate you will not be making a lot of money is forex.
Let look at an example of using a larger account say $50,000. A 2% risk on $50,000 is $1,000 ($50,000×2%). After you analyse your trader you realise that if the trade does not go in your favour you will lose 10 pips/points.
Giving the fact that your 2% risk is $1,000 you could place a trader that each point it moves you will make or loss $100 that is $1,000/10pips/points)
If this trade moves in your favour and you get the 60 pip/points that you are targeting and you now know that each point the trade move will give you $100 as calculated above, then you would make a total of $6,000 on this one trade, that is (60 pips/point x $100).
If you are able to find trade which will make consistent profit then if you place 10 trades of this nature you could make $60,000.
Therefore, the key to making money in forex is for you to learn a forex strategy that will allow you to make consistent profit, this does not mean that every trade you place will be a winner, as that is not possible in forex. You will have some loser but your loser will be within your risk management guidelines.
What you will notice from the example above is that if you win this will 6 times more that if you lose, which mean that when you make one winning trade, you would have to lose 6 times before all your winnings is taken away.
Take some time and first learn the basic, then learn a forex strategy that can give you consistent profit. When you are comfortable with your strategy then you can get a funded account, that is, you will be trading using other people money and not risking your own.
You have access to everything that you need to become a forex trader. The question is, do you have what it takes? You will never know less you get involved in this ever growing market.
How much do forex traders make a day? Can I start forex with $100?
This will depend on the trader; the account size that they are trading; their risk management strategy; their win loss ratio; etc. If you are trading a $50,000 account and you place 5 trades a week and you lose 2 of these trades and win 3 trades.
Also let us assume that your loss in pips is 10 pips/points and your target is 30 pips or points, this give you a win loss ratio of 3:1 (30 pips/10 pips). On a £50,000 account with a 2% risk you can risk up to $1,000.
With your lost at 10 pips/points you can place a trade that give $100 per pip/point. Again, this will based on the currency pair you are trading. On the other hand if you win you will earn $3,000 per trade.
Using the details above in which you place 5 trades for the week and you win 3 and lose 2. Your winning trades will give you $9,000 ($3,000 x 3) and your losing trades will be $2,000 ($1,000 x 2). At the end of the week your net position will be $7,000.
What if you had an account size of £500,000, then you can work out how much you can make in a day. Again, without a winning strategy you will not make any money you will lose money. Therefore, as a beginner, you starting point is to take the time learn a forex strategy that will allow you to win most of the time.
Is forex trading really profitable?
Yes, forex trading can be profitable if you have a winning forex strategy. It is also risky and you can lose your money but you can manage your risk, by setting a daily loss, setting a loss per trade, etc, you can find more information on managing forex risk here.
If you are trading a large account say $1million with a 1% risk than means you can risk $10,000. If your loss in pips is 20 pips/points this means you can place trade that will give you $500 for every pip/point is moves in your direction based on the currency pair your are trading.
If your risk is 20 pips/points you will want to have a target of 3:1 that means that your target will 60 pips/points. Therefore, if you make one winning trade you will earn $30,000 ($500×60).
On the other hand if you lose one trade you would lose $10,000 ($500×20). As you can see for this example above if you have a winning strategy with at least 3:1 reward risk ratio and you manage your risk then forex trading will be profitable for you.
Can I make a living trading forex?
Yes, you can make a living trading forex. You can also lose a lot of money trading forex. To make a living you need to learn and master a winning strategy. A winning strategy means that you win more than how you lose.
For example, every 10 trades you place you win 6 out of the 10. If you have a win loss ratio of 3:1 or more then in this case you will constantly be making money in forex.
How much do you need to start trading forex?
If you have a winning strategy you don’t need any of your own money to start trading forex as a lot of investors will give you funds to trade.
Get information on how you can get funded to trade forex. There are a lot of different options available. If you do want to go down the funded account route then you need at least $25,000 to start with. You can start will smaller account and grow your account but this will take some time.
You are more likely to break your risk management rules with a smaller account. Professional traders usually risk between 1 and 2% of their account balance. On a $25,000 account, then will risking between $250- $500.
If you are trading on a 60 mins chart with an average risk of 20 pips/point. This means you can place traders that will give you between 12.5 to 25 pips per point. This will be based on the leverage you have on that account and also the currency pair you are trading.
The starting point for you as a beginner is to learn the basic and get familiar with the terms used in forex. Learn a winning forex strategy and then practice, practice, practice, to master your strategy. When you are comfortable with your strategy, you can access other people funds to trade without risking any of your own money.