How Much Money Can I Make Forex Trading?

  • August 29, 2022
How Much Money Can I Make Forex Trading

As much as we would all like to say that we are involved in forex for the love of the industry, we are actually all here to make money. With a low barrier of entry and huge leverage being offered, the forex market is potentially a great market if you’re looking to make a lot of money from your trading efforts. Whilst there is a huge amount of opportunity and money to be made trading forex, there is also a huge amount of risk that comes with trading such a volatile and liquid market.

In this article, we are going to look at roughly how much money you can expect to make from forex trading so you can decide whether it’s worth dedicating years to this craft. Let’s find out more…

How Much Money Can I Make Forex Trading?

The reason forex trading has exploded in the last few years is that it’s appealing. You must have heard the stats, there are over $5 trillion dollars traded per day. Does this mean you’ll ever make it close to that? Well, no, of course not.

The average forex trader in the US earns around $98,600 per year. This is certainly a great income, but there is no guarantee that you’ll be making the same kind of money. In fact, although there are traders comfortably making millions in profits each and every year, the majority of traders will never make money in the forex markets. By dedicating your time to learning to trade, you’re taking that gamble, but it may very well pay off in the long run! The question of ‘how much money can I make trading forex’ is almost like asking ‘how long is a piece of string’. There are so many different factors that we need to look at, to know what kind of figures you would be looking at. However, we have averages that we can draw from.

Going on the US average, let’s say that you could make $8,000 per month trading forex if you were profitable.

The actual number you take home is going to depend on a number of different factors that we will dive into now…

The Factors Affecting Profits From Forex Trading

Not all forex traders are created equal when it comes to profit. So, what actually impacts your earnings as a trader?

  1. Win Rate
    Increasing your win rate is the most obvious way to increase your earnings in the markets, but this needs to be used in conjunction with other metrics. For instance, you’re much better at having a 50% win rate if you make 4x your losses each time you take a win, rather than a 99% win rate, but your losses are 50x bigger than your wins.
  2. Risk To Reward Ratio
    Manipulating risk-to-reward ratios will be key in forex trading. You want to operate with a minimum of 1:2 risk to reward, ideally. This means for every £1 you risk, you expect to make £2 from the markets. Traders with larger RR’s typically earn more money trading.
  3. Trading Capital
    Trading capital shouldn’t be the most important aspect of your trading journey, as it’s very easy to obtain funded trading accounts from online prop firms like Lux Trading. However, it goes without saying that the more capital you have, the more profits you’ll be able to pull from the same percentage gains.We have a whole article here breaking down exactly how to get funding as a forex trader.
  4. Trade Frequency
    Frequency is important in any trader’s strategy. If you have a great trading strategy but the opportunity to execute this play only comes up once every 2 years, you’re unlikely to make much money in the market. Likewise, you don’t want a strategy that gives you entry signals every 10 minutes.
  5. Risk Per Trade
    Calculating your risk per trade can make a huge difference to profits within the forex market. It’s important to use a fixed risk and a low risk at that. Although using a high percentage seems like a good idea, it’s much easier to get into large draw-downs and emotions will play into your trading performance.
  6. Multiple Trading Strategies
    Using multiple back tested forex strategies is a great way to increase your profits in the market. Market sentiments can change and strategies will stop working over time, so it’s important to have a number of strategies at your disposal.

 An Example Situation

To understand the reality of how much money you can earn forex trading, it’s important to look at your trading strategy and the situation you’re in. Let’s take an example…

  • Trading Capital = £100,000
  • Risk Per Trade = £1000
  • Win Rate = 50%
  • Average Risk To Reward = 1:2
  • Trades Per Month = 10

From having these kinds of numbers at your disposal, you’re able to calculate exactly how much you’re going to be earning per year, presuming the market doesn’t change, and your numbers stay consistent. With the numbers we are using above, you would end up with a total account value (assuming you have compounded for the year), of $179,523. Rounding this up, you would have netted a total of $80,000 profit in a year with fairly average trading results. This equates to an 80% gain. These are on the high end, but still realistic returns from forex tradingIf you only had access to £1000 worth of trading capital, this would only equate to $790 after a year of compounding and dedicating yourself to trading – something most people make every few weeks from their 9-5s.

 Increasing How Much You Earn As A Forex Trader

 The issue with the example above, for most traders, is the fact that they’re coming into the financial markets with a few thousand dollars, not a hundred thousand dollars. This lack of capital causes traders to risk a huge amount of capital per trade and ultimately fail in their pursuit of trading. 

In comes prop firms…

 Online prop firms like Lux Trading Firm give profitable traders from around the world trading capital, in exchange for a profit share. For instance, we fund traders up to $10,000,000 in capital, with the majority of our Elite Trading Club traders having over $100,000 in trading capital. When the traders make profit, we keep 30% of the profit and they withdraw the 70%. This is completely risk-free for the traders in question, and they can build their own nest egg whilst having access to large amounts of funding.  

We’ve seen it time and time again with traders only making a few percent per month not being able to take their trading seriously. They then get a funded trading account, and suddenly their few percent per month is looking a lot more appealing! For more information, have a read of our funded trading accounts.

In Summary – How Much Money Can You Make Trading Forex?

In conclusion, you will make on average $98,600 per year on average as a profitable forex trader, but the sky’s the limit. There are forex traders making millions of dollars per year in the markets. I must add that forex is not the get rich quick scheme you read about on Instagram. Those traders earning nearly $100,000 per year are professional and serious forex traders that treat this like a job, they aren’t in clubs every day and trading from a laptop. Those ‘traders’ make their money from selling courses, not forex trading. If you’re serious about making money trading, I would highly recommend you dedicate the proper mindspace to learning the markets and taking on a funded trading account to start building that discipline needed to succeed in this game.

 Looking to get funded? Work with Lux Trading Firm now!