Is forex trading profitable? This is a question I have seen on several occasions ever since I started to venture into forex trading. Some even go to the extent of asking about the expected forex trading profit per day.
Most experienced forex traders would go ahead and dismiss such questions. For me, however, they are questions that I tend to understand when a prospective trader gets to ask.
Forex trading is more of an investment since the traders involved are usually driven by the desire to make an income or create wealth.
As a result, it makes perfect sense for someone to ask the question “is forex trading profitable” or “how to profit from forex trading” before depositing their hard-earned money with a forex broker.
Whether forex trading is profitable is a question that has been debated for a long time, and as I have stated above, I get where someone is coming from when they ask about the profitability of forex trading. This goes even for the individuals who have been trading for some time.
This is because many investors and traders do not achieve forex trading success as they hoped, and their experiences have left them in doubt on how viable the forex market is as an investment choice.
However, the fact that the forex market trades around $5 trillion every day in terms of volume is reason enough to believe that there are traders who profit from forex trading.
If no trader was profiting from this investment, then forex trading would be unpopular and even fade out.
The appropriate question to ask is, therefore, not whether forex trading is profitable, but how to make profit while trading forex and how to ensure that you are consistently profitable in the long run.
Forex trading is like any other type of investment as it has its own share of risks and potential for profitability or loss-making.
Knowing how to manage these risks helps a lot in determining your own forex trading profit or loss.
The problem is that newbie traders are easily carried away by the success of other profitable forex traders.
As a result, they get driven by the desire to make money in the market, and they forget to try and figure out what these successful and profitable forex traders are doing in order to actualize the success that they are enjoying at present.
Just like any other business, understanding the process is quite critical in the forex trading business (yes, I called it a business).
You need to understand the ins and outs of the market for you to have any prospect of being profitable.
For this to happen, you need to treat forex trading as a business to ensure that you do things the right way.
Is Forex Trading Profitable?
From my experience, forex trading is certainly profitable and worth the investment. I have made money in this industry, and I will continue making money in the long run. That is why I can confidently say that forex trading is profitable.
However, the success that I have actualized while trading did not just come by chance. I have had to put in a lot of time learning and practicing different concepts before I could find something that works for me.
Below I have outlined some aspects that will guide your success in forex trading.
This will guide your thinking from questions like “is forex trading profitable” to questions like “how to profit from forex trading.”
When you reach this point, you will even see a shift in your forex trading endeavors.
Factors to Take into Account while Trading Forex
Forex is a market with its own share of risks, with potential for both losses and profits.
So as to increase your probability of profiting when trading forex, you need to learn how to manage the risks, understand the forex market and the inherent factors that drive it.
Basically, to make profit from trading forex, it is advised that you buy low and sell high.
This principle may seem and sound quite simple but to put it to practice is not that easy.
How exactly will you tell with certainty that a market is either high or low? You will start trying to pick tops and bottoms then the market continues to trend.
This is the reason why it is very important to follow the basics and the most important principles of forex trading and trading psychology.
You can commence by considering the following in order to find out for yourself whether is forex trading profitable.
Succeeding in forex trading definitely requires you to have a profitable trading strategy.
There is no perfect strategy that can work every time and for all the tradable markets.
There are even times when a certain strategy could work well for a specific currency pair and fail to work effectively on another pair.
Like in any other business, you will not make profits without the chance of there being losses.
Be ready to tackle the risks and think of implementing a good and effective risk management plan while trading.
This is something that profitable forex traders do all the time.
Among the risk management strategies you can employ is using stop loss religiously.
You should ensure that you have a stop-loss that is always set no matter the situation and any trading strategy you choose.
When you pre-define the closing price of your trade, you are able to safeguard yourself from a lot of uncertainty and get rid of the risk of losing more money than would be expected.
Keeping Your Emotions Grounded
Benjamin Graham in his work, “The Intelligent Investor” said, “the investor’s chief problem, even his worst enemy, is likely to be himself.”
There are investors who see trading as a game, and as such, they try to beat the market. This is where they start to lose it.
To me, I don’t think trading is a game. This is also an experience that lies somewhere at the junction of analysis and discipline.
The moment you start seeing forex trading as a game, you will start trying to guess or predict the direction of the market instead of letting the market show you where it is headed.
Emotions in forex trading tend to ruin everything.
You gain nothing when you are angry at the market or when you stay worried about your losing positions for a long time.
When you keep track of your performance and follow your own trading rules, then you are on the right path to success.
This is the time you will realize that forex trading is profitable.
Keep in mind that there are other markets you can trade other than the forex market.
You should only strive to invest a certain percentage of your money.
When you have other kinds of active investments, you diversify your portfolio and lower the possibility of losses.
This is something that can propel you towards profitable forex trading since it will minimize the emotions that you have towards your trades, given that you have not invested all your money.
It is always good to trade with a clear mind as this will help in conducting proper analysis. FOMO and greed will be easily eradicated, and this is important since they contribute significantly to blowing of accounts.
Making profit while trading forex as well as being a successful forex trader is determined by the level of discipline you have.
When you have a good strategy, it will always help you to avoid emotional trading and behavioral biases and help you to stay focused.
Are you still lingering with the question “is forex trading profitable?”
How is Forex Trading Profitable?
To begin with, forex trading has high leverage, meaning that the size of a trader’s trades could become larger than the original deposit.
The leverage could be big and can be used to a trader’s advantage, depending on the broker involved.
There are forex brokers who give up to 1000:1 leverage.
When you are trading with more than you can afford, this is something that could easily multiply your profits.
However, this comes with the risk of huge losses if one does not understand the market well or has poor trading strategies.
It is important here to know that the trading size is the most important factor in getting profit. When the trading size is higher, then the profits are higher and potentially the losses.
The problem with many traders is that they get fixated on profits when applying leverage, but they tend to forget that it could also end in catastrophe in case the market went against them.
This is why it is important to apply moderation when using leverage.
The point that I want you to grasp here is that in as much as forex trading can be profitable, it can also result in significant losses. That is why one cannot answer the question is forex trading profitable, with ‘yes,’ without adding a ‘but.’
How Profitable is Forex Trading?
Basically, profitability in forex trading depends on the risks you are willing to take as well as your trading strategy.
Profits and losses in forex tend to vary from one trader to the other. It majorly depends on how much risk you can handle and also how much you understand the concept of forex trading.
When you commence your forex trading career, first focus on learning the skill and not gaining profits.
With time, profits will come automatically since you are doing the right thing, given that you have now learned the appropriate concepts and you are ready to implement them.
Just like any other business, never forget that despite there being a potential to make profit in forex trading, there is also the potential to make losses. This is something that most newbie traders tend to forget when making trading decisions.
In general terms, both losses and profits are unlimited in forex trading. How you approach it is the main determiner of how your trading path will be shaped.
Is Forex Trading Profitable Conclusion
From my years of trading, I can comfortably tell you that forex trading has no one specific golden rule. Success is actualized through a culmination of doing several things appropriately.
Many people are seeking a definite response to whether forex trading is profitable, and this leads to most of them taking paths without longevity like seeking the services of forex signal providers.
In as much as this is an easy way to commence trading forex, it is not a guarantee that this will be profitable, especially in the long run.
What you should importantly remember is that you need to majorly have more winning trades than losing ones so as to be profitable. This can only be achieved if the level of your take-profit is the same as that of your stop-loss. i.e. risk to reward ratio of 1:1.
In simpler terms, and to make this easier to understand, let us say that to be profitable in this situation, you should make more correct moves than incorrect ones when you are using such a risk/reward ratio.
However, you should note that the assertion above is dependent on your risk to reward ratio.
For someone using a risk to reward ratio of 1:2 or 1:3 in all their trades, they can still be profitable even when they have more losing trades than winning trades.
That is why I am emphasizing that how you approach the market is what determines whether you will be profitable or not.
As a result, I hope by now you are not still asking whether “is forex trading profitable?” By now you can easily ascertain that forex trading is profitable though there are things you ought to adhere to for you to actualize this.