What is realistic monthly return for a Forex trader, is the question.
Forex truth is that the salaries mostly are payed each month while some have on weekly basis. While majority have monthly salary they wonder how much could they make per month by trading Forex.
Your main goal with Forex trading is to make money. Make as much is possible and as fast is possible.
The ultimate goal is to leave daily job and only to trade on the Forex market.
To make that happen you need to find out what is possible to have as a monthly return. With the amount which you can expect you can calculate is it enough to pay all the living costs.
Reading on the Internet is not easy to find straight answer. What you can find is that that everything is possible. You can make $1.00 or you can make $100,000.
I know you would like to make $100,000 each month but it is reachable. There are steps you need to fulfill before accomplishing that.
Realistic Monthly Return
Looking into forums, blogs, portals you will see that many write down that there are traders that only trade for a living. There is no information how much money they make.
Information about income they show as a percentage, 1%, 6%, 15%, 120% per month. What you want to see is the $$$ and not percentage. You need clean information in currency in which you receive your salary.
To give you amount in $$$ is not easy because successful traders do not post to much on the forums, blogs and portals. They are working and making money without bragging all around.
I will try to give you real examples in $$$ so you can get clean information what you can expect each month if you are profitable. If you are not profitable you will lose money.
The Percentage is the Goal for Monthly Return
Even though I have said that you do not want percentage but clean amount of money the goal you should aim is to calculate it in percentages.
Percentage is the main idea because percentage is the same for any amount you have on your trading account. 10% of $1,000 and 10% of $10,000 is the same. It is 10% when we talk in percentages.
You see that 10% is proportional to your trading account balance. If you want to make more money you need to increase your trading account balance.
When you decide to define your target goal as a amount of money instead percentage, this is what will happen.
Money Amount Instead Percentage
If you start with $1,000 and you decide to make $100 on each trade you will make 10% on the first trade.
After the first trade you have $1,100 on your trading account.
$1,000 + $100 = $1,100
The next trade you open and close with profit will give you
$100 + $1,100 = $1,200
That is 20% totally in two trades which means each trade gives you 10% of your initial balance.
If you would have percentage as a goal, and that is 10% on each trade, look what will happen.
Percentage Instead Money Amount
The first trade you open and close with profit will give you 10% of $1,000 which is $100. When you add those $100 to your account you will have $1,100 on your account.
$1,000 + $100 = $1,100
Second trade which you open and close with profit will give you 10% of $1,100 which is $110. $1,100 is because your account balance has increased with the first trade.
After the second trade you will have
$110 + $1,100 = $1,210
Let’s put this into the table:
|Initial balance is $1000||Balance after two trades|
|Fix amount = $100||$1,200|
|Percentage = 10%||$1,210|
There is slight difference only after two trades. Imagine what will be the difference after 10 trades.
Read further and I will show you.
Calculate the Risk on Each Trade
All traders and you should have calculated risk on each trade. From the experience, the best percentage to set as a loss on each trade is 1%.
Small percentage but very good choice when the trade is losing one. You will lose small portion of your trading account balance and you can still continue trading.
If you are aiming few percent as a profit each week or month, you need to cut your losses with smaller percentage so you do not lose to much with losing trades.
If you want to reach 3-6% on each trade it is best to have small risk included in stop loss.
1% of loss is not to much compared to 3-6% of profit. If you have 5-10% of profit as a goal then you can calculate with maximum 2% of loss on each trade.
Calculate the Profit on Each Trade
The ratio between loss and profit is minimum 1:3 which is good. If you have 1 losing trade you will have 3 wining trades. That combination at the end will give you nice profit.
You will see that many traders are telling you to cut your losses, not to lose to much on each trade, have 1%-2% of loss on each trade, you need to stay in the game, you need money to make money.
If you see so many same advice not to lose money, it must be something that is worthy paying attention to.
It is not only that you need to pay attention what risk you will take on each trade but there is profit you need to plan. You need to plan how long will you stay in a trade if it is profitable trade.
How will you manage your profits?
Will you take them out after each trade is closed or you will leave them on the account and increase your trading account.
If you choose to increase your trading account then here is one thing to have in mind. It is something that many of us would like to see on their trading account.
Monthly Return That Sum Up
The thing which you should have in your mind is that whenever you make money that money will increase your basic account balance.
Each next trade you close with profit will increase the amount of the money you will make with the next trade.
If you have $1,000 as a starting capital and if you make 10% on one trade which is $100, you will have $1,100 on your account.
The next trade that is profitable will make you 10% of $1,100 which is $110. You see that the next amount is not $100 like in the first trade but it is $110 which is 10% more.
This way of making money is very good and it will give you a lot of money in the long run. Take a look into the table below that shows you amount you will have after 10 trades.
|Number of trades||Balance|
After only 10 trades you have 2,5 times more money on your account. 10 trades you can have in one day if your trading strategy confirms trading signals.
Possible Monthly Return
The income you make by trading Forex depends on many things. But I will not go into that direction but I will try to give you some examples how much you can expect from trading.
Realistically speaking your weekly or monthly return depends on the initial balance. If you have large amount of money you can make a lot.
To give a small overview about different types of the traders here is small description:
- small profits, if any. Small amount like $10 up to $100 which is 20-100% of their trading capital
- Mostly they lose all their money because of lack of experience. Trading is not easy and you should not think about it as an easy journey
- profits that are acceptable as a side income. Their initial balance are few thousands dollars and they make around 10% which is few hundred dollars up to thousand dollars
- Balance is in $10,000 or more and they know how to make money. They make few thousands up to several $10,000
- They aim to make 5-10% which is large income on their account balance
How much you will make heavily depends on you initial account balance. Next step is to define the percentage you will risk on each trade and how much is the percentage of profit you will take.
You can make few hundred dollars or few thousands dollars by trading Forex.
If you invest $1,000 you can make $100 per week or month. It is realistic and achievable.
If you invest $10,000 you can make $1,000 per week or month. It is realistic and achievable.
One important thing to remember is that everything depends on your initial account balance. The success and the results of trading Forex heavily depends on the account balance.
If you invest large amount of money(>$50,000) you will be satisfied with few percentages and you will not become greedy. Small percentage will give you decent income(5% will be $2,500) that will satisfy your needs.
If you invest small amount of money(<1,000) you will not be satisfied with few percentages. You will hunt for 50% or 100% return which will lead to over sizing your trades. Small percentage like 5% which gives you $50 return on $1,000 account will not be enough and greed will step in.
Be careful and see what experienced traders tells you because they have gone through all the bad roads so you do not need to go through.
Now, do you know what happens if you invest small amount of money, like $100 or $500? You, lose all of it.
Why does that happen, what to do to prevent that?
Read the post on the link below where I share my personal experience with small account balance.
For beginners who does not know how and where to start with trading
In the workshop I will tell you
what steps to do in order
to transform yourself into a trader