In this article, not only will we answer the question of if Forex Trading is profitable, but we will also tell you how much money you need to start Forex Trading, and how you can get a fully funded trading account without using your own money!
Can I Make Money with Forex Trading
We get asked quite often if people can make money from forex trading. The short answer is yes! A lot of money. The long answer requires us to do some risk analysis and weigh the pros vs cons.
As we have highlighted previously, the Forex market is the largest financial market by far! This presents huge opportunities to profit from the Forex Market especially in 2020. Whether there is a recession or a boom, currencies will continue existing and fluctuating against one another.
There are countless strategies one can use to profit from forex. Some people use complex indicators, while others trade news releases such as economic indicators. Meanwhile, there are many people who simple technical analysis by looking for resistance and support levels to base their trades on. Let’s take a look at the most liquid forex pair – the EURUSD (Euro to US Dollar), which comprises almost 30% of total transaction volume:
In the chart above which is provided by Trading View, we are looking at the EURUSD pair from January 2019 to February 2020. We can see that the EURUSD ticker is in the top left. Right next to the ticker, the “D” represents the Day-View which means that each candle on the chart represents a single day. The right-side Y-axis shows the price, which on the chart we can see the last price being 1.10678. This means at that time, 1 Euro was equal to 1.10678 US Dollars.
The green, blue, and two orange lines have been drawn by us on the chart to show how we can predict price movement by even simple technical analysis. As the orange lines show, for most of the year, the price was in a trend. We can set a good risk-reward ratio and swing trade these movements repeatedly over the year to make huge profits. Furthermore, we can see the chart respect the orange trend lines even when it breaks out of this trend channel and bounces off the upper orange trend line once around end of October.
The green trend line also shows significance in the future. It is drawn from the top of where the chart breaks out of the channel in July and the next trend breakout around August is used as a guide for the green trend line.
Example of a Forex Trader Making Money
The blue trend line which is focusing on a shorter time frame from November 2019 till early February 2020, is drawn at the support levels. As we can see even from two days ago on the chart, the support level held where it previously had twice, and the chart bounced back up. At the time price was near the support levels around 1.1002, this presented a very good opportunity to profit with a high risk-reward ratio – We could have set a stop loss just below the last low which was 1.0981 (around the end of November 2019), and aimed to take profits around 1.1085 (the next level of resistance). This would have resulted in us losing 20 pips if the trade went against us, but winning at least 80 pips if it went in our favor, leaving us with a risk-reward ratio of 1:4 which is great.
In the above example, if we even opened a trade size of 1 lot, we would stand to win at least $800 with a maximum risk of $200. Of course, we recommend our traders to only risk 2-5% of their total account size in a single trade and take trading positions accordingly.
At the time of writing this (6th Feb 2020), the price chart of EURUSD has once again fallen back to the support level at the blue line. This once again presents a great opportunity to go long or short with a great risk-reward. It’s completely possible that the chart breaks support and goes lower owing to fundamentals as well. If the support level breaks, we can place a stop-loss order in place to get us out of the long position, and secure a short position instead (meaning if we’re long 1 lot, our stop loss just below the support level can be set to sell 2 lots leaving us in a net 1 lot SHORT position). In that case, the broken support line (blue line) becomes the next level of resistance once the price chart tries to climb back up, but odds are that owing to such a big support break, the price will fall drastically below.
Well, we hope this small example helped you realize how you can profit immensely from the forex market. You only need a bit of knowledge and patience. Most traders lose money because of impatience and a lack of discipline and risk management. Those aspects are 90% of the effort in being a successful trader.
How Much Money Does a Trader Make
Like we said, it’s hard to give an average amount for traders. There are some part-time traders who make $10,000 – $20,000 a year while working full-time jobs and only trading as a hobby occasionally. Then there are dedicated traders who aren’t that famous, like Matthew Owens, Nathan Michaud, Shaun Lee, and Toray K who easily earn anywhere between 1-10 million dollars a year. There are countless stories of people who became full-time stock or forex traders and make money consistently in the high six figures.
Then there’s the cream of the crop. The top guns! Here’s a chart comparison of the top ten hedge fund manager earnings vs celebrity earnings:
As you can see, the highest earning celebrity (Taylor Swift), didn’t even come close to the 10th most profitable hedge funder.
So, once again: “is forex trading profitable?” The facts certainly declare so, considering if growing up you idolized celebrities for their crazy amounts of wealth, you should’ve been idolizing traders instead.
However, on a realistic note, your earnings as a trader depend on you and your risk management. You must trade to survive – meaning, don’t blow up your account! You must have strict rules about the type of trades you will take and the risk to reward ratio. If on every trade you aim for an average 1:2 risk-reward ratio, you only need to be right 35% of the times to be profitable. Realistically, you will be right more than that if you’re following a strategy such as trading based on technical analysis, but even so, your odds are great. Like we’ve mentioned, most traders fail because of breaking their own rules (examples include over trading, not considering their risk-reward on a trade BEFORE taking it, and trading chart setups that they have no knowledge of), and a lack of discipline (examples include not cutting losses at the stop loss level they had decided on because their emotions are in the way)
How Much Money Do I Need to Start Trading
Even trading a small account of $2000, can allow you to multiply it to 5 figures easily within a year. There are many traders like Tim Grittani who have made a million dollars in 2 or 3 years after starting with $2000-5000 in the stock market which is much smaller than the forex market. To be realistic however, it’s extremely difficult to make large profits from small accounts which are below $10,000. At a minimum, we would recommend anyone starting forex trading to start with $5000. This amount still represents a solid amount to begin with in forex and cryptocurrency markets because of the availability of leverage.
What if I Don’t Have Money to Trade With
Now we understand there are people who have the determination and skills to succeed at trading, but they don’t have $5000 lying around to risk, let alone $10,000 or $25,000. Maybe YOU are one of those people… We’re proud to say that after researching thoroughly, we’ve found a solution where you can prove your skills and receive funding to trade!
Welcome to Prop Trading
Prop Trading or proprietary trading is when a firm backs you with their own funds and takes a share of your profits. The share of your profit they take varies from 20 to 50% depending on how consistently profitable you are. The better a trader you prove yourself to be, the lower the risk it is for the prop firm in giving you their money to trade with.
We are currently partnered with and recommend Fidelcrest.
Fidelcrest is a prop trading firm that will charge you a ONE TIME fee to take part in the Fidelcrest Challenge Program. If you can succeed in earning 10% profit on your account within 30 days, you will receive full funding.
Let’s say you pay a one-time $149 fee to get into the challenge program that offers you a simulated $10,000 account. You may lose up to a maximum of $1000, and your goal is to make $1000. Furthermore, your account will also have 1:100 leverage.
If you are successful, you will receive an actual account within a month that is funded with $10,000 and once again has the same 1:100 leverage. This will be real money!
To sign up with Fidelcrest, follow the link: www.pakcryptoinvestor.com/fidelcrest-challenge
