Is forex profitable? That is one question potential traders ask before venturing into a forex trade. Nobody wants to go into a business where profit is not guaranteed. I think the right question should be, how much profit can one make in a forex trade?
There is money in forex trade. If not, how do you explain the numerous brokers littering everywhere and the growing number of both original and fake forex trading platforms online? Nobody dissipates his energy, trying to duplicate or fake what doesn’t work. Everyone is interested in knowing whether forex trading is profitable before delving into the business.
In our extensive research, we found out that the forex market consists of both losers and gainers. Several factors account for either losses or profits. In this post, we shall examine what forex is, if forex is profitable, how to increase your earnings, and a few examples of people who have become rich trading forex.
What is forex?
Forex trading is the way of changing one currency into another. It involves trading a pair of currency. You sell one currency while buying another concurrently. For instance, if you are trading the USD against the EUR, you can sell the USD and buy the EUR at the same time or vice versa.
Forex, otherwise known as Foreign Exchange or FX, is done for diverse reasons, including trading, tourism, or for commerce. The forex market has an average daily trading volume of over $5.1 trillion.
The forex market is the global marketplace where all the currency exchanges take place. A forex market is a free place for regular traders, professional traders, or institutions.
Is forex profitable?
Is the forex market profitable? Well, to answer that question, there are a lot of issues to take note of:
- Many retail traders migrate to the forex market because they believe there is quick money in there.
- According to available statistics, the most aspiring forex traders do not make profits. Some of them lose a high percentage of their capital.
- There are no clearing firms in the forex market since forex pairs are traded over-the-counter. This is contrary to what obtains in futures and stocks that are traded on exchanges.
- Like a double-edged sword, leverage can result in huge profits but also sizeable losses.
- Counterparty risks, platform failures, and unexpected instability are some of the challenges the potential traders face.
How to increase your profits
As the question earlier, is forex profitable, yes it is and at the same time, there are possibilities of losses. Do you want to increase your advantage in the forex trade? Here are a few things you could do to improve your chances at trading profitably in forex market.
Use a reputable broker
The kind of broker you use for your trade determines, to an extent, the success you get in the end. A trustworthy broker is regulated and would ensure that your funds are safe. To be on the safe side, you should only patronize brokers who are members of the National Futures Association (NFA) and also registered as a futures commission merchant, with the US Commodity Futures Trading Commission (CFTC). If you live outside the US, make sure the broker is registered with the relevant body in your country.
Besides, you need to find out the account offering of the broker, which includes account funding as well as withdrawal policies, initial deposits, leverage amounts, and commissions and spreads.
Practice before real trade
Almost all trading platforms allow newcomers to use a virtual or simulated account to learn the act of trading before committing your hard-earned money into the actual trade. Virtual trading will enable you to hone your skills and understand how forex trading works. With adequate knowledge gathered from regular practice, you can improve the chances of huge profits in forex trades while reducing the chances of losses.
Proper risk management
While most retail traders make little profits or end up losing most of the time, professional traders can manage their risks by keeping their losses small and offsetting them with substantial profits. Making more profits and fewer losses will increase your gains in the long run.
Use Stop-Loss always
Try to have your stop-loss in place at all times. This ensures that you are not losing more than you anticipate losing in case of an eventuality. The more losses you can reduce, the more money is left for you to keep trading.
Get acquainted with the current market situations
You must stay abreast of the market by staying up-to-date with the latest news releases. Being in the know of major events will help you to know when or when not to place a trade to increase profit or reduce losses. You need to understand that most of the changes that take place in the market are as a result of news releases, announcements, or events – pleasant or otherwise. Remember to use your Market News tool to get updates.
Avoid being emotional
Emotions can wreak havoc on your trading if you fail to discipline yourself. When trading, try not to gamble with the market. Always place a trade based on your proper analysis of the market. Avoid anger and worry when things are not getting the way you want them. Emotions can cause you to make terrible mistakes that could cost you money. Being level headed is one of the most important quality for making profits in forex trade.
Every trader who wants to earn more profit in the forex market must learn to invest with prudence. Don’t just trade because you want to make money. Be sure you understand the way things work. Don’t push all your money into a trade at a time. You should only trade with risk capital. Risk capital is the amount of capital you can comfortably lose without going out of business. Don’t invest more than 20% of your investment money in forex.
Examples of traders who became wealthy through forex business
If you still want to know is forex profitable, we will give you a few examples of people who have become millionaires by trading forex.
In 1984, Martin Schwartz won the US Investing Championship by trading forex, stocks, and options. He earned $600,000 trading options and futures in his first year. He went ahead to make $1.2 million as an independent trader in two years.
Stanley managed George Soros’ portfolio for more than a decade, earning several millions of dollars in the process. In 2000, he made up his mind to concentrate on Duquesne and posted an average of 30% returns annually without any negatives. He was featured on Forbes’ list of the 200 richest people in the world.
In the 1980s, Bill earned hundreds of millions of dollars in profit at the department of Salomon Brothers. Bill achieved this enviable feat without previous experience in the currency markets.
Everybody might not be like Martin Schwartz, Stanley Druckenmiller, or Bill Lipschutz, but several traders are making decent profits and earning a living through forex trading.
Success in forex trading requires adequate knowledge of how things work, self discipline, use of professional tools, and the use of a reputable broker.
And if you want to go further ahead, you can simply check out Our List off Best MT4 Forex Indicators which can boost your trading.