Currency trading is a trendy profession. Many people dream of making money online and travelling the world. Modern platforms and apps allow talented traders to achieve their goal. But how much exactly can you earn working on Forex?
What Factors Influence Profits
Success does not come to everyone. Traders need to polish their skills all the time. The currency exchange has a turnover of 6+ trillion US dollars daily. Predicting movements of rates in the largest global market is not a piece of cake. Forex is accessed by individuals and large players like major banks or hedge funds. The factors driving its prices are beyond any person’s control.
Therefore, no responsible broker can give an exact estimate of your future profit. However, you might calculate potential earnings using a forex calculator from FBS. The amount depends on some factors, from initial investment to leverage. Here is a look at the main ones.
- Spread or Commission?
Different brokers have different pricing models. Two business systems exist — market makers and ECNs. In the first case, the broker is your liquidity provider, and all costs are included in spreads. ECNs, on the other hand, broadcast real-time market quotes, but charge a commission per trade. Neither system is better by default, but you should know how your costs are structured.
- Use of Leverage
Leverage allows you to open positions worth more than your balance. For instance, if the ratio for your instrument is 1:1,000, you may open a trade worth $100,000 when there is just $100 in your account. With leverage, you may earn much more than you would otherwise. It boosts potential profits but also magnifies risks.
- Style of Trading
How much you make also depends on the frequency of trading. How often do you open and close positions? There is a wide range of systems from swing trading to scalping. Scalpers prefer to be in a frenzy, as they open and close multiple positions during the day. In general, day traders can achieve a 10% monthly return on their investment in half a year. Practice makes perfect.
- Risk Tolerance
Traders should calculate their risks meticulously. First, it is vital to use stop-loss for every position. This embedded feature of trading terminals limits potential losses if the market goes against you. On the other hand, diversify your portfolios as you gain experience. In addition to conventional currencies, one may trade CFDs on Bitcoin or Ripple, spot metals, stocks, etc.
Do not expect to make a million if you have only $100 to invest. Forex is not a get-rich-quick scheme. It is a system which rewards thoughtful analysis and skilful manoeuvring. Learn as much as possible and hone your skills in the risk-free demo mode. If you are determined to make Forex your primary source of income, this is not impossible. Preparation is key. Without it, you set yourself up for failure.