Most traders get into Forex trading because of the seemingly lucrative money-making opportunities that it offers. Given the fact that the Forex market is the largest financial one in the world, there’s little surprise that traders would be looking to get a piece of the Forex pie. Let’s take a look at how rich can you expect to become by trading Forex.
How much money can you make in Forex?
The answer to this depends on how skilled you are and how much time you can devote to this job. On average, a professional Forex trader can make up to $200,000 annually. This is if they work for themselves and their primary income comes from trading alone. They may invest their own capital or work for hedge funds or trade with their clients’ money.
On the other hand, those who work under an employer can expect anything from $50,000 to $150,000. Quantifying average Forex income is quite hard since trading is decentralized and the budgets for different traders vary greatly. Roughly speaking, a trader can be considered successful if s/he can achieve about a 20% return on their investments.
But, that doesn’t mean that you can’t, theoretically speaking, become a millionaire by trading Forex. Of course, you can, but it would take ungodly amounts of analysis (both fundamental and technical), speculation, expertise, and intuition. That is why different people experience different levels of success.
Successful Forex traders
Traders have different definitions of success as well. Some consider being able to generate a constant stream of income from trading as successful, while others might be chasing after remarkable returns. Let’s take a look at some success stories that are no less legendary than the amounts that they have garnered.
1. George Soros
This merchant banker turned Forex trader came to be known in 1992 as ‘the man who broke the Bank of England.’ He made a $1 billion profit by building up short positions in pounds because he foresaw that the BoE was susceptible to a fall due to high inflation and interest rates.
2. Bill Lipschutz
This is one man who learned the lesson of risk management the hard way, making over $200,000 in the 1970s only to lose it all on one bad trade. But, he didn’t stop there and joined the Salomon Brothers for whom he was making hundreds of millions of dollars every year by the year 1984. He is rightly called the ‘Sultan of Currencies.’
3. Stanley Druckenmiller
A prodigious trader who rose through the ranks of the Pittsburgh National bank, Stanley had worked with Soros during their stint of short-selling the pound in 1992. He is one man who has constantly been at the forefront of successful trading and his net worth is estimated to be about $4 billion.
These three success stories show that if you have discipline, courage, skill, and the ability to judge things better than others, you can become extremely rich through Forex trading. All these traders espouse a strong grasp of risk management as well as the ability to discern and perceive the ever-changing market.
What to do to become a rich Forex trader?
While it is essential to learn from others and practice doing what they have done to reach great heights, there is no one ideal strategy that can work for everyone. You will have to create your own plan and find out what works best for you.
Perhaps the most important thing that you need to do to achieve success in this field is to understand it thoroughly and develop a piercing insight into the market. This will allow you to come up with a trading strategy that allows you to be confident in your execution and is well thought out.
The next thing is to try out your trading strategy on demo accounts and get a lot of practice. Practice and experience are two things that you will need to master Forex trading but doing so on live markets will provide you with the real learning curve that will get you far.
Everyone loses money on Forex at some point or another. that is simply a fact that cannot be argued against. Be it due to lack of training, planning, discipline, or just poor money management, you are going to have to take losses in your stride.
If you don’t like losing or cannot manage to have a thick skin, then you may not be able to ride out the hard times that inevitably come to every trader. That is why it is important to practice money management to reduce the amount that you do lose on bad trades.
Who should not go for Forex trading?
A minimum of $10,000 is required for you to start trading. This is the money that you should be comfortable losing. You cannot expect to start with pennies and end up becoming a billionaire. You may think that traders all over the world are getting filthy rich but, in reality, success comes to only a select few traders who know the art of trading inside out.
The problem here, as in any other field, is that traders come to the Forex market hoping to make quick money without the necessary discipline that is required to learn the art. No trader can expect to ‘get rich quickly’ in the short-term.
The bottom line
Those who are looking to start trading can expect to go through a period of learning, practice, experience, and successes sprinkled intermittently amongst losses. No amateur can expect to make big money in a short amount of time.
It takes years and loads of experience to become successful and rich. Of course, if you only want to get a consistent source of income for yourself, that can be done as well, but that will also require some level of proficiency that only time and study can bring.