I was just wondering how much the average full-time forex trader makes. You can express this amount either as a percent return on their investment, or a dollar amount. I realize that there is likely swings in their return, but I just mean on average over the course of the year.
What kind of initial deposit is required to successfully trade full-time and make a decent living at it?
Finally, is there a large difference in return between day-traders and swing-traders?
The reason I ask is because I will be done college at the end of this month, and I would really prefer to trade forex full-time rather than get a regular office job if it is at all feasible. I’ve been trading forex in a demo account for over 2 months now and I’ve had relatively good results. I started with a $10,000 balance and some days I can be up $1,000 or more… of course I got a margin call and went broke once, but I’ve learned from my mistakes. I plan on spending at least the summer honing my forex skills, but I was hoping I could make this a viable alternative to the average mind-numbing desk job some day.
Even if you had considerable experience and a proven method/system, you would need a good sized pile of cash to be able to expect to trade for a living - an even bigger one if you are starting from scratch as you seem to be.
To answer your question, by sharing my point of view, for what it is worth.
[B]The average FX trader makes a loss![/B] One does not want to be a average FX trader as the average FX trader starts out trading FX with great hope only to be thoroughly disappointing and then quits. What one should aim for is to be a FX trader that belongs to the small and elite group that actually makes a killing in the FX market. This does not come easy, it is a very difficult task and could ([B]will[/B]) take years… unfortunately!
“How much can I make?” is one of the most often asked questions by people new to trading. There is no definitive answer since the data to give you an average is sparse and even if there was a figure, most people would find it dubious and would demand to know how that figure came about. People do not generally declare their earnings, would you?
What you can instead ask is: how much does [I]my [/I]system make (in back tests)? This frees you from comparing yourself to other people because trading is ultimately a personal thing. If you haven’t figured how much [I]you[/I] can make each year, perhaps you should find out in Excel.
And you should be expressing your gains in percentages, although this is assuming your goal is to be filthy rich. A linear money management system is utterly useless.
I agree kwyjibo. I must be honest, I have wanted to quit FX trading a few times as I have never even met a successful trader in person, and my own personal results have not been great. But I use Myfxbook to log my trades and on the website there are a number of traders that visbly display their stats, and it shows they are making huge gains, either trading manually or with bots!!! I don’t know how legit these stats are but according to the websites, they are regulated. Seeing how massively their portfolios are growing is keeping me on this bumpy FX road… Or maybe I am just a bit of a fool!
In forex trading don’t listen to others. Try your own method and stick to that method. It may take some time. But eventually you can be consistent over time.
What is your definition of a “good sized pile of cash” and what would be the average trade size in order order to accomplish these goals given proper money management and disciplined trading skills.
People who aren’t profitable. The majority of course.
One trick ponies. They had an ace or two up their sleeve and they managed to do well (maybe even very well), but when their edge faded they never adapted and went back to the zero line. Some of them end up writing books and/or starting trading educational businesses, some also try to sell their previously profitable system to you for an outrageous sum of money (and you can’t sue them and claim that it doesn’t work, because they’ll show you that it did at one point).
People who make a barely livable wage, because they have a slight edge and they can’t handle size. This, sadly, is probably the majority of ‘profitable’ retail traders (those who’ve managed to stay above the zero line). Walk into an average prop firm and those who haven’t burned out are usually in this category. Also have prolific careers as book writers, signal service providers, and can be seen promoting them at your local Trader’s Expo thanks to which they can actually earn a real living from those who are in category 1.
Those who take their game to the next level and gross the big bucks. These are people who work hard to get good at their game, refine their edge, learn to handle size properly, and know how to roll with the punches when markets change behavior. Definitely in the minority but they do exist. They usually tend to be closed off to the rest of the trading world, and its hard to get them to teach you unless they personally know and like you (since teaching can be distracting, and many of them have so internalized their method that its hard for them to even teach it).
I have been trading for five years. I have met so many people over the past 5 years losing money and thinking that they can double their Account in a month however people who try to do I would say lose more than they make.
If you want to make consistent trading for living you need to trade on low risk and a practical target with low risk will be 20% per month. So if you are trading with 10k then you should be able to make 2k if you know what you are doing. So I would suggest practise more on demo and deposit small amount initially to trade with because demo and real money will be a different game al together
Thanks
When it comes to short term (intraday) trading I’m sure there are people who do 20% a month, that’s an average of 1% per trading day. Go to any solid prop firm, the top quartile will be pulling such numbers, market conditions permitting. They know their setups very well, they work hard on refining their exits, and they keep out when they know they should. They know when to ramp up size and when to scale down. One big benefit is that they have 8-12 hours a day to work on their trading plus an infrastructure to back them.
The problem is that when you’re trading totally on your own, your trading capital is a scarce commodity and it is psychologically more challenging to deal with losses. Its not just about losing principal, its also about losing your gains. When you’re at a prop firm your gains (that is, your share of them) get paid out to you each month yet you’re allowed to keep the same size as long as you stay good at your game. That makes it a bit easier psychologically, someone else is absorbing part of the risk.
As far as the “30% per year is only done by top wall street hedge fund managers”, this overlooks an important thing: size. When you have 2B under management you can’t go merrily scalping for 10 pip runs unless you have a high frequency trading algo that does numerous small sized trades throughout the day which adds up to a pretty chunk of change. And HFT algos can produce absolutely killer risk adjusted returns, which is why its become such a popular activity - though the competition has made it much harder.
You can pull solid short term returns off of a seven figure base, esp. if you stick with more liquid markets like the EURUSD, the ES, and large cap stocks like AAPL where you can move 10,000 share lots without causing a ruckus. But it gets pretty difficult above that. If you want to manage other people’s money, economies of scale make it ineffective to have AUM under 8 figures, and the preferred minimum size is around the $100 MM mark.
Also, most clients don’t want bigger returns than 20-30% because they’re afraid of serious drawdowns. Don’t forget that as a hedge fund your job is to be just another ‘stock’ in a portfolio of assets who’s main purpose is to provide diversification benefits with lowest possible drawdown. Asset managers will oddly enough get alarmed at seeing a 100-200% return, thinking you are taking on way too much risk, and in such cases they often withdraw their money thinking they ‘caught the top’. It sounds counter-intuitive but this is the way it is.
Very well said. It amuses me that just because so many (forum) forex traders are not able to accomplish 20% per month (or even 10%) they think it is not possible to do so with low risk. Sure, there is only so many traders who can do so, but to laugh at the idea and dismiss it just illustrates the traders lack of knowledge.
