olrac15
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Trading forex for a living is definitely not something that anyone can do. Can you make a living off forex markets? It is hard to say – perhaps you can, perhaps not. Still, it is better to find out how much can you make trading forex and where could you rank among the more successful forex traders before you decide this is something you want to do for a living. In order to trade forex for a living, first you need to learn how to earn money from forex.
It is not unusual for traders to dream of obtaining financial freedom and self-employment by supporting themselves through profitable Forex trading online. No more boring job, no more boss, no more wasting time with administration, pointless emails, or endless meetings. Is it a realistic ambition? If so, how can it be done? In this article, I am going to speak from my own experience, and try to give you an idea of the challenges you will certainly face if you are going to make a living by trading Forex. I hope that forewarned will be forearmed.
How Much Money Can You Make Trading Forex?
This is the first question people always ask, even if they are only asking themselves. There is a simple answer: nobody knows! No matter how skilled a Forex trader you are, you cannot control the market. You may be so good that you usually have a winning month and every year for you is a winning year. However, the exact amount that you make depends upon what happens in the market, and the market cannot be predicted with certainty. For example, look at the major Forex pairs for the first 10 months or so of the year 2012. The market was extremely flat. Even if you were not trend trading, it would have been hard to be profitable using just about any Forex strategy or approach. Later, at the end of that year, there was a huge downwards move in the Japanese Yen which gave traders the chance to make a lot of easy money. The point is that the market is unpredictable, there can be several dry months followed by an enormous downpour of opportunities to profit.
Intro – Trading Forex for a Living
Trading forex for a living is not something that people should get into lightly. Most traders blow through their first account without achieving anything. The same goes for the second. And the third! Then they get wiser and quit – or go broke, and then finally quit. Quitters have no business trading forex for a living. The best forex traders often suffer losses as well, but they are patient, persistent and most importantly, they learn from their mistakes. This is what you need to do as well, in order to make it in this business.
So, can you make money with forex? Not right away, and this is something we really need to stress out from the very beginning. A lot of brokers sugarcoat the reality and make it seem like you can make millions overnight, becoming the next Warren Buffet or George Soros. And while nobody in their right mind would believe such a thing, people still wonder if this approach could make their lives better. Because most people believe it is possible for them to make a decent living without working too hard, and this is a common misconception.
We all know that “it is better to live a hundred years like a millionaire than a single week in poverty”, to paraphrase and old catchphrase, but the way this is presented to you leaves a lot to be desired. Some people have a knack for these things; others are simply good enough. On the other hand, most end up losing a lot more than they gain. And yet, trading forex for a living is no mere pipe dream for anyone, even you. Forex market is huge, with a capital “H”. There is more money in it that it easily trumps any other financial market in the world. Wall Street? Think again! Commodities – that’s chicken feed. Forex is where the real money is at, and there is more than enough to go around.
The only problem is the way it is distributed. Not to go Marxist on you or anything, but forex started out as a playground for the rich – a place where people like J. P. Morgan and Rockefeller would go to exchange currencies. If a bank, or a government or some other major player needed to exchange cash at bargain rates, this is where they would do it. This still happens today. The only difference is that now, even ordinary people have access to this market and could get in on the game. This is something that was impossible for us just a few decades ago.
Trading forex for a living is possible. It absolutely can be done. You still don’t believe it? Let’s look at some people who would beg to differ.
Money Making Mentality
Trading forex for a living takes a lot of meticulous preparation, if you wish to be successful. The worst thing you can do is start a career in forex unprepared. Our three examples can serve as a way to demonstrate some key points that determine the right kind of mentality.
what is forexFirst and foremost, you need to learn everything there is to know about forex and the currencies you plan to trade, including the economies of their respective countries. After all, how can you make predictions on U.S. dollar if you know nothing about their economy? How can you trade New Zealand dollars and ignore their agricultural sector? The more time you spend learning about these things, the less time you’ll spend bashing your head against a nearest solid object for being so stupid with your investments. Here are some suggestions on where to start.
Do you think Soros has magically acquired his forex skills? That he is talented beyond imagination? No, he is just meticulous, unscrupulous and patient. It took him 15 years to get the resources and the know-how to open his own firm, and then another 20 years or so to make his bones, if you will. During this time, there were ups and downs, but he never gave up. In order to start trading forex for a living, you are going to need some strong determination as well as a clear vision of what you are trying to accomplish.
Next, you need to prepare yourself for some losses. I’ve said it once, and I’ll say it again: you will lose money trading forex for a living from time to time, this is inevitable, and there is no way around it. In fact, in forex you can be right and still end up losing money in the end, but this is a common mistake and we’ll deal with it in a little while. What is important is to learn how to manage risks and not be discouraged.
Lipschutz lost his entire fund but still turned out as one of the best forex traders in history. The golden rule is to keep the rewards greater than risks on every trade you make. Risk/reward ratio must be at least 1:1 or the trade is pointless. No point to target 40 pips of profit if the risk is 50 pips or more. If possible, try to keep it to 4:1 or close enough. Also, limit your exposure as much as possible. Risking more than 1% of your entire capital is considered hazardous. Anything over 10% and you’re asking for trouble.
Some traders seek to take a shortcut and choose brokers that allow them to copy trades from more successful traders. While this is technically an option that you can choose, and it may seem appealing to a trader with little to no confidence whatsoever, there are shortcomings to this “strategy” as well. For one, it’s not a strategy at all. You effectively give up control over your finances to a complete stranger and hope he does everything right. Can you sleep tight knowing all this?
forex risk managementSuppose he doesn’t. Even the best traders end up losing money. He has a backup plan. What is yours? Oh, right, you don’t have one. Big mistake! If you are going to rely on other traders to make the calls on your behalf, you need to take a few things into account. First of all, this does not qualify as trading forex for a living. This is more like “making some spare change on the side” kind of a thing. You need to set your parameters right and learn to trade as soon as possible.
What this trader does is essentially getting some free leverage on the side. Trading with money he doesn’t have to pay back if he loses. And he is not responsible for any losses he incurs on your behalf. You are! You might as well make your own fortune in life.
Common Mistakes Traders Make
When trading forex for a living, all sorts of things can and will go wrong. Sometimes the market just moves against you and it can’t be helped. Oftentimes, however, there was something you could’ve done, but you didn’t. Here are some of the more common mistakes that forex traders make.
Trading Forex for a Living
They trade with insufficient capital
Thanks to its awesome leverage, it doesn’t take a lot of money to make big trades on forex markets. However, while having a larger capital does not necessarily give you an advantage in real life, it does allow you a greater room for error. It’s not the same when you trade 300k lots on a $100,000 account and on a $10,000 account. The latter situation is far more unforgiving. The way to deal with this is to either keep your trades proportional to your account, or to be careful with your leverage.
It is not unusual for traders to dream of obtaining financial freedom and self-employment by supporting themselves through profitable Forex trading online. No more boring job, no more boss, no more wasting time with administration, pointless emails, or endless meetings. Is it a realistic ambition? If so, how can it be done? In this article, I am going to speak from my own experience, and try to give you an idea of the challenges you will certainly face if you are going to make a living by trading Forex. I hope that forewarned will be forearmed.
How Much Money Can You Make Trading Forex?
This is the first question people always ask, even if they are only asking themselves. There is a simple answer: nobody knows! No matter how skilled a Forex trader you are, you cannot control the market. You may be so good that you usually have a winning month and every year for you is a winning year. However, the exact amount that you make depends upon what happens in the market, and the market cannot be predicted with certainty. For example, look at the major Forex pairs for the first 10 months or so of the year 2012. The market was extremely flat. Even if you were not trend trading, it would have been hard to be profitable using just about any Forex strategy or approach. Later, at the end of that year, there was a huge downwards move in the Japanese Yen which gave traders the chance to make a lot of easy money. The point is that the market is unpredictable, there can be several dry months followed by an enormous downpour of opportunities to profit.
Intro – Trading Forex for a Living
Trading forex for a living is not something that people should get into lightly. Most traders blow through their first account without achieving anything. The same goes for the second. And the third! Then they get wiser and quit – or go broke, and then finally quit. Quitters have no business trading forex for a living. The best forex traders often suffer losses as well, but they are patient, persistent and most importantly, they learn from their mistakes. This is what you need to do as well, in order to make it in this business.
So, can you make money with forex? Not right away, and this is something we really need to stress out from the very beginning. A lot of brokers sugarcoat the reality and make it seem like you can make millions overnight, becoming the next Warren Buffet or George Soros. And while nobody in their right mind would believe such a thing, people still wonder if this approach could make their lives better. Because most people believe it is possible for them to make a decent living without working too hard, and this is a common misconception.
We all know that “it is better to live a hundred years like a millionaire than a single week in poverty”, to paraphrase and old catchphrase, but the way this is presented to you leaves a lot to be desired. Some people have a knack for these things; others are simply good enough. On the other hand, most end up losing a lot more than they gain. And yet, trading forex for a living is no mere pipe dream for anyone, even you. Forex market is huge, with a capital “H”. There is more money in it that it easily trumps any other financial market in the world. Wall Street? Think again! Commodities – that’s chicken feed. Forex is where the real money is at, and there is more than enough to go around.
The only problem is the way it is distributed. Not to go Marxist on you or anything, but forex started out as a playground for the rich – a place where people like J. P. Morgan and Rockefeller would go to exchange currencies. If a bank, or a government or some other major player needed to exchange cash at bargain rates, this is where they would do it. This still happens today. The only difference is that now, even ordinary people have access to this market and could get in on the game. This is something that was impossible for us just a few decades ago.
Trading forex for a living is possible. It absolutely can be done. You still don’t believe it? Let’s look at some people who would beg to differ.
Money Making Mentality
Trading forex for a living takes a lot of meticulous preparation, if you wish to be successful. The worst thing you can do is start a career in forex unprepared. Our three examples can serve as a way to demonstrate some key points that determine the right kind of mentality.
what is forexFirst and foremost, you need to learn everything there is to know about forex and the currencies you plan to trade, including the economies of their respective countries. After all, how can you make predictions on U.S. dollar if you know nothing about their economy? How can you trade New Zealand dollars and ignore their agricultural sector? The more time you spend learning about these things, the less time you’ll spend bashing your head against a nearest solid object for being so stupid with your investments. Here are some suggestions on where to start.
Do you think Soros has magically acquired his forex skills? That he is talented beyond imagination? No, he is just meticulous, unscrupulous and patient. It took him 15 years to get the resources and the know-how to open his own firm, and then another 20 years or so to make his bones, if you will. During this time, there were ups and downs, but he never gave up. In order to start trading forex for a living, you are going to need some strong determination as well as a clear vision of what you are trying to accomplish.
Next, you need to prepare yourself for some losses. I’ve said it once, and I’ll say it again: you will lose money trading forex for a living from time to time, this is inevitable, and there is no way around it. In fact, in forex you can be right and still end up losing money in the end, but this is a common mistake and we’ll deal with it in a little while. What is important is to learn how to manage risks and not be discouraged.
Lipschutz lost his entire fund but still turned out as one of the best forex traders in history. The golden rule is to keep the rewards greater than risks on every trade you make. Risk/reward ratio must be at least 1:1 or the trade is pointless. No point to target 40 pips of profit if the risk is 50 pips or more. If possible, try to keep it to 4:1 or close enough. Also, limit your exposure as much as possible. Risking more than 1% of your entire capital is considered hazardous. Anything over 10% and you’re asking for trouble.
Some traders seek to take a shortcut and choose brokers that allow them to copy trades from more successful traders. While this is technically an option that you can choose, and it may seem appealing to a trader with little to no confidence whatsoever, there are shortcomings to this “strategy” as well. For one, it’s not a strategy at all. You effectively give up control over your finances to a complete stranger and hope he does everything right. Can you sleep tight knowing all this?
forex risk managementSuppose he doesn’t. Even the best traders end up losing money. He has a backup plan. What is yours? Oh, right, you don’t have one. Big mistake! If you are going to rely on other traders to make the calls on your behalf, you need to take a few things into account. First of all, this does not qualify as trading forex for a living. This is more like “making some spare change on the side” kind of a thing. You need to set your parameters right and learn to trade as soon as possible.
What this trader does is essentially getting some free leverage on the side. Trading with money he doesn’t have to pay back if he loses. And he is not responsible for any losses he incurs on your behalf. You are! You might as well make your own fortune in life.
Common Mistakes Traders Make
When trading forex for a living, all sorts of things can and will go wrong. Sometimes the market just moves against you and it can’t be helped. Oftentimes, however, there was something you could’ve done, but you didn’t. Here are some of the more common mistakes that forex traders make.
Trading Forex for a Living
They trade with insufficient capital
Thanks to its awesome leverage, it doesn’t take a lot of money to make big trades on forex markets. However, while having a larger capital does not necessarily give you an advantage in real life, it does allow you a greater room for error. It’s not the same when you trade 300k lots on a $100,000 account and on a $10,000 account. The latter situation is far more unforgiving. The way to deal with this is to either keep your trades proportional to your account, or to be careful with your leverage.
