The Key Elements That Impact Forex Earnings
Generally, the amount of money one can make trading forex depends on multiple factors. Let's
take a closer look at some of those factors:
1. The Amount of Deposit
The amount of capital invested in the Forex market can have a
significant impact on an
investor's profits or losses. The more money an investor has, the more trading opportunities they can take
advantage of. This increases the chances of making a profit, but it also means there are greater risks
involved.
2. Leverage
Leverage refers to the capital
provided by a broker to enable
traders to open larger positions
than their initial deposit would have allowed. Leverage can be helpful as it allows traders access to larger
sums of money.
As such, forex traders who opt for higher leverage can potentially make more forex trading
profit per day, but there is also a greater risk of losses.
3. The Currency Instruments Used
Forex traders typically trade currency pairs, such as EUR/USD or
GBP/USD.
Different pairs can
vary in terms of their trading volumes and volatility. As a result, some
currencies may be more profitable
to trade than others. A trader who opts for higher-volatility pairs is likely to make more money than one
trading in low-volatility pairs.
4. Trading Platform Functionality
The trading platform is a trader's doorway to the forex market. As such, it needs to be
well-designed and reliable. Traders who opt for platforms with robust features are likely to find more
success in their trades, as they have access to more tools and resources that can help them make better
decisions.
5. Trading Strategy
A trading strategy is a
pre-determined set of rules that govern
how a trader enters and exits
trades. Having the right trading strategy can mean the difference between success and failure in Forex
trading.
Those are the average incomes of traders who adhere to conservative strategies, diversify risks to the maximum, do not make large bets, use moderate leverage, and use approximately 100% of their deposit annually. It is hard to say how much individual earnings will be per month. For example, Larry Williams somehow made 1100%, but you can lose everything if you regularly make mistakes with predictions.
One of the paradoxes of Forex trading is that when traders first start out with a small account, they often take on excessive risk in order to chase big percentage gains. A new trader with $1,000 might risk 50% or more of their capital on a single trade, hoping to double their money quickly. This is extremely risky and often backfires, wiping out the trader's account.
As traders accumulate more capital however, they tend to take on less risk per trade and preserving the principal often becomes a higher priority. A trader with $100,000 is unlikely to risk more than 2-3% of their capital on a single trade. However, the flip side is that with less risk per trade also comes smaller potential percentage gains.
The sweet spot is finding an appropriate level of risk for your account size that allows you to stay in the game long-term while steadily compounding gains. Most experienced traders recommend no more than 1-3% risk per trade, which can still generate very attractive income potential over time through disciplined execution.
Favorable factors for earning at Forex:
follow and understand market trends (recall Soros and the “black
Wednesday”);
rollback periods after sharp and highly volatile movements;
increases in the general price level (inflation);
occurrence/increase of public debt;
increase/decrease in interest rates by the Central Bank;
local and global economic crises.
No matter how financially obsessed it may seem, any problems with the national currency present potential
opportunities for a Forex trader to earn money. The crises of economic ecosystems of all levels are also an
occasion to react by making an up-to-date prediction and buying or selling a particular currency. Therefore, it
is very important to constantly monitor the world news and price movement charts for target trading instruments.