Is Forex Trading Worth it? Traders Union Explains
According to 2023 statistics, Forex is the most liquid market in the world, with a daily turnover of over $6.6 trillion. The market offers plenty of opportunities for strategic traders to earn huge profits. You must be willing to invest time and effort and find the right broker.
If you’re new to trading or want some advice on how to get started, Trade Union Explains everything.
Is Forex Trading a Good Investment?
Forex trading is a good investment, but it doesn't have a fixed income. The returns on your investment are dependent on the movement of currency rates. You can earn a good income if you pick the right market and time. However, it is hard to do this consistently, and many traders fail.
Forex market strengths
Forex has retained the top position as the leading market globally. It is a very liquid market with many traders and investors. The market is highly volatile, providing opportunities for traders to make money by buying or selling currencies at the right time.
Currently, the forex market boasts up to 6.6 trillion daily turnovers. 2023 data shows that the global forex market is worth 2.4 billion and continues to grow. The industry operates 24 hours for 5.5 days a week. With this much liquidity, traders can easily buy or sell currencies without moving the market too much or losing money due to slippage.
The Forex market is difficult for private investors
Forex trading is a wonderful investment, and traders can make good money. However, it is also a risky investment where up to 80-90% of traders lose money in their first days, and many end up quitting.
The marketplace is highly volatile, with a margin that can be as large as 400-500 pips. This means that an investor has to deposit $5000 to trade one currency pair using 50:1 leverage. If you lose money, your account balance will see a huge drop, and before you know it, the losses can get out of control.
Generally speaking, Forex is a big investment only if you know what you are doing and put in the needed time and effort.
Forex vs Stocks: Which Market Is Better To Trade?Is Forex Trading Actually Profitable?
Foreign exchange trading can be very profitable, but breaking down why it can be profitable can be a bit complex.
Due to the nature of forex, income isn’t fixed. Earnings will depend on a wide range of factors. This, however, doesn’t mean that one can’t make excellent money with the forex market.
A few factors to consider that will impact one’s earning success for forex:
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The dollar amount of deposits
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Currency instruments utilized
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The functionality of the trading platform
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Trading strategies used
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Risk diversification strategies used
Forex will always be a global market, and as such will change with trends around the world. A smart trader knows all about the trends happening around them on a local and global level.
Can I Get Rich In Forex?
One example of an individual who got rich with forex is George Soros, who made billions of dollars in this market. Soros is a good example of someone who has their thumb on the pulse of economic and financial spaces and conditions on a global level. Back in 2012, Soros’ forex traders started to work with just one pair of currencies-- the U.S. dollar and Japanese yen. The choice to do this was based on the reelection of Shinzo Abe, Japan’s Prime Minister, for a second term. Upon his reelection, Abe developed a plan to depreciate yen, which fell 25% against other currencies in other countries. The result was a financial battle between European key players and the whole of the Asian continent. Soros traded in a way that followed this trend by betting on only the single currency pair he invest in while also minding the regulations adopted by Abe’s initiative. As a result of this choice, Soros earned a whopping $1 billion for the U.S.-Japan currency pair.
This isn’t an isolated scenario, either. A slightly more relatable scenario involves Chinese trader Chen Linkuy. After depositing just $100, Linkuy profited a whopping $100,000. It’s clear that Linkuy used quite a bit of leverage and extremely high-risk strategies for growth that are almost never recommended in terms of asset management. Still, Linkuy’s case isn’t a one-off. There have been many stories from investors around the web about how individuals earned thousands of dollars with forex, all of which started with modest investments.
It is possible to make a substantial amount of money with forex, but it will take quite a bit of study, perseverance, and an understanding that there is a risk of losing funds. There is a lot of volatility with the trading instruments used for forex. Profitability depends on everyday economic factors as well as global market trends.
Forex Trading Pros and Cons
Let's look at the main pros and cons of Forex as an investment.
👍 Why it’s Worth Becoming a Forex Trader: Forex Pros
• 24/7, constant trading.
• Relatively low entry threshold.
• Offers a margin-based trading scheme.
• Little in the way of restrictions.
• The chance to gain earnings on sales and buys.
• Leader in terms of dynamics.
• Tax rules are very simple.
• Well-adapted for automated trading strategies.
• Reduced potential for insider cost manipulation.
• The opportunity for speedy returns.
• Massive selection of available tools and currency pairs.
• Absolutely no commissions from brokers.
• Lots of leverage.
• Simple and effective short selling options.
• Liquidity due to the sheer size of the market.
• Significantly fewer costs, fees, and commissions, especially from brokers.
• Despite volatility, the forex market can be quite stable and predictable.
• Accessibility.
• Opportunities for passive earnings with PAMM and copy trading.
👎 When Forex is NOT Your Option: Forex Cons
• Substantial risk of losing all transactions, especially in the early stages.
• Disadvantages for small traders with little in the way of initial buying power.
• Very sheer regulatory protections are available.
• Little in the way of residual returns.
In general, any investment in any market will involve a bit of risk. Forex is no different. For success in this market, one will need to devote quite a bit of time to training, practice, and study-- which may not be ideal for everyone.
Is Forex Trading Worth to Make it a Full-Time Job?
Those that are interested in a forex trading career will need to really learn as much as possible about the pros and cons we previously listed. If the disadvantages outweigh the advantages for your unique situation, a different line of work is definitely recommended. That’s not to say it is impossible to build up a career in this market. In fact, the total freedom one has to trade autonomously and from home can be perfect for those who love a good challenge. If the risk capital and brokerage services are worth it for you, it is definitely possible to make a decent living trading different types of currency pairs.
In general, it is better to consider Forex trading as a form of additional income rather than a full-time career. It really isn’t wise to risk a ton of money in the beginning. As a result, there are opportunities for passive income when approaching forex trading as a side project.
How Much Money Do I Need to Become a Forex Trader?
Many forex brokers don't have a minimum deposit requirement. There are some that do, but they are not too strict with this rule.
You can start forex trading with $100 or less and still be able to trade. However, the more realistic minimum amount to invest in Forex is about $500-1000, and it is better to have at least $1000. With this amount, you'll not have to use too much leverage and risk too much to trade with mini lots.
The more money you have, the more possibilities you will have of making money. It will allow you to trade with higher leverage and, this way, make bigger profits even if your strategy is not perfect yet.
You must also understand that the realistic profitability of successful traders in rare cases exceeds 100% per annum. If you want to be successful in trading, you must be realistic and willing to take risks.
If you are starting from scratch and do not have much money yet, there’s no harm in starting small and learning as you grow. But if you already have some funds and want to start earning more within a short period of time, then it is advisable to trade with mini lots instead of microlots or even standard ones.
Read more in the article: Why Now May Be the Time to Start Forex Trading
5 Rules to Start Earning Money in Forex
This multi-step algorithm to start trading is quite simple to implement.
Choose the Right Broker
The broker of your choice absolutely must be licensed and vetted for. They should also provide a wide range of services for novices in the forex trading world and newbie traders in general. Your broker is going to be your initial point of success, so it’s vital that they are able to help you from the very beginning.
Risk Management is Your Best Friends
Risk management is the foundation of all types of trading, not just foreign exchange trading. If a strategy doesn’t work initially, your risk management endeavors will help you preserve capital and reduce total losses. In general, it is not recommended that a beginner trader use a ton of leverage. Rather, it is necessary to set stop losses and not enter into a position for all of one’s funds. A broker will be able to help you develop a tried and true risk management plan for your accounts.
Follow the Trend
For success in forex trading, it’s vital to follow and grasp market trends. Because this is a global market, trends will come and go quickly in different sectors. Educate yourself as much as possible on the forex market and study different currency pairs and what tends to affect those pairs before risking your investment. This will take a lot of time, but this process will help you avoid losses.
Don’t Make Too Many Trades
It may be tempting to make a large number of trades at the beginning, but it’s best to avoid this as a beginner. Newbies to forex trading should start with swing trading and other similar strategies that don’t involve a ton of trades. In the long run, this will make it easier to keep your emotions as a trader in check.
Learn all the Way
Whether your venture as a forex trader is short-term or an investment in a long-term career, you will never stop learning. It would be a good practice to keep a printed record of your trades that include reasons for the trade to occur and factors that influenced your decisions. Also include possible entry and exit points.
3 Best Options to Earn Passive Income In Forex
It is always better for beginner forex traders to think about the various ways to gain passive income from the get-go. This can be done by using PAMM or MAM accounts, social/copy trading, and forex signals.
Forex PAMM/MAM accounts
PAMM and MAM accounts are the most common way to trade in the foreign exchange market. PAMM refers to Percent Allocation Management Module, which offers ever-evolving options to traders with the best possible risk diversification. MAM refers to Multi-Account Manager accounts, which are used to help traders manage more than one trading account by combining accounts into a massive pool of managed funds that include single trader accounts and investment accounts.
There are a few benefits to using Pamm or MAM accounts. Investors can take advantage of the trading knowledge of profitable managers. Just as well, traders can withdraw funds from the PAMM or MAM account whenever they please if they are not happy with how well the account manager is actually performing. PAMM and MAM accounts also make it very easy to diversify one’s investments across numerous accounts, which mitigates risk.
Social Trading Platforms
Social trading platforms can offer a wide range of solutions for beginner forex traders. A social trading platform is essentially a social network for traders that make it possible to follow other traders, enter the trading community, and execute trades.
There are a few benefits to using social trading platforms. They provide an excellent opportunity for newbies to start earning income without substantial experience or knowledge of forex. Just as well, social trading platforms make it easy to copy what expert traders are doing and learn more from other traders as an example. We recommend social trading platforms for making passive income and for beginners with little trading knowledge.
Forex Signals
Forex signals are suggestions for trading with currency pairs that are generated by analysts, both human and automated. Such signals can be monitored on a regular basis in real-time via RSS feed, Twitter account, or email. There are hundreds of free and paid forex signals available from a variety of providers.
There are a few benefits to using forex signals. They are beneficial to al types of traders and can be used to find quick trading opportunities at the price you want, making them perfect for newbie or low-investment traders. Just as well, forex signals can be helpful in the learning process for new traders as well.
Can I Make Money in Forex Without Large Investments?
You don’t need a huge investment to make money in the Forex market. You can still make money without large investments if you attract prop firms rather than other investors and traders.
With these firms, you'll need subscription fees of about $100-$300, and you could get potential funding of up to $1M. With the help of a prop firm, you can earn up to $10K-$50K monthly.
However, the funding doesn't come easy. You'll need to have the right skills and show these firms your ability to trade. You must convince this firm that you're worth investing in by demonstrating that you can make accurate predictions using technical or fundamental analysis.
Once you've proven yourself, the company will provide you with money to scale the deposit. Most firms give traders up to 90% of their profits.
Top 4 Ways to Make Money in Forex Trading Without InvestmentBest Forex Brokers for Beginners
Best Forex Funded Accounts
SurgeTrader
SurgeTrader offers a 75% profit split to traders who meet their criteria. It's an excellent prop firm to diversify your investment portfolio with a variety of tradeable assets.
SurgeTrader has a one-step evaluation, unlike many other prop firm trading entities. Traders of all skill levels can choose from six packages. With its Starter Package, you get $25,000 in instant funding and a 10% profit target. There’s a maximum drawdown of 5% allowed. The Starter Package is ideal for beginners who want to trade less aggressively.
With a $1 million funding size and 75% profit split, the Master Package is the highest-tier account. A 10% profit target is set, along with a four-percent daily loss limit and a five-percent maximum drawdown. If you have a lot of confidence in your trading abilities, this package may be for you.
Additionally, this prop firm offers a wide variety of tradable securities, including crypto, gold, and stock indices. It’s possible to use up to 10:1 leverage.
SurgeTrader requires all of its funded clients to undergo evaluation. You need to pass only one-step audition of SurgeTrader. It’s not necessary to earn over 10% of your account balance in order to pass the audition.
Audition fees range from $200 to $6,500 per account. There’s no limit to how many times you can take the audition. You can use credit/debit cards and PayPal to make payments and withdrawals.
Earn2Trade
Earn2Trade provides three distinct funded trading programs - The Gauntlet Program, The Gauntlet Mini, and the all-new Trader Career Path.
A one-time payment is required for the Gauntlet program. Traders manage a $25,000 virtual account for 60 days, during which they must trade on at least 30 calendar days and once every week. If they follow the guidelines and meet the 10% profit target, successful candidates receive a guaranteed funding offer from Helios Trading Partners or Appius Trading.
Topstep Futures and Topstep Forex are similar programs to the Gauntlet Mini. Traders pay a monthly fee and must follow the guidelines. The monthly fee includes trading classes, webinars, and access to Journalytix (TM). Qualifying traders will then receive an offer for a funded trading account.
Earn2Trade's newest program is the Trader Career Path. Traders begin with a $25,000 virtual capital account and are funded with a $25,000 real money account if they pass the Evaluation. After the Evaluation, traders can develop their trading careers and handle assets worth up to $200,000 without paying a monthly subscription fee.
Earn2Trade has the largest variety of trading platforms to choose from, with close to 20 options. Choices include NinjaTrader, Finamark, R|Trader, Agena Trader, Multicharts, and Overcharts.
Costs
The Earn2Trade Trader Career Path costs $150 per month, with starting capital of $25,000. The Gauntlet Mini program offers five account sizes (25k for $150, 50k for $170, $75k for $245, $100k for $315k, and $150k for $350 each month).
Finally, the conventional Gauntlet challenge is offered for a one-time fee of $343. Earn2Trade accounts do not have free trials, but discounts of 20%-40% are often available.
How Much Money Can You Make?
Traders earn 80% of all the profits they generate with the capital received.
Is Forex Worth it? Expert Opinion
In general, it is absolutely worth it to pursue forex trading if you have a great strategy and risk management processes in place. With consistency, trading with forex can be quite profitable.
Foreign exchange will always be a volatile market full of incredible risk. However, through the use of a reputable broker and excellent risk management knowledge, forex trading can result in excellent passive income.
We recommend avoiding a few key things in order to be successful:
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Do not conduct too many trades.
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Opt for a simple and low-risk trading procedure in the beginning.
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Opt for a reputable broker.
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Keep an eye on market trends constantly.
No matter your capital power, there are options for virtually everyone with forex trading in 2023.
FAQs
Is Forex High Risk?
Yes, Forex is high-risk. You can lose all of your investment in a matter of seconds because the market is highly volatile, and you need higher leverage levels.
Is $100 enough for forex?
Technically yes, but to generate profit, you need to take higher leverage, and that will increase your risk. If you want to keep it simple, then $100 is enough for Forex.
Is it hard to be successful in forex?
Yes, a good percentage of forex traders lose more than they make in trading and even end up quitting. You must give it time and effort to start seeing profits.
Is trading forex a good idea?
Trading forex can be a good idea for some investors, as it offers the potential to earn high returns on investment. However, forex trading is a high-risk activity and requires a significant amount of research, skill, and discipline. It may not be suitable for all investors.
Is forex good for beginners?
Forex trading can be challenging for beginners, as it requires a solid understanding of financial markets and technical analysis. However, with the right education, practice, and support, forex trading can be a good way for beginners to learn about investing and potentially earn returns.
Can forex make you a millionaire?
It is possible to become a millionaire through forex trading, but it is very difficult and rare. Forex trading requires a significant amount of skill, discipline, and risk management, and the vast majority of traders do not achieve millionaire status.
How much do forex traders really make?
The amount of money that forex traders make can vary widely depending on a variety of factors, including experience, skill level, and market conditions. According to a survey by the Bank for International Settlements, the average daily turnover in the forex market was $6.6 trillion in 2019, indicating that there is potential for high earnings.
Is the forex market in 2024 reliable?
The reliability of forex isn’t really determined by the market, but rather by the broker a trader is trading with. A broker who is licensed and seasoned in forex trading can guarantee protection from fraud and scams in the forex market.
Is trading or investing if forex a better choice?
Both trading and investing have their own use cases and very different ways to approach each successful. Investing can generate stable and predictable passive income that doesn’t require any work from the investor other than ongoing deposits. Trading, on the other hand, can provide a trader with a bit more wiggle room and freedom to improve their personal trading skills.
Is there a way to reduce the risks of trading in the forex market?
Yes! Newbies to trading can begin with demo and cent accounts to get a feel for how forex works. After this point, one can work directly with portfolios and diversify one’s portfolio with deposits that span several different accounts. Risks can also be reduced by using a trust management scheme or PAMM account.
Is it really possible to generate passive income with forex?
Forex makes it possible for anyone and everyone to earn income by providing a substantial range of methodologies and tools for trading. There will always be risk, especially at the beginning of trading, but one’s accounts can be diversified to mitigate the negative effects of loss since forex has little in the way of strategy restrictions. It’s absolutely possible to receive passive income by trading with forex.
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Team that worked on the article
Andrey Mastykin is an experienced author, editor, and content strategist who has been with Traders Union since 2020. As an editor, he is meticulous about fact-checking and ensuring the accuracy of all information published on the Traders Union platform. Andrey focuses on educating readers about the potential rewards and risks involved in trading financial markets.
He firmly believes that passive investing is a more suitable strategy for most individuals. Andrey's conservative approach and focus on risk management resonate with many readers, making him a trusted source of financial information.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.