Many people choose to trade Forex online, and for various reasons. But while some want to learn about different economies and others want to improve their status, the main reason will always be to try make decent Forex returns. Everything else seems to come as a byproduct. And high returns are certainly possible. However, every beginner trader needs to ask what realistic Forex trading returns they can expect.
Without setting realistic targets, traders will make irresponsible decisions that are not in line with reality. They can find themselves out of money within days, instead of making smaller but steady profits.
We need to identify realistic Forex trading returns according to the level at which you’re trading. Doing so will be especially useful if you’re still not sure whether or not to invest in Forex.
Think in percentages
It’s easy to be attracted by websites telling you the high dollar returns you can get. They tell you you can earn 10,000 USD per month, 5,471.35 EUR per day or even 450 GBP per hour. These claims are inevitably false for one main reason: returns depend on the value of your capital. It is therefore necessary to think of FX profitability in percentages. You need to know what gains you should make proportional to your trading capital.
Identifying the risks
Forex trading gives you the opportunity to make exponential returns on your trades. However, these returns are only possible because of high volatility. In other words, you can lose as much as you can make. You can obtain high leverage when trading currencies, meaning you can make or lose far more than your actual investment. For this reason, traders should avoid risking more than 2% of their capital on a single trade.
More returns equals more potential
While modest returns may not be what you want, remember that the more you make on your initial trades, the more compounding profit you stand to make. By attaining consecutive returns over a long period of time, you’ll get the chance to then make much bigger profits.
1. New traders should accept the harsh reality that they may not achieve any profit at first. This does not mean it won’t happen. However, it should not be expected. The early stages of FX trading require low expectations in order that traders can learn from their dealings. Education and experience should be your main concern, while lasting as long as possible.
2. Once you’ve gained a fair bit of experience and knowledge – after possibly losing your first or second deposit – you can start to expect consecutive profits. You should look for at least 1% of Forex returns monthly. Do not expect more than 5% per month, as that could lead to unrealistic decisions.
3. Once you’re a pro, after making consecutive profits and compounding your trade capital, you can aim for a high dollar value on returns. You’ll need to have a reasonable trade capital in order to make the necessary profits. You can make around 4% or more, while needing a certain amount of funds for comfortable living. USD3,000 is realistic for that standard of living. If you are making 4% of Forex monthly returns, you’ll need a capital of USD100,000 in order to make the necessary income, along with some extra to cover losing months.
In FX trading it is vital that you have realistic Forex trading returns. This is especially so if you are a beginner, but even as you progress you should remember to stay grounded.