Forex realistic returns - how much should you expect?

13 November 2023

Realistic returns for Forex trades are usually considered to be somewhere around 1-10% on a monthly basis. However, it's worth mentioning that many traders lose money instead of making any and trading is not like a job. Trading is like running a business and income is not steady. There are months when traders experience drawdowns on their accounts

How much money traders make depends on various factors. The size of trading capital and having a profitable trading system have a major impact on profitability. In addition, traders need to be able to control their emotions and be disciplined to follow their own trading plans. Trading profitably requires hard-working and great focus.

Forex success stories are usually a source of information for most beginner traders when they try to get into the market. These stories are typically used as examples of what one can achieve trading Forex. The most successful traders had the opportunity to manage large sums of their own or investors' money. And to be able to manage large amounts, it's crucial to trade consistently profitably with very small drawdowns.

How can you have decent returns trading Forex?

In case you are a beginner trader, any kind of return through Forex trading is considered a decent return, as long as the trading balance is positive. Most novice traders lose money. Professionals call it tuition fees. Beginners have unrealistic expectations about trading. They think that they can double their money overnight, which leads them to take huge risks and blow up their accounts. Traders start trading and overestimate what markets can give them at the beginning. After the series of blown up accounts, the projections change radically, and they start underestimating the Forex market.

Returns depend on various factors. It depends on whether you have a profitable strategy or not. Can you flawlessly execute that strategy? Do you have the discipline? In addition, returns depend on the size of your trading balance. It's very difficult to have decent returns on a thousand dollar account. In general, most professional traders recommend having at least a $5k trading account.

One of the most popular strategies to keep the Forex annual income consistent is to have a top-notch risk management strategy and work hard on finding trading opportunities.

Forex realistic returns

Great trading is easy. It's because traders have already planned how to trade in advance. Demo and micro accounts are a great help in this regard. They help traders develop and test their strategies before risking significant capital. Once you have a trading method that fits your personality and brings you profits, implementing risk management is not that difficult. Risk management typically consists of risking up to 1 or 5 % of your trading capital per trade. Risk management involves spreading risks on many traders so that one trade never becomes too significant.

The thing is that Forex realistic returns depend on your risk appetite. The higher the risks, the more profits potential. However, it's critical to note that taking high risks doesn't mean placing random orders. Random trading is gambling and has nothing to do with professional trading. Professionals plan their trades well and trade their plans. With increased risks, comes increased chances of losing money.

What to focus on for decent Forex returns

Decent returns from forex depend on many factors. It's critical to have a winning strategy. Your strategy should include a well put together trading plan and trading journal for learning from your mistakes. It's essential to be able to find trading setups that give you an edge, mathematical advantage in trading. After you develop a trading system, risk management and discipline become the number one priority. Lack of discipline to follow their winning strategy is what prevents most traders from becoming profitable.

It's worth mentioning that trading profitably requires a clear mind. Humans are not trading algorithms, and we cannot always perform well. It's crucial to avoid placing orders when you are sick or tired. Trading decisions need to be made using a sharp, clear thinking head.

A trader should not be dependent on the profits from trading. When traders pay bills from the trading revenue, they will overtrade during drawdown periods and increase losses. It's always wise to have emergency funds or side businesses. Keep in mind that trading is not a job, retail trading is like running your own business.

Forex trading average return

Calculating average forex trader returns is difficult because there are many types of traders. There are institutional, retail, day and position traders. Profitability depends on various factors, and many traders lose money instead of increasing their trading balance. Generally forex trading monthly return can be as high as 10% of a trading capital, however, that can only happen if a trader has a well put together trading strategy. Trading is not a job, and there's no steady paycheck at the end of each month. There will be some profitable months and some negative periods. The key to success is to have more winning trades or trades with larger payouts to cover the losses.

It's critical for traders to have a clear idea about realistic forex monthly returns. In investing, higher the risks, higher the potential for profits. Most professional traders only risk up to 1 to 5% of their trading capital per trade. And risk to reward ratio is typically 1:1 or greater. Therefore, it's realistic to make up to 10% of your trading balance per month. However, the number is not steady and might be negative during drawdown periods. Traders should have savings and not be dependent entirely on income from trading. If you have bills to pay and trading is not going well, you might start over trading and blow up your trading account.

It's also critical for traders to think in terms of percentage points and not in terms of sheer numbers. Calculating forex trading percentage returns can help traders reinvest their profits and increase income using compounding. Investing a million dollars is more difficult psychologically than investing a hundred USD. The reason is that during the drawdown periods, you have much less to lose. On the other side, when trading goes well, a million invested can give you amazing profits.

If you have a sufficient amount of trading capital and trade using good risk management strategy, it's realistic to have up to 50% yearly returns. However, if your trading capital is too large, it's highly likely that you will take small risks in terms of percentage points and yearly returns will be smaller. Returns mainly depend on your trading strategy, your level of discipline and the market conditions.

Factors that can positively or negatively impact the returns

Investor returns can be influenced by several key factors, and understanding them is crucial for making informed decisions. One significant factor is changing market conditions. When liquidity drops and the market becomes more unpredictable (volatile), it can hurt active traders. This happens when trading transactions are reduced and there are fewer opportunities. In thinner markets, where there are fewer buyers and sellers, slippage can occur, making it difficult for investors to execute trades at desired price.

Economic events also play a major role. Certain news releases, like decisions on interest rates, unemployment numbers, inflation rates, and data on manufacturing and trade, can have a major impact on the markets. Investors need to pay attention to these events as they can influence market sentiment and affect investment decisions. Additionally, natural disasters such as droughts or floods can impact returns, especially for those invested in agriculture. These events can disrupt supply chains and production, causing market volatility.

Geopolitical factors are one more consideration. Trade wars and territorial disputes can have a negative impact on countries involved and their economies. The uncertainty stemming from these conflicts can lead to market downturns, affecting various investor types. It's important for investors to be aware of geopolitical developments, as changes in international relations can affect risk and return expectations.

In addition, there are events that cannot be predicted in advance, such events are called “Black Swans”. There are no ways that investors can avoid such events. You cannot prepare for something you know nothing about. However, smart investors and traders always keep emergency funds to deal with such events accordingly.

Key takeaways on realistic Forex returns

How much do Forex traders make? Well, that depends on how much they deposit and how often they trade. In addition, many traders lose money. For profitability, it's crucial to have a winning strategy and be able to manage your emotions.

To make a lot of money, traders need to invest a lot of money. However, one alternative is to trade professionally, show consistency and attract investors. Investors love consistent profits and small drawdowns. Many mutual fund managers have decent returns from trading commissions.

It's difficult to say exactly how much money traders make as there are all kinds of traders from intraday, position, institutional to retail traders. However, making up to 30-50% per year is a realistic goal. It's worth mentioning that higher the risk appetite, higher the potential for rewards, however, chances of losing money also increases when taking larger risks.

Forex realistic returns – FAQ

How much do Forex professionals make?

When starting out on a Forex market, you need to find out how much do professional Forex traders make in the first place. Depending on how much time, effort and funds they dedicate and considering that they do this as a full-time job, it’s likely for a professional’s average income to be around 10-20% of what they have to trade with.

Many professional traders work for large investment companies, and they are called institutional traders. According to some estimates, as of 2022, average institutional Forex traders make $60k a year.

Is Forex trading worth it?

In most cases, no. Nearly 90% of traders are usually unsuccessful and don’t have any Forex trading returns whatsoever.

However, those that dedicate time and energy to learning how the market works, researching all of their currency pairs and being prepared for trends tend to have at least some kind of return.

Forex trading is not worth it if a trader is not ready to take risks and learn completely new things he or she has never heard of.

Should I read Forex success stories?

If you're interested in how much you can make trading Forex potentially, then definitely yes. Success stories are always something that can give a trader the motivation to continue learning and trading on the market. However, some of them are not supposed to be taken seriously.

For example, a lot of successful Forex traders have mentioned that the risks that got them where they are now, would have never been taken if they had their current knowledge. Therefore, it’s safe to say that most successful Forex traders don’t recommend their strategies due to how risky they are.

Can Forex be a passive income?

Yes. Traders use automated trading algorithms to earn money from trading. In addition, they use copy trading and trading platforms to copy other successful traders. Traders can choose the trader they wish to copy. Usually traders sell their signals, however, you can also find traders that enable others to copy them for free. When copying someone, it's important to take into consideration the drawdowns that person has experienced. High drawdowns are not desirable for coping. For best results, it's critical to pick the ones with steady growth. In addition, some traders are not displaying their total capital, they only show gains in terms of percentage points, which can be tricky. It's more difficult to double a million dollars than it is to double a 100 USD.

What is the most profitable strategy?

There is no such thing. If there was, then everybody would be using it. In most cases, whenever a strategy comes up with a decent success rate, people use it extensively and help the market adapt to it. Therefore, most of the successful strategies are usually kept secret by those who make them. It's worth mentioning that using trading strategies developed by others might not work for you. Every trader is different and there are a million ways to make money in the market. The key to success is in finding a trading strategy that best fits your personality.

Should I quit my job for Forex?

If you have a job and wish to trade full time, it's important to note that trading will not give you a steady paycheck at the end of each month. One way of approaching trading is to swing trade. Swing trading doesn't require sitting in front of a PC screen all day. In fact, many traders do have full time jobs and swing trade. You can also take a vacation from your work and see if trading full time is the way to go.