Many individual traders want quick returns on the foreign exchange market. However, according to statistics, most ambitious forex traders fail, and some lose substantial sums of money.
Despite 70% to 90% of retail traders failing, forex can be successful, but timelines must be considered. It is often simpler to remain successful over numerous years if you have a substantial quantity of capital to leverage and a risk management strategy.
According to forex-trading.co.za, the money you can make will depend on your unique trading strategy, the market conditions, what you trade, your risk management, and other factors.
What can influence your profits?
Trading Strategies
While a strategy can have several components and may be examined for profitability in various ways, it is often graded according to its win rate and risk-to-reward ratio.
Win Rates
Your win rate is the proportion of the total deals that you win. For example, suppose you win 55 of 100 deals, giving you a win rate of 55%. The optimal win rate for most day traders is over 50%, and 55% is feasible.
Risk/Reward Ratios
Risk/reward indicates how much cash is risked getting a certain payoff. For example, if a trader loses 10 pips on failing trades but gains 15 pips on winning transactions, they are profiting more from winners than from losers.
This indicates that the trader will be lucrative even if they only win 50% of their transactions.
Risk Management
Risk management is one of, if not the most important aspect of sustained profitability for any successful forex trader. Therefore, you must limit your risk on each transaction to 1% or less, which is common.
Therefore, if your account balance is $3,000, you should not lose more than $30 on a single transaction.
How much money can you make from forex trading?
If you utilize risk-controlled tactics, reach a 55% success rate, and earn more on winning trades than you lose on losing transactions, it is conceivable to produce more than 20% monthly profits with forex trading.
However, most traders should not anticipate earning so much as there are numerous factors to consider, many of that cannot be predicted ahead of the trade.
Nevertheless, with a respectable success rate and risk-to-reward ratio, a diligent forex day trader with a sound plan may earn between 5% and 15% per month using leverage.
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Final Thoughts
Most traders lose money when they trade forex. However, the difference between successful traders and those who fail and give up is that successful traders learn from their mistakes and refine their trading strategies to start trading profitably consistently.