Many people are getting into forex trading and showing off the money they make to the world through social media. Yet many people still wonder about the question, is forex trading profitable?.
Here in this article, we answer that question once and for all. Let’s give in.
Is forex trading profitable?
As a platform with a daily trade volume of over $6.5 trillion, 外汇交易 is one of the biggest markets in the world. However, the catch here is the high risk that comes with forex trading. It is common to see that many new traders who see the success of other skilled traders try to get involved in the platform and fail.
The main reason behind this is the high skill and knowledge requirement. If you are a trader looking to do well in forex trading, you will need to work hard. So, to answer the question, is forex trading profitable? Yes, it can be profitable if you are willing to put in the time to hone your skills and knowledge.
Is forex trading profitable? 5 reasons to consider Forex Trading
Even though the forex trading platform is not very beginner-friendly, it can be very profitable if you know what you are doing. So, let’s take a look at some reasons for what makes it a good money-making venture.
Learning forex is not that hard.
Getting into forex trading is not a hard task. Anyone who is willing to dedicate their time to learning the ways of forex trading can become a successful trader. The best thing is it only takes around three to four months to catch up on the basics of forex trading. But if you are looking to fully commit and gain complete expertise, it will take around two years.
The primary knowledge areas of this platform revolve around marketing analysis and technical analysis skills. There are many ways to learn about forex, including online resources that you can use to learn by yourself at your own pace.
Is Forex Trading Profitable? Better leverage
Leverage is one of the best parts of forex trading. It allows traders to invest with financial instruments or borrowed capital. This makes it easy for traders to get better profits while keeping the risk of losing capital to a minimum.
Margins and ratios of the leverage depend on the set specifications of an individual forex broker. However, experts in the field describe leverage as a double-edged sword since it can reduce your capital while at the same time enhancing your bankruptcy risk.
When compared with stock markets, leverage is much better in forex markets. The average leverage of a stockbroker is 2:1 on overnight holds, and for day trading, it can be around 4:1 to 30:1. But with forex trading, you can enjoy leverages from 50:1 and even, in some rare cases 500:1. This is the key factor to point out to if someone asks you the question is forex trading profitable.
Possible 24 x 5 and more flexible
Forex markets are open 24 hours a day and five days a week. So you can trade in forex markets whenever you like. Traders will have full freedom of their schedule on the forex market. With forex trading, you don’t have to worry about your day job and other obligations you have in life. This is great, especially if you are doing forex trading as a side gig. You can do your main job during the daytime and get on to forex trading whenever you are free.
This platform also allows accessing its trading facilities on mobile devices as well. This offers traders greater flexibility enabling traders to make trades even on the go.
Is Forex Trading Profitable? Lower transaction costs
Low transaction costs are another major factor that forex has going for it in the topic. Since the transaction costs are built into the forex market as the spread, they generally tend to be very low.
Here the spread is what the forex brokers take for their services in the forex market transactions.
Some brokers charge an additional commission, but it is very rare. The measurement of the spread is done with the metric named pip. A pip in most currencies is the fourth spot after the decimal point. But when it comes to the Japanese Yen, the second spot after the decimal point is used as the pip.
Is Forex Trading Profitable? Better liquidity
Liquidity is an important aspect of any financial platform, and forex trading is no different. The ability to convert any of the assets to currency whenever you need it is what liquidity means. This is something that favors forex markets greatly since the liquidity of foreign exchange assets is usually very high.
Many consider the forex market as the most liquid and convenient financial market with smaller spreads. Even still, the true value of currencies is something that constantly changes, and you as a trader should keep a close eye on them to make the most out of your forex trading endeavors.
Most profitable forex traders of all times
Now you have a better understanding of where the profitability of forex trading comes from. However, the best way to provide an answer to the question ‘is forex trading profitable?’ is by giving some proof. So here are some of the best forex traders of all time.
Born in 1930, George Soros is considered by many to be the best currency trader in the world and the trader who broke the bank of England. His most famous trade was the short trade of the Great Britain Pound in 1992. Soros was able to bet more than a billion dollars by short-selling $10 billion.
With over $8.6 billion net worth at the age of 92, Soros remains one of the most successful traders of all time. Soros has donated more than $32 billion to the Open Society Foundations and is still active in the financial market.
With many considering him the most successful hedge fund manager, James Simmons is also one of the most profitable forex traders. Simmons runs the Renaissance Technologies hedge fund that has two main funds. One is public to public money, and the other one is the Magellan Fund.
Even though Simmons has books under his name, they are all about him. The best one among them is “The man who solved the market” by Gregory Zuckerman (in 2019).
Stanley Druckenmiller is a former trader under Geoge Soros and is a successful portfolio manager. He is the man behind the bet against the pound in 1992 and is one of the most featured forex traders in the world.
Before starting his Duquesne Fund, he served for over 20 years in the Quantum Fund. However, the 2008 financial crisis came with major setbacks, and he had to close his fund. Druckenmiller has a net worth of $3.1 billion and is one of the best examples to show if someone asks if forex trading is profitable.
This is a trader who is famous for turning $12 000 into $250 000 and losing it all on a single trading decision. After this incident, Bill studied and earned an MBA. Then he joined Solomon Brothers and led the forex division of the firm.
The knowledge at his disposal allowed him to make more than $300 million annually and made Hathersage Capital one of the most successful multi-asset management firms.
Currency Pairs the Best to Make Profit
While forex trading markets have a large pool of assets to choose from, currency pairs are the most important of them all. Many traders stick to more liquid pairs while others focus more on exotic pairs.
But the experts suggest that the most volatile pairs are the ones capable of bringing more profit. Even still, you need to figure out how each pair functions in the market. This will help you trade best to fit the market and its trends. Here are the most popular choices are,
- EUR/GBP – 2.78%
- GBP/USD – 11.27%
- USD/JPY – 13.34%
- GBP/JPY – 3.57%
- AUD/USD – 6.37%
- EUR/JPY – 3.93%
- NZD/USD – 4.08%
- USD/CAD – 5.22%
- EUR/AUD – 1.8%
- AUD/JPY – 2.73%
- USD/CHF – 4.63%
Tips for Profitable Forex Trading
Now, you should have a clear idea of whether forex trading is profitable or not. With this knowledge, you might want to give forex trading a shot. If this is you, don’t worry. We got some tips to get you started on your forex trading activities.
Select a Reliable Broker
A reliable broker is a must to trade in the forex market. When selecting a broker, there are many factors to consider. This includes the leverage, trading instruments, available currency pairs, risk management functions, and the types of accounts you can open.
There are many forex brokers and trading platforms out there. A great example of this is the Icon FX. Icon FX is an ASIC and FSA-regulated platform that provides you with leverage up to 500:1. In addition, with just 0.2 pips on common pairs like EUR/USD and with over 50 forex pairs, Icon FX is one of the best brokers available as of now.
Effective Risk Management
Proper risk management is a necessary skill when it comes to forex trading as it handles volatile assets. Mastering this will help you to minimize your losses and recover from them easily.
Forex markets are very volatile places that go through changes constantly. In conclusion, the profitability of your trades will massively depend on your effective risk management capabilities, which is why you need to adopt good risk management strategies.
Keep Your Emotions Aside
Leaving emotions aside is a term that is constantly used in the forex trading scene. Getting emotional and getting angry at the market or worrying you might lose your position can have a large negative effect on your trading experience.
Instead of leaning on emotions, make better well-educated decisions and establish rules for yourself. This is a great way to overcome many frustrations that comes with the forex trading territory.
If you are a trader who is just starting your journey, don’t follow the overly complicated strategies you find on the internet. The best path to follow is to swing trading or similar strategies.
Having a smaller number of trades to focus on will help you to get a clear idea of your position. This will also make sure you will not make any unnecessary mistakes as well.
Stay Updated with the Current Market Issues
Having a clear understanding of the market at any given time is also important when it comes to forex trading. The best way to do this is to stay up to date with the latest news.
Knowing how the market is going to change as soon as possible is the best way to stay on top of your game.
Forex trading is a platform that provides more for people who know more. Becoming an expert in the forex field is all about having a better understanding of the market.
Learning everything related is the best way to increase your chances of success. Also, be sure to continue to learn.
So is forex trading profitable? When done correctly, yes, Forex trading can be profitable. Put in the work and time and it will create an income fast that you have to work less to earn as time goes by.
With high leverages available within the forex trading platforms, traders can enjoy much better returns when compared to something like stock market trading. This is why many traders choose Forex over stock investments now. However, the profits scale directly affected by the risk appetite of the trader. This is common in this field because it’s a field that goes hand in hand with risk.
With the correct forex trading platform and the right knowledge and strategy, the profits that you earn can be multiplied easily. Low trading fees, low spreads, high leverages, better risk management, and being regulated are some common characteristics of a good exchange. And there are so many resources that you can use to improve your knowledge and keep up with the trends in the Forex market. Our advice is to learn forex trading very well before going to any trades.