Forex trading earning potential

Assume a trader has $5,000 in capital funds, and they have a decent win rate of 55% on their trades.

Top forex bonuses

How Much Money Can I Make Forex Day Trading, forex trading earning potential.

They risk only 1% of their capital or $50 per trade. This is accomplished by using a stop-loss order. For this scenario, a stop-loss order is placed 5 pips away from the trade entry price, and a target is placed 8 pips away. It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

How much money can I make forex day trading?

Julie bang @ the balance 2021

Many people like trading foreign currencies on the foreign exchange (forex) market because it requires the least amount of capital to start day trading. Forex trades 24 hours a day during the week and offers a lot of profit potential due to the leverage provided by forex brokers. forex trading can be extremely volatile and an inexperienced trader can lose substantial sums.

The following scenario shows the potential, using a risk-controlled forex day trading strategy.

Forex day trading risk management

Every successful forex day trader manages their risk; it is one of, if not the most, crucial elements of ongoing profitability.

To start, you must keep your risk on each trade very small, and 1% or less is typical. this means if you have a $3,000 account, you shouldn't lose more than $30 on a single trade. That may seem small, but losses do add up, and even a good day-trading strategy will see strings of losses. Risk is managed using a stop-loss order, which will be discussed in the scenario sections below.

Forex day trading strategy

While a strategy can potentially have many components and can be analyzed for profitability in various ways, a strategy is often ranked based on its win-rate and risk/reward ratio.

Win rate

Your win rate represents the number of trades you win out a given total number of trades. Say you win 55 out of 100 trades, your win rate is 55 percent. While it isn't required, having a win rate above 50 percent is ideal for most day traders, and 55 percent is acceptable and attainable.

Risk/reward

Risk/reward signifies how much capital is being risked to attain a certain profit. If a trader loses 10 pips on losing trades but makes 15 on winning trades, she is making more on the winners than she's losing on losers. This means that even if the trader only wins 50% of her trades, she will be profitable. Therefore, making more on winning trades is also a strategic component for which many forex day traders strive.

A higher win rate for trades means more flexibility with your risk/reward, and a high risk/reward means your win rate can be lower and you'd still be profitable.

Hypothetical scenario

Assume a trader has $5,000 in capital funds, and they have a decent win rate of 55% on their trades. They risk only 1% of their capital or $50 per trade. This is accomplished by using a stop-loss order. For this scenario, a stop-loss order is placed 5 pips away from the trade entry price, and a target is placed 8 pips away.

This means that the potential reward for each trade is 1.6 times greater than the risk (8 pips divided by 5 pips). Remember, you want winners to be bigger than losers.

While trading a forex pair for two hours during an active time of day it's usually possible to make about five round turn trades (round turn includes entry and exit) using the above parameters. If there are 20 trading days in a month, the trader is making 100 trades, on average, in a month.

Trading leverage

In the U.S., forex brokers provide leverage up to 50:1 on major currency pairs. for this example, assume the trader is using 30:1 leverage, as usually that is more than enough leverage for forex day traders. Since the trader has $5,000, and leverage is 30:1, the trader is able to take positions worth up to $150,000. Risk is still based on the original $5,000; this keeps the risk limited to a small portion of the deposited capital.

Forex brokers often don't charge a commission, but rather increase the spread between the bid and ask, thus making it more difficult to day trade profitably. ECN brokers offer a very small spread, making it easier to trade profitably, but they typically charge about $2.50 for every $100,000 traded ($5 round turn).

Trading currency pairs

If you're day trading a currency pair like the USD/CAD, you can risk $50 on each trade, and each pip of movement is worth $10 with a standard lot (100,000 units worth of currency). therefore you can take a position of one standard lot with a 5-pip stop-loss order, which will keep the risk of loss to $50 on the trade. That also means a winning trade is worth $80 (8 pips x $10).

This estimate can show how much a forex day trader could make in a month by executing 100 trades:

Gross profit is $4,400 - $2,250 = $2,150 if no commissions (win rate would likely be lower though)

Net profit is $2,150 - $500 = $1, 650 if using a commission broker (win rate would be like be higher though)

Assuming a net profit of $1,650, the return on the account for the month is 33 percent ($1,650 divided by $5,000). This may seem very high, and it is a very good return. See refinements below to see how this return may be affected.

Slippage larger than expected loss

It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

Slippage is an inevitable part of trading. It results in a larger loss than expected, even when using a stop-loss order. It's common in very fast-moving markets.

To account for slippage in the calculation of your potential profit, reduce the net profit by 10% (this is a high estimate for slippage, assuming you avoid holding through major economic data releases). This would reduce the net profit potential generated by your $5,000 trading capital to $1,485 per month.

You can adjust the scenario above based on your typical stop loss and target, capital, slippage, win rate, position size, and commission parameters.

The final word

This simple risk-controlled strategy indicates that with a 55% win rate, and making more on winners than you lose on losing trades, it's possible to attain returns north of 20% per month with forex day trading. Most traders shouldn't expect to make this much; while it sounds simple, in reality, it's more difficult.

Even so, with a decent win rate and risk/reward ratio, a dedicated forex day trader with a decent strategy can make between 5% and 15% a month thanks to leverage. Also remember, you don't need much capital to get started; $500 to $1,000 is usually enough.

The balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

The average earnings of a FOREX investor

How do foreign exchange traders make money?

You may have heard all kinds of sky's-the-limit stories about making a fortune from your own computer through the foreign exchange, or forex, market -- and you may have wondered which, if any of them, are true. As a 24-hour-a-day, 7-day-a-week marketplace where trillions of dollars are exchanged every day, opportunities abound to make money. The question is: how much can you, an investor, realistically expect to make?

Trader vs. Investor

Before getting into the earning potential of the forex market, those who are thinking about investing in it should consider how much of their time and money they're willing to devote to this endeavor. Your mindset and approach could affect how much you potentially make, and from a practical perspective, determine the kind of taxes you pay. The IRS treats traders and investors differently, so it's up to you whether you choose to make a living through the forex or use it to supplement your other earnings.

The forex market

Forex, or the exchange of foreign currencies, is a worldwide unregulated and decentralized market where buyers and sellers trade currencies in the hopes of profiting from price fluctuations. This market is considered the largest in the world, with high levels of liquidity and low transaction costs compared to other markets. Large or small investors can participate with relative ease. Because these transactions can be conducted online or through a smartphone, accessibility is within reach of many.

Self-traded forex

How much money you make as a forex investor depends on numerous factors, and not only your penchant for green(backs). As an investor, you could choose to trade forex on your own. Knowing at the outset that the odds are stacked against you -- most forex traders lose money -- can help you keep perspective as you hone your trading skills and become more adept at making money. The size of your trading account is one consideration in how much money can be made. A starting account of $1,000 or even $10,000 is not going to give you the same benefit of compounding that an account of $200,000 could. With the latter and experience, you could earn a monthly return of $10,000 to $20,000. However, this should not be considered "average" or representative of most investors, since each investor has different aims, ambitions and resources.

Managed forex

Another option for the investor interested in what the forex has to offer, but who prefers to let someone else trade his account, is managed forex. The account remains in your name, but you give the forex fund manager power of attorney to make trades on your behalf. For this, he receives a percentage of your profits, known as a performance fee.

Variables

It would be misguided to say that there is a standard amount of money that any given forex investor could earn, especially considering that earnings are not regular or paid out like a salary but can experience fluctuations from day to day, week to week. Those who trade the forex for money have different ways of gauging their progress, that may not hinge on money, per se. They might look at the percent return received per month, or the number of pips captured. Pips are the smallest unit of price change for any given exchange rate and a handy way for investors to keep track of gains. You might have a daily or monthly pip target, such as 100 pips a day. Alternately, investors might focus on lessening losing trades, rather than concentrating on making a set amount of money.

Use hedging in FOREX trading →

What does PIP mean in stock trading? →

What percentage should I set for a stop loss when investing in the stock market? →

Day trading income potential for forex traders and CFD traders

"how much money will I make trading forex?" is the question I am going to answer in this article.

I have posted another article, position sizing for forex traders and CFD traders, that serves as the basis on the position sizing that will be used in this article. If you find that the assumptions in the sections below are too conservative to your taste, you can check out that article for the reasons behind.

This article is long so get yourself a cup of coffee (or tea, or energy drink, or whatever) and take your time to read it.

The importance of patience

Many forex traders and CFD traders think that they need exceptional luck to make big bucks trading forex. That is not true. To make good money trading forex consistently, all you need is a half decent trading strategy with matching trading capital. You may not start out with enough capital to make a lot of money in the beginning, but that is not important. What is important is that you have to be consistent in executing your trading strategy so that you can accumulate enough trading capital.

In a sense trading forex and cfds with very small starting capital is like the professional poker scene. Majority of the professional poker players learn their skills from trading tiny bet size tables. They do not play just a few times or even a few hundred times at those tables to gather their initial stakes for buy-ins to the major poker tournaments. They played thousands of hands to accumulate both experience and bankroll.

These professional poker players can make a decent living by continue playing poker games at tables (both real ones and online ones) offering bigger bet size. But some of them would choose to enter major tournaments to see if they can get a big break. Those who enter the major tournaments using all the money they gathered for the buy-in may not be able to take home any prize money, hence losing all the gains and have to start all over again.

In this case, those poker players are doing the same thing like the forex and CFD traders who raise their position size significantly disregarding the risk of losing everything in the trading accounts. If things work out, of course, the trader would be looking at a significant boost in the available capital to trade with. Well, if things do not work out in the trader’s favour, this trader has to start all over again.

There is no absolute right or wrong in a situation where raising the position size so much that the risk of losing all the money in the trading account becomes a real possibility. Every market scenario unfolding in real-time are different. That is the probabilistic nature of the markets. Just make sure 1. You understand the possibility of losing the account is real and possible, 2. You have considered the consequence, and most important of all, 3. Prepared mentally to handle the negative outcome.

Before you get to the point of facing this decision, however, you have to have the patience to grind through the bankroll accumulation process.

Power of scalability

Forex and CFD trading offer the most flexible position sizing options available to small traders. Hence it is possible to increase position size steadily to improve overall performance. Following is the projected performance of a trader trading euro dollar multiple times a day with average profit of 20 pips per trade expectancy and that the trader would adjust his position size every 100 trades.

Capital	trades	position size	expected profit
$500	100	$3,000	$600
$1,100	100	$6,000	$1,200
$2,300	100	$12,000	$2,400
$4,700	100	$27,000	$5,400
$10,100	100	$60,000	$12,000
$22,100	100	$132,000	$26,400
$48,500	100	$291,000	$58,200

Notice that in the beginning the profit per trade is expected at $6. It is a small amount. And many people who do not have experience trading would have the urge to increase their position size quickly so that they can make more money faster. The problem is that increasing position size too quickly will easily ruin the account if it is not done properly. Hence, focus on the the potential and stick to a plan that is reasonable and doable is always better than rushing towards the finish line.

Given the example above, which is not that remote for many day traders who pay attention to the price movement closely, a day trader who do 3 to 5 trades a day will likely reach 100 trades within a month or two. A very consistent trader having a stable strategy and following this plan with no accidents and no deviation from the execution of the plan, would be able to accumulate an ending balance by the end of the year (or by the end of the 600 trades) would be $48,500.

I leave out the calculation on next few levels of position size from the table. If you are paying attention, you will be able to figure that out easily. You will also be able to figure out the profit potential the same way.

This is the power of scalability. The very same trading strategy that generates only $6 per trade on average in the beginning can also generate $264 per trade on average when it is executed with position size of $132,000 instead of the original $3,000. A position size of $132,000 is not a big one in the forex markets at all. Moving positions of size $300,000 to $500,000 is also not a problem during busy market hours. Beyond that, you will have to think about your impact on the market with your orders in illiquid conditions.

Liquidity and slippage

I just show you a very simple growth plan trading forex. It exists and it is possible to do it. It may take you 6 months. It can take you 3 years. The time needed to get to the point where you have a decent size trading account varies depending on the person. It is not something you can rush.

Just remember that by the time you get to the point of $200,000 position size, you need to stop increasing your position size at the prescribed rate. You have to start working on strategy that enables you to trade even bigger position size, or, diversify into trading other forex pairs.

Why diversify from a winning strategy when it is working so well?

The problem lies in the fact that the approach which works with small account size are mainly scalping strategies. Some people call that trading the flow. It enables you to get a piece of the action in the market and works very well up to certain extend. Such strategies will have execution problem if you try to do it in large scale. Slippage becomes a very real problem when your average profit is just 20 pips and that slippage eats into that by 5 pips or more.

Depending on the brokerage you use and also the exact strategy you are using, you may be able to push the position size larger but eventually at $500,000 range you will have to deal with the liquidity issue still. It is better to resolve the problem by keeping your current strategy to work on a reasonable size so that you have capital allocated for diversification into trading other forex pairs and/or strategies.

The bottleneck

Consider the transition from the small account size (less than $50,000) to reasonable account size or trading capital (up to about $200,000) as the bottleneck period, it is the the most likely time when a good trader who can turn, say, a $5,000 account, into $30,000 in months, going busted in just a few weeks. A trader who can run the account up 6 times the initial capital is not stupid. The trader obviously has done something right. The problem, however, is that along the way in accumulating the capital, unlike playing pokers, the trader can easily deviate from his original working strategy to optimize for the current market environment.

Even a slight change of a good strategy will drastically modify the risk profile and performance of the strategy. In this situation, however, the trader most likely does not even know he is drifting away from his working method because relaxed money management can often get away in certain market conditions that are more forgiving. Hence it is important for the trader to make sure the trading plan is followed properly.

If the trading plan is followed rigorously but the performance is still slipping, it is important to give yourself time by reducing the position size and observe objectively if the strategy is no longer working, or, it is just one of those periods where the method has a tough time making money.

Diversification

By keeping your original strategy to trade at a reduced position size, you get to give yourself some room to test out new strategies. For example, if you successfully traded your account from $1,000 to $25,000, you may consider lowering your position size to base on just $15,000. Then use the other $10,000 as your capital for testing new strategies.

It is best to keep the position size as small as possible for the new strategies. This time, however, you are not cash strapped to just the $1,000 you start with. You can try out multiple strategies with say $2,000 behind each experiment. As long as you are doing this carefully like how you first started, this will speed up your process in finding new ways to trade your account more efficiently.

Swing to win

Many professional day traders trading forex make only 50 to 60 pips a day net on average. It is not that much at all. They do not scalp that often as it is easier to maintain multiple positions trading the swings. The take home profit per unit traded stays approximately the same as trading the flow, although with few trades. The reason for the similarity in performance is that capturing swing profits require relatively larger risk per trade which is not feasible with very small trading accounts.

These traders are making decent amount of money because they are doing it with size. Yet, we seldom hear or read anyone telling this simple truth to the beginners. It is their hard earned wisdom. I guess not that many people like to share this.

Those home runs we hear people keep talking about are the glory trades. They are also talking points in social gathering but they are not the norm. Beginners often confuse that these glory traders are the reasons why some traders can make it big. The glory trades are just frosting on top of a sustainable trading career. They are done on the side with limited risk and usually do not affect the daily trading routines of these traders.

The secret to trading forex successfully for most retail traders is to start small and learn to trade the flow. After accumulating enough capital, the trader will have to learn the next set of skills to master swing trading, even if the timeframe is just day trading. By then, the trader will be able to carry decent position size, making it possible to make a good living off the trading profits.

The income potential of trading forex and cfds is not that different from trading the emini S&P (see day trading income potential for index trader) with similar trading capital. The difference, however, lies in the transition issue mentioned above.

Traders trading the emini S&P index futures do not suffer from this problem in general because of its better liquidity at each smallest price increment (probably one of the best markets in this aspect) and non-directional volatility (allowing efficient scalping).

Traders trading forex can start out with smaller account size and have the advantage of being able to trade smaller position size and easier to scale up the positions with very small incremental size but have to deal with the slippage issue later if their trading style depends heavily on very small profit targets.

No one can speed up the process of evolving from trading the flow to trading the swings for you. You need the experience yourself so that you can handle changes to the trading environment in the future without going into a panic. As I mentioned many times in my other writings, it takes personal growth to make you a consistently profitable trader.

Realistic forex income goals for trading

What are realistic and acceptable forex income goals?

Setting realistic trading revenue goals is a tough question to answer because there are so many factors. Each trader is different, and the reality is that most traders lose money. The reason is that trading is tough and it takes real effort and discipline to be successful.

It is impossible to find out what the best independent traders make. Only a few people share that information. Those who do, may or may not be telling the truth. We will start by looking at some independent forex trader salary public data available on the internet:

We will start by looking at some independent forex trader salary public data available on the internet:

Salary.Com says:
how much does a foreign exchange trader III make? The median annual foreign exchange trader III salary is $166,461, as of march 31, 2017. The range is usually between $130,000-$194,728. However, this can vary widely depending on a variety of factors. Our team of certified compensation professionals analyzed survey data collected from thousands of HR departments at companies of all sizes and industries to present this range of annual salaries for people with the job title foreign exchange trader III in the united states.

This professional forex trader income makes, not the retail traders who work from home.

A foreign exchange trader job is hard to find. But you can do it if you work at it, however, I think it is better if we work on trading for ourselves. Here is everything you need to know about brokers.

How much can you make trading the forex market?

There is no limit on how much you can make! You can make millions of dollars. Anything is possible which is why so many people try to learn how to trade.

WAIT! Forex income is challenging:

Before you get crazy here and start throwing loads of cash into a trading account. I need to tell you that, only a few people get rich trading retail forex. It is difficult, and you must be a master of trading and discipline to make a significant amount of money.

We could play the scenario’s all day long. This is the reason a lot of people get into forex trading in the first place. They see the possibilities of millions of dollars as what is possible. The next thing you know, they will have lost several thousand dollars trading. This is because they trade without knowing what they are doing and lack of discipline.

Realistic trading income calculations:

So let's calculate realistic numbers regarding profit potential.

The first thing you have to realize is that the use of leverage in trading is an excellent way to maximize gains. And risk can be managed fairly well if you have the discipline. That is the problem though is most people do not have the discipline.

But for the sake of this article, I am going to assume you have the trading discipline and have the ability to follow a forex trading income; risk management plan.

The great thing is you do not have to risk much to make a substantial profit. Let me give you an example.

You have an account of 10k, and you want to earn 2.5% per month with a goal of 30% account growth per year.

Now you decide that you are only going to risk 1% of that account per trade.

At 1% risk of 10k, that is $100 USD, and therefore you are only risking 1% at any given time, and you could potentially earn the 30% growth by never risking more than $100 at one time.

Now there are many more numbers that must be calculated such as what is your win rate, what is the risk to reward ratio. So the scenarios could go on and on forever.
You could, in fact, raise your risk to 2.5% or $250 and hit your goal with a single trade and meet our monthly goal by using a risk/reward ratio of 1:1.

Forex income compared to real estate income

Compare that with something real estate where someone might have to risk a great deal more to achieve the 2.5% gain. For example, you could spend 100k or more purchasing a house, and in trading, you can earn 2.5% with a much smaller investment by opening an account for as little as 1000. You can also read the information on gold investments.

You could potentially make 2.5% on one trade versus a lot more upfront money and time involved in real estate investment.

That’s the only trade you would have to make that month in order to gain what you would be averaging in real estate to be considered extremely profitable. The conclusion is simple: forex has such an incredible potential, that it can easily surpass real estate even with minimal risk measures in place.

I cannot think of many investments that yield anywhere near 100% ROI a year. Let's take a look and see how hard it would be to make this with minimal to moderate risk management. It comes out to 6% a month compounding. Now that, my friend, is more than doable in this market. If you are confident in your profitability as a trader and willing to risk, say 3% of your account on each trade, then with an RR of 1:2 you could easily achieve this percentage with one trade in a month.

Forex is an excellent investment IF you take it slow and focus on the long term. Also, read a million USD forex strategy.

What is the average forex trader salary?

I would like to compare forex vs average and above average careers.

Now, looking at the average income per capita (person) in the U.S. The average income per capita in 2015 was $58,714 via wikipedia.
Let us imagine that you would like to make at least $50,000 a year trading. After all, you're doing this for the money, so you want to make as much as possible.
Once again using minimal-moderate risk, we said you could accumulate 8% a month.

Assuming that you increase your lot sizes with your account each month, instead of weekly or daily for risk management purposes. You would need to have a $40,000 account to make $53,265.56 a year at 8% a month.

Now let's say you minimized your expenses and worked a job, so you were able to build your trading account. How long would it take you to make 1 million off of a $10,000 account at 10% ROI a month? In 4 years you would have $970,000. Divide that by 4, and you get $242,500. Which means that you made $242,500 annually. That is if you did not pull any out, instead let your account build at 10% ROI each month.

What if you wanted to wait until five years and then start pulling out all of your profits. In 5 years you would have $3,044,816. Now you can feel free to pull out all of the profits each month. That would mean you would make $304,481 a month! Just imagine that. If you build up your 10k account for five years, you will be making $3,653,779 a year after that if you pull out all of your earnings. So we see that it is much better to build up your account until you feel you NEED to take the money out. I mean, can you imagine making that kind of an income five years from now every month. I am not even talking about something that is unachievable. 10% a month is possible in forex by finding a great trading system, having proper discipline and finding a trading mentor. It's important to keep yourself in check, perfecting your craft each and every day by educating yourself.

In fact, 10% per month can be accomplished with only a few high-quality trades each month. Many traders get caught up in quantity instead of the quality of trades. We have a forex trading income calculator on this site to help you do your calculations.

I would challenge you to find another career in the world that will have you earning that kind of money in 5 years. I mean, honestly, those numbers are mind-blowing, remember though don’t get caught up in the figures. Trading isn't easy but can be done, if you follow a plan.

I say this simply to reinforce how profitable the forex market can be if you work hard, and have long-term goals in mind.

You really can make great income in forex

In conclusion, if we can maintain a realistic view of forex, then we have a greater chance of setting reasonable goals. This helps us maintain a profitable trading strategy that brings us a steady forex income over time. If you don't believe me take a look at the forex compounding calculator which will tell you all you need to know about how much forex income you can make.

"nothing can stop the man with the right mental attitude from achieving his goal. Nothing on earth can help the man with the wrong mental attitude." -thomas jefferson

Please leave a comment below if you have any questions about realistic forex income!

Also, please give this strategy a 5 star if you enjoyed it!

(33 votes, average: 4.45 out of 5)

Calculating profits and losses of your currency trades

Currency trading offers a challenging and profitable opportunity for well-educated investors. However, it is also a risky market, and traders must always remain alert to their positions—after all, the success or failure is measured in terms of the profits and losses (P&L) on their trades.

It is important for traders to have a clear understanding of their P&L because it directly affects the margin balance they have in their trading account. If prices move against you, your margin balance reduces, and you will have less money available for trading.

Realized and unrealized profit and loss

All your foreign exchange trades will be marked to market in real-time. The mark-to-market calculation shows the unrealized P&L in your trades. The term "unrealized," here, means that the trades are still open and can be closed by you any time.

The mark-to-market value is the value at which you can close your trade at that moment. If you have a long position, the mark-to-market calculation typically is the price at which you can sell. In the case of a short position, it is the price at which you can buy to close the position.

Until a position is closed, the P&L will remain unrealized. The profit or loss is realized (realized P&L) when you close out a trade position. In case of a profit, the margin balance is increased, and in case of a loss, it is decreased.

The total margin balance in your account will always be equal to the sum of the initial margin deposit, realized P&L and unrealized P&L. Since the unrealized P&L is marked to market, it keeps fluctuating, as the prices of your investments change constantly. Due to this, the margin balance also keeps changing constantly.

Calculating profit and loss

The actual calculation of profit and loss in a position is quite straightforward. To calculate the P&L of a position, what you need is the position size and the number of pips the price has moved. The actual profit or loss will be equal to the position size multiplied by the pip movement.

Let's look at an example:

Assume that you have a 100,000 GBP/USD position currently trading at 1.3147. If the prices move from GBP/USD 1.3147 to 1.3162, then they jumped 15 pips. For a 100,000 GBP/USD position, the 15-pips movement equates to $150 (100,000 x .0015).

To determine if it's a profit or loss, we need to know whether we were long or short for each trade.

Long position: in the case of a long position, if the prices move up, it will be a profit, and if the prices move down it will be a loss. In our earlier example, if the position is long GBP/USD, then it would be a $150 profit. Alternatively, if the prices had moved down from GBP/USD 1.3147 to 1.3127, then it will be a $200 loss (100,000 x -0.0020).

Short position: in the case of a short position, if the prices move up, it will be a loss, and if the prices move down it will be a profit. In the same example, if we had a short GBP/USD position and the prices moved up by 15 pips, it would be a loss of $150. If the prices moved down by 20 pips, it would be a $200 profit.

The following table summarizes the calculation of P&L:

100,000 GBP/USD	long position	short position
prices up 15 pips	profit $150	loss $150
prices down 20 pips	loss $200	profit $200

Another aspect of the P&L is the currency in which it is denominated. In our example, the P&L was denominated in dollars. However, this may not always be the case.

In our example, the GBP/USD is quoted in terms of the number of USD per GBP. GBP is the base currency and USD is the quote currency. At a rate of GBP/USD 1.3147, it costs USD 1.3147 to buy one GBP. So, if the price fluctuates, it will be a change in the dollar value. For a standard lot, each pip will be worth $10, and the profit and loss will be in USD. As a general rule, the P&L will be denominated in the quote currency, so if it's not in USD, you will have to convert it into USD for margin calculations.

Consider you have a 100,000 short position on USD/CHF. In this case, your P&L will be denominated in swiss francs. The current rate is roughly 0.9970. For a standard lot, each pip will be worth CHF 10. If the price has moved down by 10 pips to 0.9960, it will be a profit of CHF 100. To convert this P&L into USD, you will have to divide the P&L by the USD/CHF rate, i.E., CHF 100 ÷ 0.9960, which will be $100.4016.

Once we have the P&L values, these can easily be used to calculate the margin balance available in the trading account. Margin calculations are typically in USD.

The bottom line

You will not have to perform these calculations manually, because all brokerage accounts automatically calculate the P&L for all your trades. However, it is important that you understand these calculations, as you will have to calculate your P&L and margin requirements while structuring your trade—even before you actually enter the trade.

Depending on how much leverage your trading account offers, you can calculate the margin required to hold a position. For example, if you have a leverage of 100:1, you will require a margin of $1,000 to open a standard lot position of 100,000 USD/CHF. Having a clear understanding of how much money is at stake in each trade will help you manage your risk effectively.

Countingpips

Introduction

Forex trading is one of the most popular investments all over the world nowadays. It has been a fan favorite investment among the investors and traders over other investments for a long time now. Forex brokers are making huge money in the forex trading and providing their clients a satisfactory return for their initial investments. Most of the forex reviews reviewed forex trading and forex brokers thoroughly and found out the 6 advantages forex trading has over other investments. Advantages which make people choose forex brokers over other investment opportunities are as follows:

Low amount of initial investment

Forex market is the only investment opportunity where the traders get to start with a low amount of initial investment. Some forex brokers even offer free trading accounts on their sites. But no other investors show these types of opportunity to the clients. But in forex trading, you have the chance to participate in trading with a small sized account. It is an incredible opportunity to all the newcomers of the forex market because they can test the market and forex trading platforms with a small amount of capital before taking risks with high investments.

Unlimited earning potential

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Forex trading is a place of making money but the most amazing fact about this place is the potential of making unlimited money. Trillions of currencies are traded in the market on a daily basis. This is why forex market is one of the biggest financial markets of the world. Transaction volumes and amounts are so high that it can manipulate the market anytime. Therefore, you can get the opportunity to earn as much as you want. So, trading with one of the top 10 forex brokers in the world can be an ideal option for starting a stable financial business. A proper forex trading platform can help you increase your potential earning in the market.

Never sleeping forex market

You can do forex trading at any hour of the day whether it is in the early morning or late night or midnight. Forex market never sleeps at all and this is why it is known as the “clock market place.” this is a great opportunity for those who can’t get spare times to do day trading as they have to maintain their day jobs as well. Therefore, forex brokers are like a blessing for them as they are able to trade whenever they get spare time from their day jobs. So, for all the wannabe part-time traders, forex trading can be a life-changer for you.

Transparent accounts

There is no scope of frauds and corruption in forex trading as the whole industry is out and out transparent. You can easily search and look for all the necessary forex information from any device with internet connection. This is the beauty of the forex trading. Forex brokers do not keep any real time news, information, and analysis to them. They keep them public for the betterment of their clients. Because of this transparency of the forex brokers, their clients get the real time news and information by which they can do their own research to set the strategies. They can manage their own risk management system in the forex market as well. Therefore, chances of having any unexpected surprise in trading can be avoided.

High leverage

In stock market, your stocks will be limited by the amount of fund you initially invested in the stock market. But the scenario is different for the forex trading market, because they are allowed to make money according to the leverage not by their initial investment. Traders will earn money on the basis of high leverage of their trades. It can go up to 100 times of their capital. Even a forex trader with a lower capital has the potential to make sufficient amount of money from the forex market on the basis of the currency exchange rate and leverage. No other investment can give you this advantage and this is why people are chosen forex brokers to invest their money in trading.

Zero commission and no exchange fees

Though forex brokers help their clients in forex trading to make some money from the market, but still, some of them charge zero commission for their services. Even sometimes they don’t even take any exchange fee from their clients as well. These things are only possible in forex trading. No other investments can provide you this advantage. Commission free trading can be a great opportunity for all the beginners at forex market. They can start their journey on the forex market just by paying the money to take a position of a spread in the forex market. Forex brokers hugely depended on the forex trading platform because it can help their clients with all the ins and outs of forex trading without their physical presence.

Wrap up

Forex market is the only place where you can earn money from both falling and rising market. Those brokers who can ensure this to their clients get their spot in top 10 forex brokers in the world. They take great care of their clients and help them make money from trading. Therefore, choosing the right forex brokers is also quite important as a trader. You need to do a thorough research before choosing any forex broker to start your trading journey in the forex market.

By top forex brokers review

Trading forex tips

Monday, january 18, 2021

Knowing how to trade in forex is simply just not enough to be successful. In this largest and the most liquid financial market in the world, you need to have more than the knowledge and skills to be successful. You need to know about the different things involved in forex to earn huge amounts of money.

Simply knowing how to trade forex and about the major currencies traded, like the US dollar, the japanese yen, and others are just the basics. Knowing when to trade and what to trade is equally essential to be successful in forex.

Fore these you need to have a trading strategy. So, what exactly are the trading strategies involved in forex? There are a number of money making strategies that you can use when trading in the forex market.

If you use these strategies correctly, you will earn huge amounts of money in a very short time. Firstly, you have to realize that forex trading is very different from stock trading. Therefore, strategies are also very different.

The first strategy that you can use to earn a lot of money in the forex market is the leverage forex trading strategy. In leverage forex trading strategy, it allows you, as an investor in the forex market, to borrow money to increase your earning potential.

With this strategy, you can easily turn your money to 1:100 ratio. However, the risk involved can be great. This is why there are stop loss orders you can use to minimize the risk and also to minimize the loss. The leverage forex trading strategy is one of the most commonly used strategy by forex traders to maximize profits.

In the stop loss order strategy, the forex trader creates a predetermined point in the trade where the investor will not trade. As mentioned before, you can use this strategy to minimize risk and minimize loss. However, this strategy can also backfire to you, as the forex trader. This is because you may run the risk of stopping your trades when the value of the currency goes higher than expected.

It is up to you to decide if you will be using this strategy or not.

These are some of the strategies you can use when trading in the forex market.

Forex trading is a 24 hour market where you can trade anytime and anywhere you are. If you think that the forex market conditions are good at a specific time, then you can trade at that specific time.

Also, the forex market is the most liquid market in the world. This means that you can enter or exit the market anytime you wish to. This is to minimize the risk and there is also no daily trading limit.

Here are other tips that you should remember in order to earn money in the forex market and be good in doing so:

The first and the last ticks are usually the most expensive. So, for most traders, the rule of thumb is getting in late and get out early.

When you are losing, you want to minimize the risk of losing more money. So, don’t add money when you are losing.

Select trades that move along with the trend. This can minimize the risk of losing money and maximize your chances of profits.

There are quite a few tools you can use when trading in the forex market. One is the forex charts. For the speculator, the chart is the most important tool that you can use to determine market trends and accurately predict the future value of the currency. Although it isn’t actually 100% accurate, you can use the forex charts as a guide to what’s happening in the market.

You need to know how to read the different charts involved in the forex market. There are daily charts, hourly charts, 15 minute charts and even 5 minute charts to get you closer to the action. You can compare each of the data in the chart to spot market trends and at the same time, spot potential money making trends.

This can also help you minimize the risk when trading in forex. Learn how to read charts effectively and you will be well on your way to become successful in the forex market.

These are some the strategies and tips that you should keep in mind in order to minimize the risks in forex trading and maximize your earning potential. Depending on your skills and how you apply your strategies, you can really make a lot of money in the forex market. However, to be a truly successful forex trader, you need to accept the fact that you will sometimes lose money. Never get discouraged when you do. Analyze where you made your mistake, think of a solution to get back what you lost and continue trading.