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.