Is Forex trading profitable for everyone?

26 October 2023

No.

Forex trading is not profitable for everyone. The market is based on competition and speculation. What this means is that it’s impossible for everybody to be profitable at the same time.

The way the Forex market works is that there’s always somebody who makes a profit on a trade and somebody who loses it. Profit in Forex is something based mostly on prior knowledge, experience, and research, which is something not everybody does on a daily basis.

To make it a bit easier to understand, try to imagine you and your friend exchanging stickers of famous football players. You have a sticker of a newbie player, but your friend has a sticker for a very famous one. However, it turns out that your friend is a really big fan of the player who’s sticker you have, so he’s okay with making the exchange.

Once you make the exchange, you quickly find out that this famous player got an award, which makes his card much more valuable. In fact, you can now get 100 stickers of the player you had with your new sticker. This means that you’ve made a huge profit, but your friend had a huge loss.

So, is it profitable to trade Forex for everybody? No. But is there a possibility to be profitable if you trade Forex? Yes, definitely. One trade does not determine if you are profitable or not. As long as you have more on your balance than what you started with, you will be considered a profitable trader.

Why is trading in Forex profitable for only some of the traders?

As already mentioned above, not everybody can be profitable when trading Forex online. Since we already brought an example through non-related things such as pens, now let’s try to bring in an example talking about actual currency pairs.

Is Forex trading really profitable

You see, when you are starting a trade, let’s say on EUR/USD, you are basically telling the market that you want to buy USD with Euros. The market then finds a suitable trade where another person wanted to buy Euros with USD. The market then matches these trades and confirms the order.

You get your USD and the other person gets EUR. Once the exchange rate changes, it will be determined who managed to profit from Forex trading that was just done.

Let’s say that 1 USD = 1 EUR and you want to buy 10. In order to do this, you would have to exchange 10 EUR. After a day from this exchange, the exchange rate turns to this: 1.1 USD = 1 EUR. What this means is that now you need 1 dollar and 10 cents to buy 1 euro. If you were to decide that you want your 10 EUR back, you would have to have 11 USD this time. This means that the exchange rate determined that you didn’t profit from the trade, while the person that traded the USD with you did.

Trades like these happen 24 hours a day, 5 days a week, and thanks to computers millions of trades can be processed within minutes. Therefore, in the end, your 1 trade may not be profitable, but another could be. If you have a larger balance at the end of the day, compared to what you had in the beginning, then it’s usually considered that your Forex trading profit for the day was positive.

Ways to potentially stay profitable when trading Forex

There are multiple ways where you can increase your chances of staying profitable when trading Forex. Naturally, none of them is 100% accurate, because it’s impossible. If there was a strategy that had a 100% success rate, then everybody would be using it and the market would simply stop working.

Here are some ways to potentially stay profitable:

Low volatility pairs
A diverse portfolio
Planning ahead

Let’s take a look at them on a much more detailed basis.

Low volatility currency pairs

Is Forex trading profitable if you’re making very little profit? Yes, of course, it is. In fact, making little by little is usually how people become experts or reach fortunes in the market.

A low volatility currency pair is a pair that does not change its exchange rate too often. And if it does, then the change is very small. Choosing these currencies helps traders avoid the risk of losing money on the market, but it doesn’t really help them increase their profits as well. These pairs are usually used as a safe option next to other, more volatile pairs.

Diversified portfolio

A diversified portfolio means that you are trading more than 1 currency pair. Basically, traders usually diversify their portfolio when they are not sure that their first choice is safe enough.

For example, trading a currency pair that has high volatility, and another one that has low volatility is a popular strategy. One has high risk, but high return, while the other has the opposite. But how is Forex trading really profitable with this? Well, if you are unprofitable with one currency pair, there is always another that you can rely on. It’s basically like a backup plan if things don’t work out too well.

Looking at the big picture

The next step is to look at the big picture. Was your day not profitable? No worries, you can always look at the weekly profits. The week is also not profitable? No worries, you can always look at the monthly profits. This can go on and on. As long as the balance shows more than it was at a certain time, then the profitability has been reached, no matter how many bad days there were when getting to it.

3 takeaways about Forex trading profit

It’s usually best to understand that Forex trading is not profitable for everybody. Is trading profitable for some? Absolutely, but not for most people. In order for it to be profitable for a beginner, it needs to be supplied with background knowledge, research, and dedication. And even at that point, there’s still a large chance that the whole thing will not bring profit.
The definitive answer to “is online Forex trading profitable?” is Yes, but only for a selective few.

Most traders usually understand that every trade has the potential to be unprofitable, but they also understand that it’s profitable for somebody else. In the end, it’s always possible to get the profit back at some point in the future. So having one unlucky trade is no reason to not try again.

The more diverse a portfolio is, the more likely it is to be profitable. This is usually what traders believe and it turns out to be true in a lot of cases. The more currency pairs a trader is trading, the less likely they are to be hit hard with an unprofitable week for one of those currency pairs.

Can everyone profit from FX trading? - FAQ

How profitable is Forex trading?

As we have found out in the above guide to is Forex proftable, it can be profitable in multiple ways. It can be a side income enough to buy you a couple of lunches, or it could be a primary income enough to pay the bills and buy houses. However, both of these versions have their risks and issues.

A smaller income is much more likely than a large income. It all depends on how well a trader manages the risk, and how well they follow strategies to remain profitable.

How many people make a profit from Forex trading?

Although it may seem that the Forex profit/non-profit ratio is 1/1, so there’s always an unprofitable trader for every profitable one, the reality is completely different. In fact, the most likely number is that 80-90% of traders are not profitable, while 10-20% are.

This is further complicated by how much each of these traders deposits. For example, the people who are profitable would generally profit quite a lot because they trade a lot, while those who aren’t profitable would not lose too much.

Is there a 100% profitable strategy?

No. If there was a 100% profitable strategy, everybody would be using it. Once they do, it stops being a 100% profitable strategy simply because somebody needs to be unprofitable, so that we have profitable traders.

The way Forex trading profit potential works is that a strategy is created by some traders and spread in the community. If enough people catch on, then the market becomes predictable. Those who spread the information will know the trend and therefore trade accordingly to make a profit in the long run.

What are the realistic profitability rates?

Your profitability rate is dependant on how much you are willing to risk. For example, it’s considered that if traders risk around $1,000 there’s a chance of having $20,000 per year. But all of that is just guessing, there is no real predetermined amount that one can make as a profit.

One thing that is considered to be true is that in order to remain profitable, the profitability of your trades needs to be above 50%. So if you are making 100 trades with the same amount and 51 of them are successful, then you’ve made a profit. Considering that the market is extremely unpredictable and very volatile.

Having a goal of 1-5% profitability is quite realistic.