Do People Make Money Trading Forex?

This is a very common question that I often hear and a very sensible one if trading Forex is something you are considering beginning. So you would be perfectly within your rights to ask do people make money trading Forex?

Anyone who has been around the internet and make money online sector for any length of time will be only too aware of all of the BS out there.

Mocked up screenshots of untold wealth at the touch of a button.

Endless shots of fancy cars and exotic holiday destinations.

You get the picture 🙂

This sort of hype is not yet so evident in the trading world where many people prefer not to flaunt their financial situation be that good or bad. Yes people do make money trading Forex and other financial markets but even more people lose money trying so what is the difference?

What Is Required To Be Successful?

 

Training and Understanding.

As I have said many times on other areas of this website you are asking to fail if you do not undertake some type of proper training, delivered by someone who knows what they are talking about and have the proven track record to back it up. This will be the foundation stone which will sustain you through both the good and the bad trading times.

You must also have a clear understanding of that training, how it relates to each market you intend to trade and the part it plays in every trading decision that you make.

A Clear Action Plan.

To be successful in both the short and long term you must have a clear action plan which you follow on a daily basis. This plan will guide you through the decision making process with the aim of making as automatic a process as is humanly possible in the trading environment. This automation serves to take as much of the emotional side of things out of the decision making process. Allowing emotion of any sort to influence your decision making will only end in disaster and loss of money.

A Large Enough Trading Bank And Proper Risk Management.

Although it is possible to begin trading for £1 per point I would not advise taking this approach. The main reason for this is to give your trades sufficient room to move. It is not practical to expect every trade you enter to only move in the direction you want much less to expect that every trade you enter will even be successful. To be practical you need to have a trading bank of at least £500 and preferably £1000 or more. For each trader you should never be risking more than 5% of your trading bank. If your availbale bank is too small then this 5% figure makes it very difficult to trader successfully in the long term.

The Forex market fluctuates almost constantly up and down, some moves are small but some are more dramatic. To be successful we need a tool to nullify as much of this fluctuation as we can.

Enter the good old Stop Loss Order

Whenever we place any trade, in whichever direction we believe the market will move, we will have decided both our intended profit margin and where our stop loss order will be set. Most successful traders work on a 1:2 risk reward ratio. This means that they plan to make 2 pips profit for every 1 pip they risk. This can seem a bit much as a beginner and the temptation to reduce this ratio will be strong however, losing trades have to be factored into any risk management system and your overall profit potential will suffer if you deviate too far from 1:2 ratio. If you have chosen a profit target of 50 pips then you would place your stop loss order at least 25 pips in the opposite direction to your trade. This will allow the market to move up and down but not affect your trade most of the time.

You can read more about Stop Loss orders here.

So This Is How People Make Money Trading Forex.

So the answer to the initial question is a resounding yes!

Anyone can make money trading Forex if they follow the points made above as a starting point. Essential requirements for a successful Forex trader are training, patience, focus, discipline, a clear plan of action which is executed with every trade and a trading bank large enough to allow then to trade without compromising their risk/reward ratio.

As always I hope that you have found this information useful. I have only scratched the surface in order to answer the original question so if you have any thought please feel free to comment.

Filed under: Tools and Strategies

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