This week’s question comes from Martin, who asks:
How much money can I make per month trading Forex?
This is probably the first question that came to mind when you thought about trading Forex for a living.
Or even part-time!
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There’s no shame in it. I certainly wanted to know how much I could make when I started with equities in 2002.
The thing is, it’s a slippery slope.
Curiosity is natural. While there’s no harm in asking questions, the answer you receive—and whether or not you dwell on it—can have serious consequences.
In today’s post we’re going to discuss how much is too much profit, the proper time horizon for measuring returns, and an alternative method that has served me well.
Ready to do this? Let’s go!
Forget What You’ve Been Told (or Sold)
Has someone ever tried to convince you to buy their trading system that promises 10% profit per month?
How about 20% or 30% every month?
If you have, feel free to a leave a comment below. I would love to hear from you.
In case you’re one of those traders and are still confused about how much money you can make trading Forex, forget what you’ve learned thus far.
There are no guarantees in this business, only possibilities and probabilities.
No matter how good you are, you won’t make 30%, 20% or even 10% profit every month.
Sure, you’ll have a great month now and then, but sustaining those types of gains is not realistic. In my opinion, the people using these kinds of profits as a selling mechanism give this business a bad name.
Sometimes in order to move forward, you have to forget what you think you know. This is one of those situations.
If you have dreams of living off of your $500 trading account, think again.
The business of trading is a marathon, not a sprint.
It’s a slow incremental process that requires a ton of discipline to succeed, and you can’t have massive profits without the associated risks.
So when someone offers you a system that produces 30% profit every month, they are handing you a ticking time bomb.
This brings me to an extremely effective, but somewhat unconventional, way of thinking about earning potential.
Put the Trading Process Before Profits
If you want to become a consistently profitable trader, you must focus on the process first.
I can’t stress this enough.
No trader has ever become successful by focusing solely on how much money he or she can make each month.
In fact, many traders don’t even have such a goal.
I’m more concerned with how much money I might lose in a given month than how much I can make.
I know that if I protect my capital and follow the process I’ve laid out for myself, profits will follow.
That’s the key here. A race car driver doesn’t hop into their car and focus on nothing but winning the race.
Sure, that’s the goal and it inevitably crosses their mind, but their focus is primarily on details like when to brake, how early or late to take each turn, and when to punch the accelerator.
They know that it’s the small things that make the difference.
If they adhere to the process of good driving that they’ve practiced for years, the win is all but guaranteed.
Trading is no different.
Focusing on making 50% profit per month won’t make you a dime. It will, however, put you out of business in a hurry.
Just like the race car driver, you should focus on the trading process.
Keep your bets small, wait for quality setups and don’t trade the news. These are a few of the steps of this process that you should focus on.
Do these things well consistently and the profits will find you.
If You Must Aim for a Monetary Goal…
I get it, striving to master a process isn’t appealing to a lot of people.
Personally, I enjoy it. But then I’ve always been a process-oriented person.
If you must set a monetary goal, here are a couple of ideas to consider:
Keep it conservative.
You aren’t going to make 30% profit every month, even if you’re trading Forex for a living.
If you’re keeping your bets small, which you should, then your gains will also be relatively small.
But that’s a good thing. There’s nothing wrong with aiming for just 2% to 5% each month. In fact, I think that’s a good place to be.
This isn’t a goal you want to knock out of the park. If you’re aiming for 5% profit per month and you make 40% instead, chances are you over-traded or overleveraged your account, or both.
Neither of these are habits you want to feed.
Make it a monthly goal or higher.
The problem with weekly and daily goals is that you aren’t giving yourself enough time.
You may only get five to ten quality setups each month if trading the daily time frame. With just one to two setups each week, you can’t possibly measure a return in one day or even one week.
You could also set quarterly and yearly targets.
Just remember that the process required to achieve those profits is far more important than the money itself.
See this post for more on goal setting.
In the Long Run
The amount you can earn from Forex over the long run is nearly limitless. With approximately $5 trillion exchanged every day, entering and exiting the market with millions on the line isn’t even a blip on the radar.
I suspect that’s the problem right there.
Everyone is in a hurry to get a piece of the $5 trillion pie.
Here’s the thing, though…
The market favors the disciplined.
Those who have the patience to wait for quality setups and never take excessive risks get rewarded for their prudence.
Start treating your $100 account as if it were $100,000. Heck, write it as $1 million if you have to; whatever it takes to avoid the temptation to double your account every month.
After all, 2% to 5% of $100,000 is $2,000 to $5,000 of profit each month.
And with a $1 million account, it’s $20,000 to $50,000 per month.
Of course, those are just hypotheticals.
You will always have good and bad months no matter how much experience you acquire.
Figures like these may seem unthinkable to some. But many of the multi-millionaire traders we read about started with far less.
Bill Lipschutz, one of the best currency traders of all time started with $12,000.
Ed Seykota began his trading career with just $5,000, and Randy McKay could only scrape together $2,000 to start trading.
All three grew their accounts into millions of dollars despite starting with a relatively small amount of capital.
If you want to separate yourself from the 90% (probably closer to 95% in my opinion) of traders who lose money consistently, you have to think differently.
Most Forex traders overtrade and overleverage their accounts in an attempt to make 30% profit or more every month.
So to be in the top 5% to 10% of traders, you have to do the opposite.
You have to put more focus on how much money you could lose rather than how much you can make.
Remember, a trading edge is far more than just a strategy. Anyone can learn to trade price action or swing trade and utilize the various strategies of each. That’s nothing special.
An edge is the entire process from start to finish. It’s anything that separates you from the crowd.
So start thinking long-term.
You can grow your account from where it is today into a fortune, but it’s going to take years, not weeks or even months.
That’s precisely what the likes of Bill Lipschutz, Ed Seykota and Randy McKay did to achieve greatness.
Trading any market successfully is a long-term endeavor.
It takes years, not months or weeks, to become consistently profitable.
Armed with that information, it becomes much easier to take things slowly. Keep bets small and focus on quality setups, rather than attempting to trade every day.
If someone claims their trading strategy or system earns 30% or 40% every month, run and don’t look back. While such profits are possible, they aren’t sustainable and will likely lead to a blown account.
I learned years ago that it’s far better to focus on the trading process.
That includes things like risk management, having the patience to wait for quality setups and drawing accurate levels among other things.
As long as you master the process of trading well, the profits will follow.
In other words, let the money you earn from Forex become the byproduct rather than making it your motive.
If you must aim for a specific monetary figure, make it a conservative one. Don’t make the mistake of shooting for 30% or 40% profit per month.
A goal somewhere between 5% to 15% per quarter is reasonable yet still quite attractive, especially for those with larger accounts.
Frequently Asked Questions
Is it possible to trade Forex for a living?
Of course! Is it easy? No. Possible? Yes. The key is taking the time to understand what it takes to make it in this business. That includes finding a time frame and strategy or strategies that suit you as well as developing patience and discipline, all of which takes a considerable amount of time and energy.
How much money can you make trading Forex?
The Forex market exchanges trillions of dollars every day. That means your earning potential is technically limitless. Of course, in reality, you aren’t going to make trillions, billions, or even millions in a day. My best advice for anyone thinking they’re going to strike it rich with Forex is to forget about making money. Focus on the process of good trading and let the profits be a byproduct of that process.
What is the best way to make money with Forex?
The best way to make money with Forex is to forget about making money. Seriously! You want to focus on the process of good trading. That includes things like conservative risk management, staying patient and only trading the best setups, and having a plan before you enter a trade, among other things. Focus on those things first. If you make trading about the money, you’re going to struggle to become consistently profitable.
Your Turn: Ask Justin Anything
I’d love for this new weekly Q&A to be successful and provide an invaluable repository of answers to common Forex questions.
To do that, I need your help.
Here’s what you can do to get involved and have your question answered in next week’s post:
- Ask questions. Post them in the comments below or Tweet them to me @JustinBennettFX
- Help me answer questions. If I missed something or if you have something to add, don’t hesitate to leave a comment below.
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