- Summary:
- One of the most intriguing questions that aspiring traders ask themselves is how much professional traders make per month. We look into it in-depth.
For one to succeed as a trader, they require a great deal of knowledge, expertise, and perseverance. If done correctly and consistently, the rewards of trading can be substantial. One of the most famous traders in the world is George Soros, who shorted the British pound in 1992 and made a billion dollars in a single trade! There are a few other traders who have made monumental trades in the last few decades. However, these are the exception rather than the rule. Aspiring traders often wonder how much money professional forex traders make in a month. This article delves deep into the topic and shares useful insights into that question.
How do forex traders make money?
There are multiple ways through which professional traders can make money. The primary way is through trading profits, whereby traders make money by buying and selling assets like stocks and currency pairs. Once they have established themselves as successful traders, however, professional traders are able to create other revenue streams. These encompass a variety of opportunities, such as selling alerts, copy trading platforms, and receiving a percentage of profits.
How much do forex traders earn per month?
There is no universally accepted average monthly income for all traders. Comparisons based on percentages of monthly profits carry little weight, as they are not based on reliable data. In the absence of data, it only produces misleading conclusions about trading. For retail traders in general, there is no reliable history of results from which one can extrapolate average monthly profits.
That said, there is a direct correlation between a trader’s risk tolerance and the amount of profit generated.
When calculating a professional trader’s average earnings, it is best to use a sample of trades that are representative of the market as a whole. At the end of the day, however, it all boils down to the period of experience and the average number of trades made within the specified time period. For instance, getting the average returns from a trading history with, say, 5,000 trades is more meaningful than calculating the average profit from 500 trades.
Traders employed by investment banks, trading firms, or hedge funds have more stable earnings, as they typically earn a base pay plus a performance-based bonus. This bonus could be a set sum of money or a proportion of the profit generated, or a fixed amount based on set targets.
What determines the monthly income of a trader?
- State of Mind: Every aspiring trader should keep in mind that trading is not a get-rich-quick scheme. Furthermore, you shouldn’t expect to generate large earnings unless you have invested large amounts of capital in trading. However, if you are able to return substantial profits, it becomes easier for you to attract wealthy investors, and then you can thrive off of trading from their capital. When you help other people and their needs are met, you will be fairly compensated. Looking at trading from that perspective requires a whole new frame of mind.
- Capital Invested: The amount of capital you put into trading is an important determinant of the amount of earnings you can generate as a professional trader. Thats because the potential for profit grows in direct proportion to the financial resources invested. A trader whose trading account has $100,000 as starting capital for instance, has a far better chance of making a substantial profit than one with a $5,000 account.
- Trading strategy: A key bottom line in successful trading is the trading strategy employed. Different trading strategies have different levels of risk and reward, depending on market condition. Trading on leverage are able to increase their potential profits even when they have small amounts of trading capital. However, this also exposes them to greater risk and raises the possibility of incurring substantial losses. Professional traders know how to use risk management strategies, like using take profit/stop-loss orders and maintaining trading discipline.
- Diversification: Professional traders spread their investments over many products and currency pairs to reduce overexposure to a single market and minimise the risk of losing everything. This strategy is known as diversification. By allocating your capital across different asset classes, you reduce your exposure to risk and increase your potential for return.
In summary
There is no universally accepted average monthly earnings for traders. Rather, the amount of profit generated depends on several factors, most of which are discussed above. Furthermore, maintaining a stable and reliable profit rate requires a commitment to lifelong learning, flexibility in strategy, and being in control of one’s emotions. Also, due to the inherent risks in the market, many traders experience periods of loss or drawdown, and this can take its toll on one’s mental peace. On the other hand, if done consistently and correctly, trading can be quite rewarding.