New traders reasonably worry about the effectiveness of Forex trading. Is it still profitable given all the news regarding the risk level, the high percentage of traders losing money, and the difficulties of trading on the foreign exchange market? The answer is: if you can carry it out with the proper methods and evaluation, for example, the fear and greed index, you can obtain definite outcomes for sure.
Experienced investors have their own strategy and know how to mitigate Forex’s inherent risks and determine the potential for profitability or loss. Everyone who ever tried to make some investment has times when they make a profit in the market, but to make a consistent profit, traders have to consider some factors essential to success.
How Much Can You Earn Trading on Forex?
Of course, even the best Forex trading platforms like MetaTrader 4 for Mac will not make you a millionaire overnight. Each trader is different: the best performers can show up to 50% per month, but the numbers go down beyond the minus. Profitable retail Forex traders have the potential to earn 20-30% return a month or, maybe, more. So, how to set realistic trading revenue goals for beginners in trading?
On average, with a long-term operation, a common Forex trader can obtain monthly performances of 5% to 7%, excluding drawdown periods, and not calculate taxes. Profit margin can significantly grow up with intraday or scalping operations, but it requires a better experience and a proper working strategy or trading plan.
Key Points of Wise Investment
It is quite possible to get rich by trading Forex if you are trading wisely and never risking more than you can afford to lose. To minimize your risks, use the principles of any trading:
- Get a good understanding of the basics of how the market works.
- If you are uncomfortable with something, don’t trade it.
- Trade with money that you can afford to lose without affecting your living standards capital only.
- Use portfolio diversification and remember that you shouldn’t spend more than 20% of your entire investment portfolio on Forex.
These simple rules will help you minimize risk and build earnings slowly but steadily.
How to Manage Your Emotions to Be a Successful Trader?
One of the Forex instruments that help to make a decision about particular trade is the Fear and Greed index. It shows the tendency when market sentiment has become risk-off or neutral and can ease to facilitate the adoption of the decisions during periods of high market volatility.
However, the balance between fear and greed is the key to success in trading. Behavior that shows reluctance to enter a trade or the closing of a winning trade prematurely is the marker of fear. When traders add more capital to winning trades or over-leverage to profit from small moves in the market, it reflects their greed.
Here are some ways to make sure your emotions can’t come to the fore, and fear and greed do not influence your trading decisions or overall success:
- You’ll be more confident with your actions by having a clear trading plan and not deviating from it under the influence of emotions.
- Do not try to increase the size of the transaction under the influence of emotions. Stress after witnessing price swings on a large live trade could potentially lead to wrong choices, which may impact the trading account unfavorably.
- Record your trades, make note of what is working, and fix strategies that aren’t. This trading journal will help you to cut unsuccessful scenarios.
- Try to learn from the successful traders and discover what had worked for them so you can apply it to your trading strategy.
How to Make Money on Forex?
Luckily, profits and losses in the Forex market are limited only to your risk appetite, trading strategy, and level of understanding of the market processes. Good advice for beginners is to trade for your skills first, and in time, profits will rise proportionally to your expertise. With the most realistic view of Forex, you have a greater chance of setting reasonable goals and maintaining a profitable trading strategy.
The risks that you are willing to take on have the greatest impact on the amount of profit from Forex trading. The number of your trades can be significantly higher than the amount of your deposit, which potentially leads to extremely high income from Forex, but the same also applies to your losses.
Operating different Forex indicators, using analytic tools and methods allows you to anticipate how the market will act in the future and which trends are likely to reoccur, You can also increase your profit by alternating the available passive income instruments (percentage allocation management module, Forex signals, copy trading, managed funds) with active trading. It will help you to increase your profit without extra effort.