One question that comes up a lot is: Is Forex Trading Profitable?
Many times this question comes from retail traders that are not finding any success with their trading approach. When I say “trading approach”, I don’t just mean their trading strategy.
Your trading approach is much more than a trading strategy and we will cover that later.
The short answer is yes, Forex trading is profitable.
The slightly longer answer is yes, trading in the Forex market is profitable but chances are you won’t make any money.
How do I know trading Forex can be profitable? Because I’ve been swing trading Forex since 2008 and make money. In fact, you can take a look at my free Forex chart setups that I post every week using technical analysis and then update any trades at the end of the week.
Everything in those chart is for one reason: To teach you how to use a simple approach to trading Forex to make profits.
It’s one thing to make money trading and an different thing to keep the profits.
I’ve mentioned it many times in my trading posts but the number one job you have as a trader, is a risk manager. If you do not understand risk…if you do not manage your trades in the proper way, you will lose.
If you are risking too much per trade to withstand a string of losing trades, you will be out of trading faster than you imagined.
If you continue to move your stops around to avoid taking a loss, you will eventually lose your account. Your broker will be happy because you are probably a retail trader and your broker banks your loss, but you won’t be.
Your second job as a trader is simple: Enter trading orders.
If you are trading, you’ve done your homework and are trading a strategy that has a verifiable edge in the market. You have made a trading plan complete with which setups to take, how you will exit, where you will take your loss.
You’ve outlined which currencies you will trade and the style of trading you will be doing. Day trading is popular but swing trading currencies is how I trade the retail market. If I day trade, it is not often, is not Forex, and is done in the Futures markets with the occasional options trading play.
Your job as a trader is to execute the trading plan when your setups take place. You enter your trading orders, manage your trades, and take your profit and loss the way it is set out in your trading plan.
Consistency matters when currency trading and if you are applying the trading plan in a consistent manner, you should be able to reap the rewards of the edge your trading plan gives you.
Will you always win?
You will take a loss and sometimes many in a row. You will see your trading account fluctuate and it can be painful to see at times. The expectancy of your trading system is what should keep you glued to the trading plan during the times of an equity curve down swing.
The truth is you will have a losing day.
You will have a losing week.
At times, your month may be at break-even or worse, at a loss.
These are the realities of trading and if you are asking about being profitable over the long run, the answer is yes if you are trading a positive expectancy trading strategy.
One week of loss or even a month of not being profitable does not make for trading failure. It must be expected. You must expect to lose and also to imagine that you have yet to take the biggest loss of your trading career.
You read that right. Think that you have yet to experience the most painful loss of all. Expect that a multiple of risk loss is around the corner.
What will that do?
It will remind you that the biggest trading job you have is trading your emotions for a proper mindset and to protect your trading capital.
Forex money management is simply about risk. In short, if you take big risks, you can make a lot of money in short period of time but the bad side of that is that a few bad high risk trades and you lose a lot. Wins and losses come in a random distribution.
You never know if that next trading will be a winner.
When you trade a lot, over trader, that’s bad forex money management. When take a lot of risk in a trade, that’s bad forex money management.
Learning Forex money management is the easiest thing. But doing it, applying it, sticking to it when everything else doesn’t seem to be working is really hard…and all it comes down to is mindset.
There are many books written about the trading mindset but before I list a few – a great mindset is useless if you are trading a flawed trading strategy.
Trading the Forex market is a business and like any business, you have to approach it with a professional approach and like most companies, have a “Trading Resolution”, something you abide by at all times.
The four mindset points above can be a great place to explore.
Break out a pen and paper and jot down those four ideas about mindset. Expand on them and ask what they mean to you.
If I had to use one word to describe the best trader, I would use the word consistency.
By using that one word, I am assuming that everything from your trading plan to the Forex broker you will use has been detailed.
The job you have trading currencies is to implement that trading plan. How? With consistency. Traders that do everything in a consistent manner are sticking to a proven edge.
More importantly, by being consistent, when a trader is not seeing their profitability increase or they are seeing their profit drop, they can zero on each step they take to find the issue.
It is difficult to find where a problem is if you are constantly switching gears.
This is why I never think it is a good idea to take trading signals from people you don’t know. Too much trust goes into the word of someone else – someone who is not responsible for your trading account. How can you fix a strategy if you don’t know how the trading signals are generated?
In the end, I believe everyone has the chance to become successful and profitable when trading. The issue is if they will take the steps required to do so.
I also believe that most won’t do what is required and will continue to look for the easy way or the “secret sauce”.
There is no magic. It’s called hard work on the right things. I hope my trading blog and the setups I post every week are helping you gain some ground in your quest to be a profitable trader.