Making a living trading Forex

May we attain financial freedom by trading forex?

Yes, of course. In fact, the number of people making a living out of Forex is quite big. However, the question could be split into two.

  • Is it possible to make a living off Forex as a retail trader?
  • Is it possible to make a living off Forex selling products and services?

The answer to the first question is: yes, but almost impossible. The answer to the second question is a definitive yes.

The probability that you are going to make it as a forex full-time trader is almost nil.

It is true that there are a lot of people who make a lot of money with Forex. People who can do that are high net worth individuals that move hundreds and millions of dollars.

Forget about opening a $10.000 account and be trading for a living in a short time. If you start with $1.000, just forget about it. And no, buying forex robots or signal providers will not do that for you. What is more, in most cases you will go bust doing it.

Forex and the problem of day trading

The biggest fantasy in the Forex world is about the supposed facility to make a living by doing day trading in it.

Forex is the market where it is the easiest doing day trading with a lot of flexibility. There are not restrictions to trade there.

A guy with a $300 account can open an account easily and start trading at will. Some traders will do it through retail brokers like FXCM or Alpari, and others will do it through institutional brokers, like Hotspotfx.

The flexibility to trade in Forex is huge. Many years ago you could trade full lots of only 100.000 currency units. Nowadays, most brokers offer micro lots of 1.000 units, which opens the world of Forex to anyone.

People open accounts with $200, 500, 2.000, and start doing day or frequent trading.

The problem is that the great majority of those traders will have lost their entire accounts after some weeks or months.

This false myth about day trading success is promoted by the fact that 99,99% of what the industry promotes is based on day trading as a way to riches. And most people believe it.

Forex making a living

Forex gives us the chance to trade with very tight spreads and commissions.

It is easy to find the EURUSD with a spread of 1 pip. When people find that kind of spreads, and realize that those instruments move 100 pips daily easily, they think that they can do high frequency trading efficiently.

Forex, also, offers the possibility of trading using huge leverage.

No other assets offer that kind of leverage. That is why many day trading candidates go to the Forex path.

Anyone who sees that he can trade $200.000 with a margin of $1.000 will think that by mastering frequent trading he will make a living out of it. But the truth is that doing it, what he achieves is it is other who makes a living off Forex.

Making a living through Forex?

All those “advantages” promote the use of day trading in Forex.

It is not that easy to do day trading in stocks, where the leverage is almost nonexistent (4:1 in USA). CFDs usually have bigger spreads, what makes them not so efficient doing day trading (that does not push people off anyhow).

Futures have good conditions for day trading, but the amount of money to trade them efficiently, is bigger than Forex. You need a $5.000 or $10.000 to be able to trade those contracts. Although there are traders who try to do it with less.

When someone tries to open a Forex account with $2.000, it is logic that it will be to try frequent trading. However, it is not the way to win in the long run.

Bruce Kovner did not use to do day trading.

Making a living off Forex

The way to win in forex in the short-term is through selling products or services related to it, like: broker commissions or spreads, trading signals, forex robots, managing accounts, promoting products, selling courses, writing books, et cetera. As a day trader your chance is almost nonexistent.

Those ways of making money may be honorable or deceitful.

For instance, there is nothing wrong when the broker charges a commission. What is wrong is when some brokers try to steal the trader´s money by using tactics like strange requotes.

What is wrong is someone who tries to sell a robot for $500 that promises a 500% annual return.

What is wrong is selling “signals” that supposedly win 80% of the times. There are, also, good and honest signal providers, but they will not usually promise crazy returns and do day trading. Yet, there are not many of those.

Making a living online trading Forex

The quantity of people making a living off Forex by selling products and services is much bigger than that of the ones who trade the markets. So if you want to make a living “trading” Forex, you should consider joining the latter. But the problem is, that, many of those do it in a very suspicious way and swindling people.

The best way to win in the long-term in Forex as traders is doing medium or long term trading.

Whoever does want to keep alive in the world of Forex should look for a decent swing or trend trading style. The rest is, in most cases, half-baked stories.

Thanks for reading and sharing.