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Can I really make a living out of trading Forex?

It is believed that more than 50% of Forex traders are losing money long term in the foreign currency exchange market. In spite of this statistic new Forex traders are continuously jumping into the market unprepared and losing their money. If you are reading this article you are probably wondering, “Is really possible to make a living trading the Forex market?“ Can you do this full time?

The answer will depend on your discipline and your ability to manage money. Money management is art of controlling your risk, while balancing your potential for profit against your potential for loss. For example, good money management means you know your profit objective and the odds of being right or wrong, and are able to trade without emotion to achieve your results. You are better off with a trade where you might lose $1000 if you are wrong and make $500 if you are right, that would work eight times out of ten, than to take a trade where you would make $1000 if you are right and lose only $500 if you are wrong, but works only one time out of three
. If you want to make a living trading Forex, you will need adequate startup capital. You can’t just open a Forex account with a couple thousand dollars and expect to make a living from that. Even if you are successful at first, every trading system will have a downturn. Like any other business, you must be capitalized to accommodate that downturn. If you plan to do Forex trading for a living, your money management plan must include your living expenses. How much money will you need to live on? If you are investing using your savings, it’s even more important that you manage your money in your trading and in your personal expenses
. The basis for your money management plan must be a realistic expectation for results of Forex trading over a given period of time. You must develop an investment plan. Basically, in order to be able to make $3000-4000 a month you would need to have an account of $50,000 or more. This conservative figure assumes you are recognizing a 6% gain.

The second key element of your money management plan will be a realistic risk management plan. How much capital can you afford to loose? Most experts recommend you only risk a maximum of 10% of your total trading equity on a single trade. By risking only 10% of your equity on a single trade, you will still be able to make good profits from successful trades whilst avoiding the risk of being wiped out during a bad streak. Even the most profitable traders can have losing streaks in which they could for example have 3 or 4 consecutive losing positions. Start your money management plan off with a number that represents the amount of capital you are using to start your Forex venture and then calculate what would happen if you were successful with a realistic win to loss ratio. What will your average net gain be per day or per month?

Calculate the point when the amount of your monthly profits will be at least twice as much as the amount you need to live. At this point you can begin taking out 50% of your monthly profits. From that point on you will make a living AND your trading account will increase each month while the amount you take out will also increase every month from that point on.

Now you can quit your day job!