If you are searching around the Internet, you’ll see mixed statistics on trader’s performance in the forex industry. I’m not sure where they’re collecting this data as there’s no central exchange for the data, but the range of failure rate varies from 50% to 90%. So, it’s a valid question can you really make money trading forex?
Trading forex is an art form
In my opinion the failure rate is closer to the top end of the range of 90% or above. But that’s not because it’s super hard to trade forex, to me it’s more a reflection of the lack of knowledge and understanding about the forex market and trading in general. Trading forex is an art form. Like any art form, or any profession for that matter, it takes time to develop the knowledge and skills to execute without thinking.
The market is completely transparent, it’s extremely dynamic as it responds swiftly to changes in the fundamentals. Which is completely different to trading equities (shares) and any other market for that matter. Yet people jump in with no training, no experience and think they can turn $1,000 into $100,000. And right there is the problem. They lack knowledge and are massively undercapitalized which generally means they trade the wrong opportunities; they trade way too big against the capital they have invested, and one loss usually sees them blow up their account.
So, there are the Pros who make long term careers out of trading forex and then there are the wannabe part-timers who last a month or two. Why the big difference? Let me take you through the life cycle of both and you’ll see very clearly why their outcomes are different.
The Retail ‘Wannabe’ Trader
- Gets excited after seeing promotional material that promises easy risk-free trading strategies (no knowledge required), that delivers riches beyond belief.
- Opens an account with $1,000 or less with unrealistic expectations of turning it into $100,000 within a few months.
- Lose half their cash in the first few trades.
- Change strategies every day looking for something (anything) that generates cash.
- Give up thinking the forex market is a scam and no one makes money!
The Pro Trader
- Lands a job with a bank as a junior graduate. Spends 2-3 years learning the intricacies of the market, how to analyze and execute before trading.
- Starts trading the banks money with large account parameters and realistic profit targets.
- Trade small and build a capital base from which to leverage from when the ‘perfect’ trade setups present themselves.
- Spend years developing clear structure and strategies that they know work and can consistently execute repeatedly with stringent capital management.
- Trading becomes a career and they consistently make money year in year out.
Looking through the two life cycles it should be clear as daylight why the retail trader doesn’t survive beyond the first few months, unless they have deep pockets and keep pumping cash into an account that continually bleeds money. The Pro trader from day 1 has clear structure, trader development programs and most importantly stringent capital management systems.
To me there are 4 ways you can become a successful trader:
- Get a job with a bank and get trained up properly – unfortunately with the improvements in technology over the years the number of traders at the banks has declined significantly so it’s near impossible these days unless you’re under 23 years of age, have a University Master’s degree and your Uncle runs the bank.
- Keep trying different things over and over again until you find something that works – this will likely be very costly, have no guarantees of a positive outcome & no time frame for success.
- Find a legitimate trader with extensive Bank trading experience and get them to fast track your training alongside an extensive support program – make sure you research their trading experience as 99% have no investment bank experience despite claims they do!
- Join a Funded Forex Trading programme that also has a training programme and let that company take the capital risk. That way you only have to concentrate on trading and not worrying about losses – check the Programmes & make sure they don’t include a monthly subscription. The Programmes that do have a monthly subscription & no training are designed to bleed you dry as you continually try to get a funded account.
Invest in yourself with training
Professional full-time traders are patient, disciplined and controlled and have a huge amount of knowledge and experience to draw upon when they need to. If you want to become a successful trader instead of another ‘failed trader statistic’ invest in yourself and get some serious training under your belt before you throw away your hard-earned cash!
There are loads of options online and if you do your research your chance of success is greatly improved. And don’t think for a minute just because you pay $20,000 for education you’re going to get a good result. In my opinion the key things to beware of are:
- Trading experience – do they have ‘forex’ trading experience in investment banks? Most have some sort of equity trading background but that isn’t good enough to get you through.
- Auto-trade robots – if this is the basis of their trading system run the other way!
- Using indicators all over their charts – if someone is showing you how they work it generally means they have no understanding of the fundamentals.
- Secret Supply & Demand model – Bank traders don’t leave orders in the market, so anyone who promotes they know where the banker’s orders are, is a complete hoax!
So, in conclusion, yes of course you can make money trading the forex market. But to make money it’s imperative you know what you’re doing. If you do, then you’ll have a long and successful trading career. If you don’t then your trading experience will be short, disappointing and will be nothing more than a trip to the casino where a failed outcome is almost guaranteed!