There are certain things that we need to know as far as money and economy is concerned. The economy is both psychological and cycle logical and it is human psychology that controls the cycle of the economy. This is of the facts that Economics as a course of study is described as a social science.
In essence, people and individuals looking for money to support life and seeking an improved living standard may be of these four categories of the economic positions; employees, employers, business owners and investors. Of these four categories of people, trading is the center point that connects them together. Analytically, the employers employ the employees and the aim of the latter is collecting salaries when due for payment.
Business owners are employers but looking closely, their incomes are not fixed since they make profit through selling products that are produced by the human efforts of the employees. However, market fluctuations determine the level of the producers' incomes but that of the employees is fixed. Incomes are not fixed for trading and owing to this fact, do not expect your income or gain to be fixed as a trader of forex trading. It is so because how much you make perhaps daily, weekly or monthly is determined by the following factors;
1. Your Level Of Skills And Strategies: It is how technical you are as a trader of the trade that determines how much you make from the market. That comes only through knowledge acquisition, level of training and experience that each one has.
2. Level Of Intelligence: This is described as the multi-faceted ability of a person in judging, understanding and reasoning well. This is not equal for traders of forex trading and it is important for profit making in the market.
3. Level Of Account Balance: A trader who has but $100 in his Live trading account is not expected to realise the same amount of gains like him that has $10,000 in his account. This is worthy of note for all forex traders because no matter the level of knowledge, huge capital is of the determinants of quick arrival at financial success.
Forex trading is not a salaried work in which incomes are fixed. Therefore, incomes of forex traders are not fixed but it is consistent making of profit that counts in the trade and that should be the goal of each trader.
What is the ideal Forex monthly return of a successful Forex trader ?
There is no fixed or specific monthly return we can determine of a successful Forex trader, as the successful trader in Forex market is the trader who can survive for long time in the Forex market without facing margin call or stop out. And this can be achieved only through the trading with low risks and money management in the Forex market. Where, there are many traders can achieve huge profits from Forex market in two or even three months. But at the end, they typically lose all their money during the trading when they lose the control on their losses. While, there are other traders can achieve small profits from Forex market but with low risks and money management, making them able to survive for long time in the Forex market without facing any big losses. Those traders can be classified as successful traders, as the big profits which the trader can achieve from the Forex market is not an evidence that he is a successful trader. because he may achieve these big profits with high risks and by luck.
For instance, let's say that a trader has $1000 in his trading account. And this trader started his trading with high risks in order to achieve high percent of profits, such as 100% to 200% monthly. This means that this trader will take high risk per each trade in order to achieve his monthly target. And he may trade with risk of 10% or more per each trade until he achieves his monthly target. At the beginning, this trader may achieve his target. But step by step he will lose the control on the losses as result of the high percent of risk that he take p[er each trade. So, this trader can't be classified as a good trader as result of the big losses that he may face during his trading with these high risks.
But let's say that another trader has $1000 in his account, and this trader decided to trade with low risk and money management in order to achieve from 10% to 20% monthly. This means that this trader realize well risks of the Forex market, and that he can control his greed during his trading in order to achieve only that monthly percent without any high risks. Because this trader will need only to take risk with percents range from 0.5% to 1% maximum per each trade in order to achieve his monthly target, meaning that this trader will be able to survive in the Forex market for long time. Because even if that trader faced any losses in any trade, his losses will be only 1% and he will be able to compensate that percent easily without any high risks. So, in my point of view, i see that the ideal Forex monthly return that can be good for a successful Forex trader can ranges from 10% to 20% monthly.
What Is The Ideal Monthly Return In Forex Trading?
This question has to do with the perception that a trader has among his peers. It is normal for a trader to ask this question but there is a detrimental effect on the flip side too and that is what if the trader so far only knows that the top trader in the world can only make 50% a year and then finds out that there are other traders who can make 50% a week? This type of findings will shake that trader to the core if he does not have the proper understanding about this matter.
First up let’s put you in the right perspective!
Generally speaking, the amount of money that a trader can make is grouped into two major categories and the first category is the trader’s capital.
Based on capital
Those traders who are trading with millions and billions of dollars are of different caste than the average retails traders who only trades with small capital in his account. The traders with millions and billions of dollars mostly don’t trade with their own money only but they also trade other people’s money. Here’s a list of things that are different between big traders and small retail traders:
The big trader moves a large sum of money.
The big traders have access to better liquidity providers.
Big traders also have access to information not readily available to small retail traders.
Big traders are usually compensated with management fees (somewhere between 2% to 5% a year), profit sharing (around 15% to 30% of profit but usually on a high watermark basis) and other fees when they perform extraordinarily during a certain period of time which is called performance bonus (depends on company policy or a set of agreements with the clients).
Big traders usually work in teams so they mostly have people who work under him managing the multi million or billions of dollars of clients’ money.
They trade around the clock using big time frames (usually the daily time frame is the minimum but there are also some who use H4 time frame).
Big traders trade based on the fundamental issues rather than purely technical. Some of those very successful big traders say that they mostly use 80 to 90% fundamental and then the remaining 20 to 10% on technical analysis to confirm their views.
Big traders usually seek the high volatility pairs such as the USD/PLN, USD/HUF, USD/SEK and USD/DKK because they are much more volatile compared to GBP/USD and EUR/USD.
They use a very, very small risk per trade usually less than 0.5% per trade. Some of them use 0.01% per trade some others who are more aggressive use 0.02% to 0.03%.
Most of them don’t use leverage to trade but even if they do, they only use a leverage of 1:8 instead of 1:1,000 like the small retail traders.
Their top achievement is not that far off of the S&P 500 index’ annual growth which can go up to around 20% a year (and I’m guessing this is very far from the expectations of the people who like using 1:100, 1:400 and 1:1,000 leverage).
Their ideal return is not calculated on a monthly basis but instead on a yearly basis and it’s anywhere up to 20% a year (there are those who outperforms the S&P 500 index by a wide margin but it’s definitely not in the range of 200 or 500% a year).
Based on the trader’s skills
Among the small retail traders you will find people who can make big returns like 5% a month and more trading with $100,000 up to $10,000,000 account and they vary according to their trading skills. The difference between the skilled traders and the less skilled traders are:
Skilled traders can pinpoint market turns or identify the strong momentum.
Skilled traders have the ability to act fast when opportunity comes.
They sometimes use the help of script or tools to keep in touch with the changes in the market sentiment.
They have years under their belt in terms of screen time.
It took them years to achieve their current skill level.
They are properly equipped to trade and have knowledge on various things.
Most of them are using technical analysis in 90% (if not more) of their trading decisions.
Many of them are using the H4 time frame (minimum) and up.
They have at least a couple of trading strategies that they use for different market situations.
They are always on the lookout for new trading ideas and keep updating their trading skills with new information and the development in the market.
Seeing people who make 10% (or even more) a month is not rare due to their trading skills.
The traders in this group like to review their trading performance on a quarterly basis instead of monthly so their returns might be anywhere between 5% to 25% because there will be losing months also.
Based on risk tolerance and aggressiveness
There is also another type of traders who are very aggressive in setting their risk and also their trading strategy. These are the rare breed of traders in the trading world. They have trading skills and market insights that either they trained for many years or they really have strong aptitude in trading.
This kind of trader usually doesn't like to come out or they intentionally hide themselves.
They rarely appear in public, so not much is known about them.
Only a handful of people know about them personally.
They don’t flaunt their trading result in public.
It’s not strange to hear someone made 100% returns last week or 30% returns yesterday.
Myths And Misconception
The most common misconception among traders is when you see someone make 20% on a single trade you immediately think that he can do that consistently on every trade. Difference in language or personal assumption often led to this misconception. Someone with $1,000 can make 100% of his account last week does not mean he can do it consistently all the way to infinity. In most cases, as the trading account grows the trader will lower his risk. So, thinking that the trader will keep his risk level the same when he already trades with $10,000,000 is really silly. This is due to the fact that those with big funds don’t have access to the same leverage that the traders with $1,000 have. In all cases, leverage is the number one factor that helps a trader get big profit so if you take big leverage out of the window then all you have left is the trading skills. So, although the trader still has amazing trading skills he won’t be able to replicate the trading results that he previously had when he was trading with a $1,000 or $10,000 account.
Another myth is that there is someone out there who never had a losing trade. Sure. However, this is achieved with a very low profit during the year and there is a great risk when trading like this. Generally speaking, the larger your stop loss is (in pips) the less you will get stop loss. But, what if the price is currently 10,000 pips (not pippet) below your buy position? How long do you think until the price will go into your profit target? How far will the price drop? What if the price drops another 5,000 pips? How long will you keep the position open? If your stop loss is very big then you are using a very small lot size and if you use a very, very small lot size then how much profit do you expect to make in a month? I hope you get the idea now.
Let’s go back to the original question…
“How much is the ideal profit per month in forex trading?”
Well, it depends on who you are asking the question to. If you ask those who trade with billions of dollars they might give you an annual return instead of a monthly return because the big traders are usually evaluated on a yearly basis. If you ask the question to a retail trader then you will most likely get an answer somewhere between 5% to 20% but not every month is going to be like that because there are also losing months. If you ask an aggressive trader then you might have an even bigger figure though it should not be taken as a consistent performance every month to infinity.
You only need to read THIS ARTICLE to make money from forex trading,
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