I think this is a question that is asked a lot.
Is Forex Trading Profitable?
Around us, we hear many stories from successful people on the forex market, but also from people who have lost a lot on the forex market.
What exactly is this and why is one trader profitable and the other not?
Let me start with the fact that Forex trading is not a get rich quick system.
It takes months and maybe years of hard work, studying a lot, but also getting to know “yourself” very well.
In the beginning of your Forex career you will probably bump your head a lot and probably lose some money as well.
(Or maybe everything if you don’t have a good money / risk management.)
And this is often the point where many traders will fail and give up.
They will say that the Forex market is not profitable.
But what they don’t ask themselves is why it didn’t work?
And when they start to ask themselves that question, I often hear the same answer.
Mostly there are only 2 reasons why they keep losing.
I’m going to tell you this now.
1. Keeping yourself under control. / Is forex trading profitable?
Often the strategy is fine.
But the most common problem why traders keep failing because they can’t control themselves.
And what do I mean by this?
This has everything to do with the psychological aspect.
I think that as a trader or if you are just starting to trade you get to know yourself very well.
Not only in trading but also in your daily life.
You are confronted with yourself which can be very nice if you can also change this so that you become a better and stronger person.
Okay, now back to the core of the story.
What I often see when I look back at the lost trades with a losing trader, there are a number of things that immediately strike me.
Number 1 is perhaps revange trading.
Where the trading day first started well in control, you lose a trade. (Which is not a bad thing because everyone loses a trade once in a while!)
He then lets go of all control and takes all trades after that without a clear trading plan.
Or the lot sizes increased to make up for the lost money.
What eventually happens is the first 100 euro loss in the first place, eventually becomes thousands of euros loss at the end of the day.
Only by revange trading just because he wanted to make up for his loss.
Overtrading, too high lot sizes, letting go of the trading plan, no longer using your strategy properly.
Therefore, always review your trades at the end of the day.
What went well? and what went wrong?
You will eventually learn a lot from this.
2. Risk management. / Is forex trading profitable?
Okay now point two.
Did you know that a lot of traders also fail at not having or having poor risk management?
And how important do you think that is in trading?
Exactly very important!
Because without good risk management you can never become profitable in the forex market.
Imagine we have 2 traders.
Peter and Mike.
Peter has a win rate of 8/10 trades and Mike a win rate of 6/10 trades.
Who will be more profitable in the end?
Okay, we don’t know anything about their risk management yet.
Peter doesn’t really use risk management.
And Mike uses very good and tight risk management.
Who do you think is more profitable now?
Good job Mike of course!
Mike uses a risk of 1% over his entire account balance and aims for 2 to 3 percent which equates to a risk to reward of 1 to 2 to 1 to 3.
So even if Mike loses 2 out of 3 trades still makes overal 1 percent profit.
So the message of the story is where peter sometimes risks 20% to 30% of his account in just 1 trade.
Will Mike eventually last longer because he sees everything in percentage and uses his risk management wisely.
Do you now understand how important good risk management is?
Often even more important than a good strategy!
Only you can limit your own risk.
Forex trading is definitely profitable if you do it the right way.
So you do not only need a good strategy, there is much more to it.
And no you really wouldn’t be able to earn a lot of money in a day or in a week on the Forex market.
It takes time and experience! But it is certainly not impossible!
I hope that with this blog I have been able to give you some more insight into whether you can be profitable with trading forex.
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