Is Forex Trading Profitable, and Can It Be a Lucrative Career?

Written By
G. Dautovic
Updated
September 12,2022

Forex trading is a popular way to make money, but how profitable is it, really? This is a question that many people ask themselves as they consider their investment options.

As we answer the question, “Is forex trading profitable?” we will also look at the pros and cons of this type of trading and compare it to stock trading. Finally, we will discuss the risks involved and some strategies to help you make the best of this market!

What Is Forex Trading and How Does It Work?

Forex trading is the process of buying and selling foreign currencies in an attempt to profit from the difference. It’s one of the most popular forms of trading and can be extremely lucrative if done correctly. However, it’s also perilous, which is why many people lose money in the forex market.

So, how does forex trading work? Essentially, traders buy currencies when they’re low and sell high, pocketing the difference in currency values.

However, those values constantly fluctuate, so it can be difficult to predict when to buy and sell. To counteract that, forex trading often relies on technical analysis, i.e., the study of past price movements, to identify patterns that may help predict future trends.

Although there is no guaranteed way to make money in forex trading, those who have a deep understanding of the financial market and how to read technical indicators stand a much better chance of success. They also have a solid risk management strategy in place to minimize their losses.

Finding the Right Investment Platform

Best for: Trading beginners

eToro

Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.

eToro Logo
OVERVIEW

Since its launch in 2007, eToro has acquired over 25 million users globally and established trading in crypto, stocks, and ETFs. With its zero-commission fees, extensive educational resources, and a CopyTrader feature, eToro is a great option for beginners who want to dip their toes into the world of online trading.

  • Extensive educational resources
  • FCA and CySec regulated
  • Copy trading feature
Learn More
On Official Website
Min. Deposit:
$10 (UK, US), $50 and up (other countries)
Commissions/Fees:
$0
Currency Pairs:
49
Mobile App:
Yes
Best for: Users looking for a simple and accessible platform

Robinhood

Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.

Robinhood Logo
OVERVIEW

Robinhood is a commission-free online broker that offers a great platform for trading stocks, ETFs, options, and crypto. Founded in 2013, Robinhood has quickly become a popular choice among investors due to its sleek interface and zero-commission fees.

  • Robinhood Cash Card with weekly rewards
  • Low deposit minimums
Learn More
On Official Website
Min. Deposit:
$1
Commissions/Fees:
$0
Currency Pairs:
N/A
Mobile App:
Yes
Best for: Retirement investors

Vanguard

Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.

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OVERVIEW

Vanguard is one of the biggest investment companies in the world, with over $4 trillion in assets under management. For low commission fees, Vanguard offers a wide range of investment products, including stocks, ETFs, mutual funds, IRAs, and 401(k) plans.

  • 90 days of Vanguard digital advisor for free
  • IRAs and 401(k) trading
  • Over 3,300 mutual funds
Learn More
On Official Website
Min. Deposit:
$3,000 (mutual funds)
Commissions/Fees:
$20 annual account fee
Currency Pairs:
N/A
Mobile App:
Yes
Best for: Portfolio management

M1 Finance

Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.

M1 Finance Logo
OVERVIEW

M1 Finance is an online portfolio management app that offers commission-free trading for stocks, ETFs, and REITs. M1 Finance is a great choice for beginner investors looking for pre-built portfolio options and automated investing.

  • Owners Rewards Card with up to 10% cash back
  • Intuitive mobile app
  • Interactive dashboard
Learn More
On Official Website
Min. Deposit:
$100
Commissions/Fees:
$20 inactivity fee
Currency Pairs:
N/A
Mobile App:
Yes

Advantages and Disadvantages of Forex Trading

Forex trading can be an incredibly lucrative way to earn money, but it also comes with a fair share of risks. Before you start trading, it's crucial to weigh the pros and cons carefully and learn the basics of forex trading.

On the plus side, forex trading is a very accessible form of investment, as you can start with a relatively small amount of capital. Forex markets are also open 24 hours a day, so you can trade whenever it suits you.

However, although there are multiple advantages of forex trading, there are also some significant downsides you should be aware of.

The first is that currencies represent a very volatile market, and your investments can go up or down quickly. This makes it a risky proposition for anyone who doesn't have a lot of experience in investing, is impulsive, or cannot easily discern trends.

Additionally, forex markets are often subject to manipulation by large institutional investors. This means the playing field is rarely level, and small investors can easily get crushed by the competition.

Overall, forex trading has plenty going for it, but it might not be for everyone. It's important to carefully consider both angles before you decide whether it's right for you.

How Much Do Professional Forex Traders Make?

Professional forex traders - those who trade for a living - generally make money from a combination of salary, commissions, and bonuses. However, their incomes vary greatly, with some making millions of dollars annually and others barely scraping by.

The income of a professional forex trader typically depends on three factors: experience, performance, and the type of employer. As always, traders with more knowledge tend to have higher salaries than those with less. Likewise, traders who consistently produce profitable results are often rewarded with larger bonuses and commissions.

Finally, the size and structure of the firm also play a role in determining compensation. For example, independent traders typically earn less than those who work for major banks or hedge funds. In general, though, professional forex traders typically have the potential to earn substantial incomes.

According to data collected by Indeed, the average annual salary for a forex trader in the US is $98,107. The low end of the range is $54,000, while the high end is $179,000.

However, extremes always exist, and some forex traders earn staggering amounts of money. George Soros is perhaps the most famous example, as he made over $100 million by shorting the British pound in 1992, earning the nickname "The Man Who Broke the Bank of England." This isn't the only time he's made a huge profit, either, and he’s well-known for his successful investments.

Tips for Becoming a Pro Forex Trader

Currency trading, or forex, is one of the most popular forms of trading in today's market. However, it can be a volatile and risky business, so it's crucial to approach it with a clear understanding of the underlying principles. Here are five essential tips for those who want to know how to profit from forex trading:

  1. Choose your broker carefully. Not all brokers are created equal, and some may engage in practices that are not in your best interests. Do your research and only work with a reputable broker.
  2. Develop a trading plan. Like any business venture, forex trading should be approached with a well-defined plan. Before you start trading, determine your goals, risk tolerance, and strategies for managing your money.
  3. Learn risk management. One of the most important aspects of forex trading is knowing how to manage risk. There are various strategies for this, and it's essential to find one that fits your trading style.
  4. Don't over-leverage yourself. It's easy to get caught up in the excitement of a trade and make impulsive decisions that can lead to significant losses. Remember to use forex leverage responsibly and only risk as much capital as you're comfortable with losing.
  5. Be patient. Rome wasn't built in a day, and neither is a successful forex trading career. Don't expect to make overnight fortunes in the market: Instead, focus on slow and steady gains over time.

Strategies for Profitable Forex Trading

Anyone can make money in the forex market, but it requires skill, dedication, and discipline to be a profitable trader. There are three key tactics all leading traders employ to make consistent profits: Risk management, trading with the trend, and using price action.

First and foremost, risk management is essential to long-term success in the forex market. It's vital to always trade with a stop loss order in place to protect your capital.

Second, it's crucial to trade with the trend. Underlying trends drive the vast majority of all forex price movement, so you have to identify them and trade in the same direction if you wish to maximize your forex trading profit.

Lastly, price action is a powerful tool that all successful traders use to make informed trading decisions. By studying past price movements, traders can get a better sense of where values are likely to head in the future.

By following these three simple forex trading strategies, you can put yourself on the path to becoming a profitable forex trader.

Bottom Line

Forex trading can be profitable if you approach it with a sound trading strategy and risk management plan. However, like with any other form of trading, there are risks involved. 

Professional forex traders typically make money through a combination of salary and commission. Some also earn by managing other people's funds or teaching forex trading courses.

If you're considering this type of trading, familiarize yourself with the potential forex trading risks first. Also, you’ll need a solid trading plan and risk management strategy. With discipline and dedication, you can be on your way to becoming a successful forex trader.

FAQ

Is forex safer than stocks?

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There is no easy answer to this question as both forex and stocks come with their own risks.

Forex trading deals with more volatile assets, so it’s often riskier than the stock market. It’s also less regulated than stock trading, making it a more speculative activity. However, with proper risk management, such as stop-loss and limit orders, you can control the danger you’re putting your finances in.

If you're weighing forex trading vs. stock trading and which is more profitable, it really depends on your trading style and financial goals.

Some people prefer the stability of stocks, while others like the quick profits of forex. Ultimately, it's up to you to decide which market you're more comfortable with.

Which is the best forex broker?

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This is a difficult question to answer, as there are many good forex brokers out there. Some of the most advanced forex trading platforms include TD Ameritrade, eToro, and Forex.com, but the choice will ultimately depend on your needs.

Is there a monthly fee for Forex?

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Most forex brokers do not have monthly fees and instead charge a commission on each trade you make. Also, some of them charge an inactivity fee if you don't trade for a while, so it’s crucial to go over all costs with potential brokers before you start trading.

Therefore, if you want the answer to the question, “Is forex trading profitable?” to be yes, you must ensure you have the skill, dedication, and discipline required for success. Anyone can make money in the forex market, but they’ll always need a solid trading plan and risk management strategy to stay afloat.

Who controls the forex market?

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The forex market is decentralized, meaning that there is no central authority that controls the market. Instead, it comprises a network of banks, hedge funds, and other financial institutions. This makes the forex market one of the most liquid financial markets in the world, and also one of the most volatile.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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