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CO03 - Which Kind Of Returns Do You Expect To Make From Forex Trading?

"Traders often ask the amount of returns that they can make from the forex markets. The main thing to note is that with the exception of a few changes, the forex markets behave the same way as stocks do. The same principles that affects one asset tends to also play a similar role affecting the price of the other assets. Still, thanks to hyped up marketing, traders often turn to forex with unrealistic goals. Many believe that it is possible to make huge profits that are usually not possible with stocks or other derivative trading products. But this is a trap as it leads you into setting up for failure rather than success. In this article, we talk about the realistic returns that one can expect from trading forex and also how you can work towards setting such realistic goals with forex trading. Do not make the mistake that many beginners in forex do."

When you have come this far and learned quite a bit about the forex markets, the question that comes to mind is what kind of returns you expect from trading currencies. The answer to this is just the same as you would ask any other question. What kind of returns can you expect from investing in an education or in a specialized course.

Some can achieve great things, while others remain mediocre. The difference is of course, luck to an extent and the dedication and perseverance that comes with it.

Many beginners in forex trading take up forex falling prey to the false marketing propaganda about becoming rich. Contrary to popular opinion, more forex traders lose money rather than make any money.

This can be due to a number of reasons. But the biggest reason is that traders lose money in forex because they do not give themselves enough time to practice and get familiar with the currency markets.

When it comes to the question of what kind of returns you can expect in the currency markets, the answer can vary. There is no single or a straight forward answer. For example, look to the stock markets. Different fund managers have different rate of returns and this can vary from one year to the next and so on.

The forex markets are no different from the above either. One trader can make huge profits, while the other can simply lose all their invested capital. One of the things in the forex market is that traders believe that they can aim for abnormal returns.

Many beginners think that in the forex markets, it is possible to make 20% - 50% returns. This is true, but only in some very rare cases. Furthermore, it is quite a difficult task to maintain such kind of returns for prolonged periods of time.

In order to achieve such high returns, you will have to be an exceptional trader and be able to manage your risk very well while at the same time be able to trade the markets very efficiently.

These things are possible but as mentioned, you cannot be very consistent. There is a general rule of thumb that the rate of return you expect depends on the level of risk that you take. Thus, in order to achieve a high return, you will have to take huge risks.

This can basically put your trading metrics into the worst figures they can ever be. For example, your drawdown, the difference between the highest equity and the lowest can be significantly higher.

You might also end up being too leveraged which in itself can pose a significant risk. While there are some very rare cases where some traders make such big returns, it is impossible to maintain these consistent results over time.

In order to understand how much you can make from the forex markets, look no further than the equity benchmarks. Because stocks are also risky, the yearly returns given from the stock markets can be a good guideline for you to follow. Simply aim to achieve the same results that equity indices give or try to beat them by a margin. This in itself is considered to be exceptional.

Typically, the S&P500 index tends to give on average about 10%. Thus, traders should be aiming to achieve this kind of growth from their forex trading account. Using the power of compounding, you can then further grow your forex trading capital over the years.

This will mean that you can consistently grow your trading account while attempting to achieve realistic and market oriented results over the period of time. Depending on your trading capital, you are also able to reduce your risk exposure such as using smaller leverage and be able to trade smaller contract sizes.

When traders lose sight of the reality and start to aim for unrealistic returns, that is when they start to lose focus on the risk and consistency factors. It is possible to make an odd high return or two but being able to maintain the gains or to capture such profits consistently over time will mean that traders will need to risk a lot more.

This can in turn prove to be detrimental for you as a trader at the end as you will end up losing money rather than even able to make any meaningful profits over a period of time. The above article should help you to set correct goals in terms of achieving the realistic returns that are more in line with the general markets.

Read 629 times Last modified on Thursday, 04 July 2019 09:54

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