It is hard to say exactly how much forex day traders make as most traders are known to be very discreet about their earnings. Based on recent case studies, the estimate for the average salary for day traders in the United States is approximately $43,378 per year.
The requirement for the job is a Bachelor’s degree or higher with relevant work experience. Some offline prop firms also require traders to invest their own capital to access the company’s trading tools and dedicate their utmost time to the company. Acceptance at an offline trading company is very low and a recommendation from an acquaintance or friend may be necessary.
How to become a day trader without risking your capital?
Online prop firms like True Forex Funds accept clients worldwide to work whenever and wherever suits them the best and only require a marginal registration fee, which is 100% refundable with the first profit split.
In the first quarter of 2023, True Forex Funds paid out around $8 million dollars to traders and their payout arrived in less than 24 hours making the firm one of the fastest payers in the industry. Traders receive payouts every second week, so they can have two payouts on a monthly basis. Past data shows that True Forex Funds payouts range between a few hundred and +$100,000.00. On average, traders receive +$3,800 in profits.
What is forex trading and how does it work?
Many beginners ask themselves the question: is forex trading really profitable? The Forex market is the largest market in the world with an average daily turnover of $7.5 trillion dollars, recorded in 2022, being the most accessible market for individual traders, while the N.Y.S.E. daily volume is only at $22.4 billion.
The forex market is decentralized that lends itself to different trading styles, so you can find your edge too.
The benefits of day trading Forex:
- Forex market is available 24 hours a day/5 days per week
- Forex has low transaction costs
- Easy to enter
- Forex trading requires a minimum investment to get started
- The Forex market is independent so it is not controlled by governments or central banks
- You can trade anywhere and anytime
The basic concept of Forex Trader Day Trading
Forex day trading involves buying and selling forex pairs throughout the day. It can include long trades that take hours, even the whole day, or require short intervals such as 1-minute trades. Traders using this type of strategy aim to make reasonable profits throughout the day. There are several simple methods that work well for Forex pairs.
In day trading, the trader analyzes the market and selects entry and exit points when an opportunity is detected. If the trade is successful, the trader exits and only re-enters once another profitable position is found. If the trade is losing, traders cut their losses short, minimizing their risk and looking for a new fruitful opportunity.
How to make money with forex day trading?
Day traders’ average income depends on the individual’s experience, decision-making ability, and the amount of capital being put at risk. Success in terms of profits can vary widely. While one Forex trader may earn up to $10,000 in one day, another day trader working on the same pair may earn only $1,000 in one day. In the end, it will all come down to your risk management and how much capital you are working with, which you will master by the end of this article.
Funded forex trading firms, such as True Forex Funds invest their corporate capital into talented traders. This means that you don’t have to risk your own capital while day trading. With True Forex Funds, you can receive up to $400,000 in funding. All you have to do is to pay a small payment fee – starting from €89 -, which is 100% refundable, and pass the two-step evaluation process to enroll in the funded program.
What makes a successful trader?
- The win rate
If you are a day trader you will make a certain number of trades per day. The win rate is the number of profitable trades made from these daily transactions. For instance, if you trade 10 times a day and 6 out of these transactions are profitable your win rate will be 6 out of 10, resulting in 60%.
Simply put: you need more wins than losses to be profitable. But this is only true if you disregard the Risk to Reward, where you don’t even need to be right 50% to make a living from trading.
Remember, you don’t have to win all of your trades, just focus on winning more than losing. Using the example above let’s assume you have a target of 10 positions per day and you set your profit at 50 pips per trade (a pip is a unit to measure the change in value between two currencies).
A win rate of 60% means you profited 6 times 50 pips and had 4 times 50 pip loss out of 10 trades. Your win rate formula is Average Win – Average Loss, therefore 6*50 – 4*50 = 300 – 200 = 100 pips will be your profits by the end of the day.
2. Risk to Reward ratio (RRR)
What if you do not have a strategy that produces a 60% win rate or better? No problem, because you will be still able to make it in forex trading. The risk-reward ratio measures the difference between a trade entry point to stop loss and take profit. Stop loss is the maximum risk you are willing to take and the take profit is the maximum profit you are willing to have. If you set your allowed risk lower than your reward you will have a ratio greater than 1:1. Most forex traders use a ratio of 1:3, like risking 50 pips per trade in a return of 150 pips profits. Therefore, you will only need a 34% win rate and still be profitable.
What are the most common Day Trading Strategies?
Day traders use various intraday trading strategies to generate forex profits from short-term price movements. Some of the most popular strategies include:
Range Trading: With this strategy, traders identify key levels of support and resistance within a defined price range and buy or sell when the price reaches these levels.
Scalping: Scalping aims to make small profits on quick price changes by opening and closing positions within minutes to take advantage of price movements.
News-Based Trading: This strategy involves taking advantage of market volatility around news events. Traders buy or sell based on the news and aim to profit from the ensuing price movements. You can find out more about news trading in our blog.
How does a day trader who starts losing become a winner by the end of the day?
Here is an example of trading a currency pair:
One day, you see a bullish sign on EUR/USD and decide to open a long position in the 1-minute chart. You set a stop loss of 5 pips. As one-minute passes, the dollar strengthens against the euro and EUR/USD trades to the downside. You lost 5 pips. Later that day, you enter the market again to make profits.
Your daily winnings are X pips, your losses are Y pips. This gives you a net win of X-Y pips.
Let’s say you are a day trader who focuses on forex. On this day, GBP/USD is doing well, so you enter the market on the 1-minute chart, see a possible bullish move, and buy GBP/USD. After a minute, the trade goes against you, but your stop loss is at 5 pips, so you start the day with a loss. Remember you use a 1:3 risk to reward per trade so your reward is 15 pips. After 10 minutes, you re-analyze and set up three positions, where 2 respect your order, and only one goes against it. By the end of the day, you have earned 30 pips but lost 10, despite you had two winning and two losing trades.
To monetize your forex profits with the average standard unit size most traders use, a net 20 pips profit for the day with 1 lot would result in $200.
Making $200 a day is nice without a shadow of a doubt. What if you are a disciplined trader who follows this throughout the month and trades for 20 days? Would $4,000 be a significant amount coming from a side hustle?
How about taking your day trading to the next level by using a prop firm’s money to invest? Successful trades at True Forex Funds may receive up to $400,000 in funding. All you have to do is pass a two-step evaluation process and pay a small registration fee, which is fully refundable with your first profit split.
Why risk your capital? True Forex Funds is looking for talented traders to sponsor them with capital.
What is the currency pair quotation system?
Forex always comes in two pairs, represented by three-letter abbreviations. The first currency on the left is called the base currency, and the one on the right is called the quote currency.
In a two-way quotation system, when trading forex, there will be two exchange rates for buying and selling for each currency pair: the bid and ask price. For example, Ashley is an American traveling in Europe. The cost of purchasing euros at the airport is as follows:
Bid price: The rate at which a dealer is willing to pay for a currency.
If Ashley is returning to the U.S., she wants to have dollars, so she will sell the euros. She has €1,000, which she can sell at the bid price of $1.10 (the lower price) and would receive $1,100.
Ask price: The rate at which a dealer is willing to pay for a currency
Andrew is visiting Europe and he wants to buy euros. To buy €1,000 he has to pay the dealer (€1,000*ask price) $1,200.
The higher price (Ask) is what you would pay to buy the currency and the lower price (Bid) is what you would receive if you were to sell the currency.
The difference between the two is called the spread which is the dealer’s profit.
True Forex Funds provides spreads starting from 0.0 pips to secure institutional trading conditions.
What does a forex order mean?
Placing a forex order means placing an instruction to buy or sell a currency. It provides the direction of the trade (whether you short/sell or long/buy), and the price you wish to trade. Trade orders tell the interface what and how much to buy, where to deposit profits, and when (when certain conditions are met) to exit the trade.
Crucially, the market must go up or down but you can make profits in both cases. This is true even if you bought long or shorted the market and waited for the price to fall.
Leverage is a useful but risky tool.
Leverage is a booster that traders utilize to acquire assets and increase their profits. Leverage is an excellent tool to increase forex profits, but before using it, you need to be aware of the principle behind it.
Leverage is a debt for investment. During leverage, traders borrow funds and use them to multiply returns on a trade. This increases their buying power in the market.
One simple rule: the higher the leverage, the higher the profit and loss. Leverage multiplies the potential gain as well as the potential downside risk. True Forex Funds provides up to 1:100 leverage. This means with $10,000 capital you can trade a position of $1,000,000.00.
Can you get rich by trading forex?
Let’s assume you have $100 capital. If you trade every weekday, earning a maximum profit of 5%, you would make $5 per day. Your monthly profit would amount to $100. Even Warren Buffet the world’s greatest investor would envy this staggering 100% return. Of course, you’ll have to pay fees for commission, trading and withdrawal for your broker and your net monthly gain will decrease a bit.
While this may be attractive, not many traders have reached this level of a 100% monthly return on their investments.
Considering that we have scarce resources, and limited time and want to spend it with our loved ones too, could you make decent profits with only a 5% return per month?
If you are a funded trader managing a $100,000 funded account, your 5% monthly return would be $5,000. If this is appealing, consider funded programs starting with an initial fee of only $100.
What if you raise the stakes and use a larger lot size?
Let’s set our risk at 5 pips against a reward of 15 pips.
If you trade on your regular $100 broker account, you use 0.01 lot size because it is a small account.
0.01 lots x 15 pips = $1.5 per day.
$1.5 x 20 = $30 per month, which equals $360 annually.
In case you start trading with an initial investment of $100,000.
1% x 100,000 = $1,000 risk per trade, using a lot size of 1 since the amount is more significant.
1 lot x 15 pips = $150, because each pip with 1 lot size is $10.
$150 x 20 days = $3,000, which equals $36,000 annually. However, you will earn more if you use a larger lot size.
Is forex trading worth it? What do you need for success?
Time and energy invested in learning
For all its advantages, the forex market is turbulent. Achieving 100% turnover is very difficult and rarely happens. The goal is to minimize losses even if, despite all efforts, it is impossible to eliminate them. You’ll need a lot of patience and sound risk management techniques. It’s important to deepen your knowledge of forex before you rashly throw your money into the unknown.
What percentage of day traders make money?
Astonishingly, about 1% of day traders will succeed by the year’s end. Don’t let this discourage you because you can be in that 1% if you follow the right strategy. Profitable trading depends on how much time you invest in learning and understanding the market. How long does it take to learn forex? It depends on the time invested and the learner’s capabilities.
The role of trading psychology
Thinking with a cool head and separating emotions from trading is crucial. It is no coincidence that trading has psychology and traders apply it. If anyone has any doubts, let us explain why. First, forex trading should not be confused with gambling, where you can win or lose big with no skills involved. Forex requires time and money to master. Therefore, you must invest not only your money but time to acquire knowledge to see how the market works. It is advisable to start with a smaller account.
Psychological pitfalls in forex trading
If you bring emotions into forex trading, you are almost guaranteed to lose at a high rate. Why? Let’s suppose you experience a flop in your career or troubles in your personal life. Don’t bring those problems into trading. Because if you do, you might experience losing on Forex as another personal failure. And this will affect your decision-making ability for example by taking too much, or too little risk. Life is life, with its problems. Don’t let those mix into Forex trading.
What do you need to succeed in day trading?
How much you can earn as a forex trader in a day depends on how much money you invest. Therefore, knowing how much to risk is critical.
According to advanced traders, your risk should be no more than 2% of your capital in a trade. Therefore, if you have $100,000 in your trading account, you should only risk $2,000 with a higher profit rate.
Discipline and moderation
The key to success as a day trader is to follow a disciplined strategy: it is essential to remember that you can lose at least as much money trading forex in a day as you win. The internet is abuzz with people who made thousands of dollars in one day and then lost it all the same day. If your system tells you to use 0.5% of your capital and make a maximum of 5 trades daily, you are going against yourself if you don’t stick to it. It is crucial to be able to stop when you have reached your daily target.
Can you get rich by trading forex, especially with day trading?
It is possible to make a living with day trading if you have enough determination, imply the right strategy, and set up stop-loss options. Day trading can even be a good career opportunity in which you can throw off the shackles of a 9-to-5 day job.
Making serious money while day trading can involve putting your capital at risk. You can win big, but also, you can lose a lot. By using a prop firm’s capital to invest in Forex, you can trade with up to $400,000 on your trading account – without investing your capital. To reach the funded trader status, you have to complete the two-step evaluation process first.
Frequently Asked Questions:
Is it possible to make a living out of day trading?
Simply said, yes. While it is known worldwide that the success rate of a profitable forex day trader is really low, True Forex Funds traders disprove this statement and exceed the expectations of what forex traders can achieve on average. As a reference, the success rate of TFF traders is fairly high. In contrast to other prop firms where you may see a low rate of success, at True Forex Funds, 50 sometimes reaching close to 100 payouts are sent on a daily basis with an average payout of almost $4,000 for profitable traders.
What are the main risks of day trading?
The most obvious risk is that you could lose money. If you trade your own broker account you run the risk to lose all of your investments, however, if you are trading with a prop firm, your losses are limited. To put it into context, if you are trading with €1,000 in your broker account your profits are limited to your small account size and you can lose all of your investments.
But if you are trading with a prop firm, for the same €1,000 challenge fee you will receive a $200,000 trading account, where your profits will be greater due to the greater account size.
Where can I find to learn more about day trading?
The internet is full of day-trading tips, gurus, and mentors who preach their strategy is 100% reliable in live trading conditions, but take all advice with a grain of salt as your capital is at stake. You can start learning forex trading for free or subscribe to a mentorship. If you are interested in more depth reviews on how the markets function, look at our free tutorial about our Candlepedia series, where you can learn the basics of forex trading. Just hit up our Instagram page, follow us and every week we will come up with new topics to expand your forex knowledge.