Is Forex Trading Profitable? Full Guide

Is Forex Trading Profitable? Can Forex Trading Make You Rich? Although our instinctive reaction to this question would be an unequivocal “no”, we must qualify this answer. Forex trading can make you wealthy if you are an investment fund with huge pockets or an unusually talented currency trader. But for the average retail trader, rather than an easy path to riches, forex trading can be a tough highway to huge losses and possible poverty.

Is Forex Trading Profitable?

Many people become interested in forex trading as a get-rich-quick scheme. However, while you can definitely make a decent income in forex trading, this market will not make you rich unless you are a professional forex trader with persistence and a special mindset. In this market, for every 1 dollar that a person earns somewhere in the world, another person loses money somewhere else in the world. This market has actors such as central banks, pension funds and George Soros. In order to be able to profit from forex despite such powerful actors, you must be very prepared and skilled.

A November 2014  Bloomberg article noted that according to reports that two of the largest forex firms at the time— Gain Capital Holdings Inc. (GCAP) and FXCM Inc. presented to their clients, 68% of traders had a net loss from trading currencies in the previous year, while this can be interpreted to mean that one in three traders made a profit. This is not the same as making a fortune in forex trading.

The success rate in forex PerspectForex Success Rate The brutal reality is that Forex trading has claimed countless victims over the years. Sometimes, this form of investment can be wonderful Perspect

Key concepts

  • Many retail traders seek quick returns on the forex market.According to statistics, the majority of aspiring forex traders fail, and some even lose money.
  • Leverage is a two-edged sword that can result in both big profits and significant losses.
  • Platform issues, counterparty concerns, and abrupt spikes in volatility present difficulties for new forex traders.
  • Unlike stocks and futures contracts traded on an exchange, forex currency pairs are traded in the over-the-counter market without a central clearing company.

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Note that Bloomberg’s numbers came just two months before an unexpected seismic shock in currency markets highlighted the dangers of forex trading. On January 15, 2015the Swiss National Bank abandoned the ceiling of 1.2 Swiss francs against the euro, which had been in place for three years. As a result, the Swiss franc rose 41% against the euro.

The minimum capital to enter Forex Perspect When it comes to retail forex traders, one of the most significant differences between trading companies and professional traders is that they havePerspect

The Swiss central bank‘s surprise move cost hundreds of millions of dollars in losses to countless participants in forex trading, from small retail investors to large banks. Losses in retail accounts wiped out and bankrupted at least three brokerages and pushed FXCM, then the largest forex broker in the United States, to the brink of bankruptcy.

The risk that forex traders confront is not limited to unexpected one-time incidents. Here are seven more reasons why the odds are stacked against the retail trader who wants to get rich trading the forex market.

Excessive leverage

Although currencies can be volatile, violent swings like the Swiss franc are not that common. For example, a significant move that takes the euro from 1.20 to 1.10 against the US dollar over a week is still a change of less than 10%. On the other hand, stocks can easily trade up 20% or more in a single day. But the appeal of forex trading lies in the enormous leverage forex brokers offer, which can increase profits (and losses).

What is Leverage in Forex? | PerspectMany people are attracted to forex trading because of the leverage brokers offer. Leverage allows traders to trade in M ​​marketsPerspect

A trader who sells EUR 5,000 against the USD at 1.20 and then covers the short position at 1.10 will make a profit of $500 or 8.33%. If the trader uses the maximum leverage allowed in the US of 50:1 (disregarding trading costs and commissions), the profit is $25,000 or 416.67%.

Excessive leverage

Of course, if the trader were long on the EUR at 1.20, used 50:1 leverage, and exited the trade at 1.10, the potential loss would be $ 25,000. Leverage can be as high as 200:1 or even greater in some foreign jurisdictions.. Because excessive leverage is the most significant risk factor in retail forex trading, regulators in some countries limit it.

Asymmetric risk for reward

Experienced forex traders keep their losses small and make up for them with substantial profits when their currency call is correct. However, most retail traders do the opposite, making small profits on some positions but holding losing trades for long periods and incurring significant losses. This can also result in a loss of more than your initial investment.

Asymmetric risk for reward

Platform or system failure

If you have a buy position and cannot close the deal due to a platform malfunction or system failure, imagine thatAnything from a power outage to an internet overload might be the cause. or a computer crash. This category also includes volatile times when orders such as stop losses do not work. For example, many traders had limited stop losses on their Swiss franc short positions before the rate hike on January 15, 2015. However, these were ineffective as liquidity dried up, even as everyone moved to close their short franc positions.


The largest forex trading banks have massive trading operations connected to the world of currency and have an information edge (eg, e, dealing in currency movements and covert government involvement) that are not accessible to individual traders.

currency fluctuations

Recall the example of the Swiss franc. High degrees of leverage means that business capital can be quickly drained during periods of unusual currency fluctuations. These events can occur suddenly and move markets before most traders have a chance to react.

OTC market

The forex market is an over-the-counter market that is neither centralized or regulated in the same way that the stock and futures markets are. This also means that forex trades are not guaranteed by any clearing house, which can lead to counterparty risk.

$6 Trillion Daily

While the OTC forex market is decentralized, it is vast, with data from a 2019 three-year Central Bank of Foreign Exchange survey showing that more than $6 trillion of currency is traded daily.

Fraud and market manipulation

There have been forex fraud cases, such as Safe investment, which disappeared with more than $1 billion of investor capital in 2014. For example, in May 2015, five major banks were fined nearly $6 billion for attempting to manipulate exchange rates between 2007 and 2013, bringing the total fines levied on the five banks to almost $9 billion.

Fraud and market manipulation


If you still want to try your hand at forex trading, it’s wise to use a few safeguards: 

  • Limit your leverage.
  • Keep losses limited.
  • Use a reputable forex broker.

 Although the odds are still stacked against you, these steps may go some way to leveling the playing field.

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