The Forex market is the most liquid financial market in the world. It has long been a market comprised of a wide range of participants from across the globe, but the rise of internet trading has made it even more accessible. Consequently, an incredibly diverse variety of people are involved in the market.
In other words, it is no longer just a game for the big boys at investment banks.
However, anyone new to the Forex market may still be wondering whether Forex trading for a living is possible as a retail customer. Here's the good news – it's possible to trade Forex for a living.
The proof is the numerous full-time and part-time traders all over the world. But to be someone who does FX trading for a living full-time, you are going to have to put in the legwork. This means you will need to develop a successful trading system, which is likely to take time and effort.
There may be some false starts. And there will undoubtedly be many lessons to be learned. But don't be deterred by such adversity.
Instead, try to learn from the experience.
Those that do stay the course learn that the financial markets have their merits. With the Forex market, it does not matter who you are or what your background is. All that matters is how well you make trading decisions.
FINDING A SUCCESSFUL STRATEGY
If you are going to trade FX for a living, you're going to need a successful strategy. A useful way of discovering which strategies work for you is to trade on actual market prices with no risk.
The only way to stay risk-free is via a demo trading account.
Free demo account
With a demo account in play, your aim is to find a strategy that gives you a trading edge. An edge is a term borrowed from game theory, which means that conditions are in your favour.
Why is it essential to trade with an edge?
A trading strategy with an edge will yield net gains in the long term vs. a trading strategy without one.
Think of trying to win in the long run by gambling on a coin flip. The outcome of a flipped coin is known as a random walk. You cannot find a way to predict the outcome – whether a head or a tail has previously come up has no bearing on the probability of the next flip.
When you gamble on the flip of a coin, there is no edge.
The Forex market is completely different. Those trading the market influence where the prices go. Previous prices can influence those trading the market. So previous prices can have a bearing on future prices.
Note that this is not the same as saying that previous prices will affect future prices. Be aware of the common warning:
Previous performance does not guarantee future performance.
Therefore, historical prices are not necessarily a strong guide for future performance, although they remain one of the best guides available.
So, can Forex be traded for a living?
Again, yes - but not without a strategy. To do so would be like gambling on that coin flip, except with added transaction costs. You might do it for fun, but you wouldn't pursue it as a means of making a living.
To work out if a strategy works, you will need to backtest it. You can read more about backtesting in our education section. At its core, backtesting seeks to simulate the performance of a strategy using historical data.
Always be aware that backtesting is a rough guide. The smaller your sample data, the rougher this guide will be. You are making an assumption that the past represents what the future will bring.
For this to be valid at all, your testing must cover a large enough sample. If you test over a short period of time, your test may not be representative of all market conditions.
When you backtest, try to be skeptical of your results. You must note that a return generated in the past may not perform so well in the future, and also attempt to disprove your results, to find any hidden system flaws.
If your system stands up to this kind of scrutiny, it might just work.
What can you do once you have identified a strategy that looks successful? You can start trading with real money.
A successful strategy is only the starting point though, if trading Forex for a living is your end game. To get to your goal, you will have to build up to it. Start small and establish a method that works for you.
Keep in mind the stress that comes with real risk and build up your risk capital from there.
A quick note on success – a successful trader may not necessarily win many more times than they lose. In fact, some successful systems may yield more by losing trades than winning. It is the magnitude of gains and losses that is vitally important.
A successful trader seeks to maximise gains and is not overly concerned with the success rate of trades. They know that maximising gains has little to do with the ratio of winning trades to losing ones, it's more about how you deal with winning and losing trades. If you are trading with an edge, you will want to trade long enough for the edge to pay off.
Good money management is essential – read our top 10 money management tips to get started.
More pointers on how to trade Forex for a living
MT4 Supreme Interface
If you are hoping to trade Forex for a living, you need to treat it like a profession. You must examine your motivations. Boring, repetitive and profitable is better than exciting, varied and unprofitable.
Once you've discovered what works, stick with it until it no longer works. Keep scrupulous records of your profit and losses – a spreadsheet will allow you to examine just how well you are performing.
Beginners are often reluctant to examine how much they have lost, so they overestimate their performance. Be honest with yourself about your level of success.
You also need to consider the impact on your lifestyle if you are trading Forex for a living. If you want to succeed, you must be prepared to commit the necessary time and attention to trading.
Advances in technology mean the 24-hour FX market can be with you at all times on your phone, but what you gain in accessibility may also be countered by a reduction in your free time.
Professional-grade tools like MetaTrader Supreme 4 can help with time management. Our Admiral.Prime account offers institutional-quality execution.
If you are supporting yourself with the proceeds of your trading, you will not be trading in small sizes. There will inevitably be times when trades are going against you.
For most people, this will provoke a level of anxiety.
If you've built up the capital from a small starting point, it may help ease this anxiety. But it's still worth preparing yourself for the psychological rigors you will face.
Final words on FX trading for a living
So, can Forex be traded for a living?
Well, it's not easy and it required a lot of effort – but still, the answer is yes. We aren't talking about generating enough to support a millionaire lifestyle of course. Such gains are not impossible, but clearly that kind of performance is rare.
Generating consistent returns that entirely support your cost of living is a realistic goal for a wide cross-section of traders, provided they are willing to put in the work and have the patience to stick with it.
Also – and this is a really important point – you should definitely keep educating yourself and learn new things. Being a successful trader means staying fresh and open to new experiences.