Among the retail traders I’ve spoken to over the years, more than half say that trading Forex for a living is their eventual goal.
This isn’t surprising, given that traders can make money anywhere in the world with an internet connection.
I mean, who can resist the idea of lying at the beach sipping a mojito, all while making a thousand dollars a day?
Alas, while this is technically possible, it isn’t the full story.
You see… after more than a decade in this business, I’ve learned a few things about full-time trading that most new traders don’t realize.
Trading Forex for a living has its perks, sure… but it’s not as wonderful as you might think.
So here are 4 harsh truths about full-time trading that will give you a more realistic view of what to expect.
Trading Forex for a Living – Harsh Truth #1
Your average monthly profit will be less than 8%.
The truth is that a 8% average monthly return on your trading capital is unsustainable over the long term.
If you’re lucky, you might get an average 8% monthly return over the first 12 months… but it’s very unlikely that you’ll maintain such performance levels without excessive drawdowns.
More likely, your average monthly return over the long term will be less than 5%.
Of course, as with any competitive endeavor there will be outliers who will perform much better than the average winning trader. But for the most part, a reasonable profit expectation for most would be an average of 2-4% per month.
Surprised? Most new traders would be.
The truth can be a bitter pill to swallow, but it’s better to be disappointed with the truth than to be led on by a lie.
After all, the more realistic your projections, the better position you’re in to make effective decisions.
Which brings me to the next point…
Harsh Truth #2
You’re probably under-capitalized.
With a more realistic profit expectation, you come to realize that to make $2,000 per month you have to be trading with a $40,000 account… and that’s being optimistic. More likely, you’d need more than that.
A common mistake new traders make is thinking that they can start with a $300 account and grow that capital into an amount large enough to sustain full-time trading.
To achieve this, one would have to make a 10% profit consecutively every month for 4 years. That’s pretty much a perfect record for 48 straight months.
It’s not going to happen.
The bottom line is that in this business, it takes money to make money. Unless you’re going to have access to mid-five figures of trading capital, trading Forex for a living is not something you should be considering right now.
Part 2 Coming Soon
Full-time trading is a highly challenging endeavor, and unless you’re prepared to deal with the practical reality of what it takes, you’re better off working towards a different objective.
In the next post, we’ll take a look at another 2 harsh truths of trading Forex for a living, and what you should expect if this is your goal.