Forex Basics

Can you get rich from Forex trading?

 

We hear from time to time about the stories of some Forex traders claiming to make a fortune in a short period of time, and how currency trading has guaranteed them a luxurious life. However, you will notice that most of these online stories end with a link to open an account with a Forex broker, or even buy a trading system that its owner claims to have superpowers. Although common sense requires not paying attention to such marketing tricks, the details of these stories will inevitably lead us to think about the truth of the matter. The question that will come to mind after finishing reading these ads is whether Forex trading alone is able to transfer it to the ranks of the wealthy. In this article, we will try to come up with a clear answer to this important question with a presentation of the foundations that support our argument.

 

How to get rich

Before deciding whether a Forex trader can really become a wealthy person by investing in the currency market, we first need to define what “richness” means. There is a great variation in the definition of a rich person, for example, a person who earns the equivalent of $ 50,000 in a third world country can guarantee himself a comfortable physical and social level. On the contrary, this amount will not be sufficient in the United States or Western European countries to rise to the ranks of the wealthy, as this person will be classified at best within the middle-income class. Over the past few years, the criteria for rating the rich have also changed, as a person needed only a million dollars in his bank account to hold this title. However, given the impact of inflation, sitting among the wealthy now requires a cash surplus that exceeds this number.

 

According to a survey conducted by brokerage firm Charles Schwab, a wealthy person in the United States should own more than $ 2.40 million. This number may vary slightly depending on the country in which the Forex trader resides. In any case, we will use this number, that is, $ 2.40 million, as a minimum to classify the trader as the wealthy.

 

Generate wealth

Forex discussion is not without the idea of ​​getting rich. In general, working in the field of financial trading is the preferred choice for many who wish to build their own wealth by taking on some risks associated with working in this field. The same applies to currency traders, where the Forex market provides unparalleled opportunities to get rich, at least in theory. Even in practice, there are no major restrictions on capital requirements, trading time, or profits that you can make. In addition, the leverage provided by Forex brokers, and although it is a double-edged sword, it is not equally available in other financial markets. These facts encourage novice traders to be convinced of the idea of ​​being able to get rich quickly. Unlike the traditional business and investment world, making profits from Forex trading does not require a significant amount of time consuming. This is precisely one of the most important reasons why the idea of ​​building wealth is so popular by simply touching on any discussion about Forex.

 

Get rich from Forex trading

Of course, you can become rich by trading currencies. But this dream cannot be fulfilled overnight. It may take individual traders many years to grow their small account by accumulating profits. There is also a possibility that you will lose all your money. This prompts us to ask the ideal capital with which to start your business in Forex trading. Some Forex brokers allow opening a single dollar account. In practice, however, it is impossible to achieve any real income using this negligible amount. This is based on the fact that all traders, even the seasoned ones, can face a series of consecutive losses which exposes them to evaporation of their account within a short period. As a general rule, a trader’s loss in any trade should not exceed 2% of the capital.

 

According to this rule, a person who trades 0.01 lot with a leverage of 1: 100 and placing a stop loss within 50 points from the entry point will need initial capital up to $ 350. Working according to these limitations, but with less capital than the amount in question, will necessarily result in hitting stop levels due to the diminishing margin. On the contrary, the risk of evaporation of a trader’s balance decreases in parallel with the increase in the capital at which the business begins, but provided that he follows prudent rules for managing risks and choosing the appropriate size of deals.

Although saving $ 350 may be enough to start trading Forex, converting this small amount into millions of dollars will be an almost impossible task. In other words, increasing the initial capital will allow the trader to reduce the time and effort required to achieve his goal of becoming a “rich person”.

 

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