Similar to when you apply to any other job, when you decide to generate an income via forex trading , asking or knowing how much money you can make is a very valid question.
Most new traders tend to focus on how much money can be made on a per trade or month basis. This mainly stems from watching different traders on social media flashing their winning trades. But what’s unknown is their actual capital and some time whether they are actually trading a REAL account. But that’s a different topic for another time.
What you need to be focusing on is the percentage you can gain relatively to your account balance. Let’s first discuss why you need to focus on percentage returns.
The amount of money you can make per trade is always relative to the total trading capital. Why?
Because as disciplined traders we only risk X% of our capital on each trade. The percentage you are willing to risk per trade is truly a personal decision, but keep in mind that no one trade should put you account capital or account balance at risk. That said a good risk per trade should be around 1% – 5% per trade.
That being said you will understand that a new trader with $5000 account balance and a veteran trader with a $100,000 account balance has huge difference in how much money they will risk per trade.
A new trader with $5000 account balance would risk $50 per trade A veteran trader with $100,000 account balance would risk $1000 per trade.
If both these traders achieve a 2:1 risk to reward on this trade, the new trader would walk out with a $100 profit and the veteran trader would walk out with $2000 profit.
I hope this explain why you should not be focusing on the dollar amount gains but rather focus on the percentage of your capital you can gains. Also please note that you should not be focusing on gains and losses for each and very trader. As a trader you should understand that trading is a probability game and learnt to except loosing trader. You should be focusing on weekly and monthly percentage gains.
To summarize what I mentioned above,
- Understand that measure your self by percentage gains relatively to trading capital.
- When you trade always risk no more than 1%-2% of your trading capital
- Don’t expect to win all of the traders
- Measure goals weekly or monthly