Is day trading forex profitable?
Most traders prefer the forex market for trading over the other financial markets because it requires the least amount of capital to start day trading. Forex trading occurs 24 hours a day during the five weekdays and offers a huge profit potential due to the leverage provided by the forex brokers. The forex market is extremely volatile and a novice trader can lose a substantial amount of money.
The question is: how much profit does a forex day trader make? This question is impossible to answer. The reason is that many traders disclose their earnings to anyone but the Inland Revenue Service (IRS). Additionally, results differ extensively depending on the risk management practices, trading strategies, and the amount of capital available for trading.
This is the fact that day trading is a highly risky activity and losing money at day trading is easy. Choosing the right forex broker, and developing a suitable trading strategy with proper risk management are the keys to success in day trading. Click here to check the best south African brokers.
What Do Day Traders Do?
Day trading refers to the entrance and exit of a trader within a single day, and hence the term day traders. They typically do not hold positions overnight.
In general, day traders target stocks, currencies (including crypto), binary options, commodities, or futures holding positions for hours, minutes, or sometimes even seconds before selling again.
The goal of day trading is to make profits from short-term price movements. In trading, leverage plays an important role in the amplification of returns and the amplification of losses.
Forex Day Trading Risk Management
Managing the risk is one of the crucial elements of day trading to gain maximum profitability. Initially, you should start small to keep the risk small. In day trading, the risk is managed with the help of a stop-loss order.
Important factors that Influence Earning potential in Day Trading
Significant factors that influence a day trader’s earning potential include:
1- The Capital Amount You Have
If a trader starts with 5000 USD, his earning potential is far less than the trader who begins with 50,000 USD.
2- Market in Which You Trade
Each financial market has its pros and cons. In general, the stocks market is the most capital-intensive marketplace. Novice traders can start their trading career with less capital than the other asset classes, such as forex or futures.
3- Timeframe
Some day traders get success in just a few days or weeks. Profitable approaches, systems, and trading strategies can sometimes take years to develop.
Salary of a Day Trader
Day traders usually do not get paid a regular wage or salary whether they are trading for themselves or working for a trading shop. Instead, they get their earnings from their net profits. These profits comprise what has left over after trading commissions and fees, the cost of trading software, and the amount of ‘Seat fee’ paid to a trading company. However, according to a report by Glassdoor, the income of an average day trader in 2021 was $74,000 per year.
