When you want to put money into the Forex market, you have to be completely honest about the opportunities to make a profit。Financial markets are a zero-sum game - for every winner, there is a corresponding loser.。

The answer to this question is that for some people, Forex trading is profitable and the challenge is to find a way to benefit you。In this article, we will explore ways to improve the chances of success。

Understanding the Forex market and its participants

If your trading is based on coin toss, then from a statistical point of view, the ratio of expected profit and loss is 50-50。The reality is that retail traders have worse profit / loss ratios than this。

All reputable and regulated brokers are required to publish the percentage of retail investor accounts that lose money when trading spreads and CFDs with them, and even well-known brokers report that 75 to 80 per cent of retail investors have losses。

Although brokers offer demo account exercises, research and learning services, and even "weekly trading" support, if the law of probability indicates a 50% loss, why is the actual total close to 75%？Part of the reason is that some hedge funds and other institutional traders have the resources and experience to operate in the foreign exchange market.。

What methods can make trading profitable?？

One way to make trading more profitable is to ensure that you take full advantage of demo trading, and new ideas should always be researched, developed and tested using demo accounts。

Only after extensive testing can any strategy move to real-time trading. This shift is best limited to small transactions. You will improve your chances of success by better understanding the management trading cycle。

Let's go back to the coin toss example。If 50% of the price movement is in your favor and 50% is not, cash returns will be skewed if profits are cashed out too early due to "panic."。

This is a common feature of beginner traders and can be attributed to basic human psychology。Human nature thinks things will eventually get better, so some traders let losers run too long。This natural aversion to giving back what has been "won" leads traders to profit prematurely from winners.。

The profit / loss ratio can be 50-50, but poor trade management can make you one of the losing retail investor accounts。

Also, as a small business, you may not be able to compete with large investment firms in all markets。Focusing on one currency pair, such as the euro against the dollar or the pound against the dollar, may allow things to develop in your favor。

Also consider the question of where to trade after determining a specific currency pair or a strategy that is more suitable for you。There are many high quality regulated brokers and the right broker can have a beneficial impact on your trading。

Ensure that the broker you choose is regulated by a primary regulator。The next step is to open a demo account to try。Also consider mobile trading, which varies by broker。

Cultivate trading psychology

Extensive learning about trading is good for you, and the trading journey is fascinating。However, it is important to be clear what is exciting and what is profitable, the two may not always coincide。

Focusing on a specific currency pair can make your learning more focused and informative。Similarly, you may find that a particular strategy suits you and choose to apply it to the currency pair that is most likely to generate profits。

By focusing on one currency pair or one strategy, efforts can be made to resist widespread temptation。Our goal is not to become a market expert, but to become a profitable trader。

Successful trading requires discipline and calmness, the strategy should include trade entry points and trade exit points, which can start with accepting free signals from third parties, but resist the temptation to allow other people's signals to run real currencies until you thoroughly test them with a demo account。

Another benefit of a demo account is that it allows you to get used to losing trades。If you make 100 trades and all make a profit, then either you can pick that strategy or you need to change it completely。

Trading is risky and no one is always a winner。The ability to accept losses while reducing the occurrence of losses is one of the ways to improve the profitability of foreign exchange trading.。

Realistic goals for novice traders

The next question is, how much money can be made from forex trading？In a way, this is the key to the whole question of profitability。

Any trader starting at $200 who wants to earn $1,000 a month must run a strategy with risk-reward characteristics to ensure that they do not face bankruptcy and that no one can buck the market.。

More realistic targets would be based on percentage returns rather than total cash。

If the first trade wins and the account is closed for the rest of the year, you may get a profit percentage above the base rate。

In a low interest rate environment, large institutional investors such as hedge funds are also struggling to earn decent returns。As explained by Reuters:

"Years of low or below-zero interest rates, trillions of dollars of stimulus, and perhaps most importantly, an almost complete absence of policy disagreements among the world's major central banks have all but erased opportunity."。"

The exchange hedge fund's Eureka Hedge Index performance shows that the foreign exchange market has been in trouble for the past few years, even for more well-known players.。Percentage returns have been flat since 2014。

The foreign exchange hedge fund index returned only zero last year..86%。If the "smartest person in the room" posted such a return, it would be too hard on yourself to blame yourself for 5%, 10% and 25% returns。

Is it feasible to get rich in foreign exchange trading?？

Some people do make a lot of money through forex trading。If you have a lot of cash to invest, you can join the rich club on this basis even with a relatively low risk / reward strategy。If you have less capital and want to get rich, you need to adjust your risk / return。Traders who take the latter tend to account for a large portion of the 80% of losing traders。Taking a more professional approach may get you in the top 20%, considering they're your "adversaries."。

Some retail investors will be happy to announce how they are giving up their day jobs。Big banks and investment funds are constantly trading in the market to generate returns for investors and shareholders。

However, even top forex traders have to take into account some down days。According to Reuters:

Goldman Sachs lost more than $1 billion in currency trading in the third quarter, regulatory filings show, giving an insight into why the firm is considered one of Wall Street's savviest traders, yet its main trading arm posted its worst quarterly performance since the 2017 financial crisis.。"

Conclusion

These practical ways of weighing the odds in your favor can make you one of the 25% of profitable traders。

The first step in active trading is to abandon the unrealistic ambition of making excess profits as an initial investment in a short period of time.。On second thought, any lucrative return will get you into a fairly exclusive club。Becoming one of the 25% of successful retail investors is a major achievement。

Turning success into more cash requires expanding the size of the position, not abandoning the winning strategy。