How Much Money Can Forex Traders Make Per Day?

Many forex traders even lose money each day. What separates the traders that make big money from the traders that only make a little… or even lose?

It all comes down to account size and position size, number of trades, win rate, and reward/risk. That’s it. Those factors determine how much money you make.

Let’s play around with some different scenarios and strategies to see how each one can play out when trading the market.

The Factors That Determine How Much Money You Make Forex Trading

Profits can be broken down based on a few simple statistics. You can then play around with those statistics to see how it affects profits. If you have a strategy, record that data to determine how well your methods are working for you.

Here are the four factors that determine how much you can make forex trading:

• Capital and position size
• How many trades you take
• How many trades you win
• The size of your winning trades relative to your losing ones

Let’s tackle these in order, exploring how each of these statistics affects how much money you make trading.

Capital: The more capital you have, the bigger the positions you can take. If you can take a larger position you can potentially make or lose more money, compared to someone trading a smaller size.

For example, someone with $1000 may make 80% per month, and thus make $800. Someone with $1 million can make 5% per month and make $50,000. Smaller percentage return, but a much bigger income. Capital matters.

Position size is based on capital and risk tolerance. It is advised not to risk more than 1% of the account on a trade. This means if the account is at $5,000, you shouldn’t lose more than $50 on a single trade. This still holds true even though you may be using all your capital, or even more with leverage, to initiate the trade.

Number of trades: The number of trades you take also affects your profits. If you have a winning strategy, the more trades you take, the more money you make. Think of a casino. They have the house advantage, so they want people to play as many hands as possible. Their profits tend to rise with each bet placed.

Win rate: Win rate is the percentage of trades you win out of the trades you take. If you win 50 out of 100 trades, your win rate is 50%. If you win 60 out of 100, it is 60%. Contrary to what many beginners believe, you don’t need a win rate to be profitable. In fact, you can be very profitable even with a 30% or 40% win rate, if you have a high reward/risk.

Reward/risk: This is how big your average profit is relative to your average loss. If you calculate your average loss and it is $100, but your average win is $220, your reward to risk is 2.2. That’s good; your wins are bigger than your losses.

There is an interplay between win rate and reward/risk. If you’re seeking large rewards, the win rate generally goes down, because those huge moves only come along every once in a while. Traders that go for small profits tend to have higher win rates because the target is easier to reach.

How Much Money Forex Traders Make Per Day

Now that you understand the statistics that go into determining profits, let’s look at some examples.

We’ll look at traders with different account sizes, win rates, numbers of trades, and reward/risk. This will give you an idea of the profit potential of forex day trading.

Profits for an Active Forex Day Trader

Let’s take an example of a day trading scenario. This day trader trades for 2 hours per day and has the following stats:

• $10,000 account, risking 1% of the account per trade
• 5 trades per day
• 50% win rate
• 2.2:1 reward risk

First, calculate what 1% of the account is. It’s $100. Based on the reward:risk, we know losing trades are $100 and wins are $220. On average, there are 2.5 winners and 2.5 losses per day:

2.5 x $220 = $550 in wins

2.5 x $100 = $250 in losses

Profit = $300/day less commissions, if applicable.

Now, let’s look at an active forex trader with some different statistics. This trader trades for 1 hour per day and has the following stats:

• $2,000 account, risking 1% of the account per trade
• 2 trades per day
• 60% win rate
• 1.5:1 reward risk

This trader is risking $20 (1% of $2000) per trade, and their profits are 1.5x bigger, so their average win is $30. Let’s say they take 2 trades per day, and on average, they win 1.2 of those trades (0.6 x 2).

That would mean they lose 0.8 trades. It sounds weird to win 1.2 trades per day, but over the course of a week, they would have made 10 trades and won 6 (60%) which is 5×1.2.

1.2 x $30 = 36 in wins

0.8 x $20 = $16 in losses

Profit = $20/day, on average, less commissions if applicable.

Profits for a Less Active Day Trader

Let’s take another scenario of a trader who is more laid back. They wait for one, maybe two, big trades a day, and they try to captilize on it by seeking a big profit.

• $20,000 account, risking 0.5% of the account per trade
• 1 trade per day
• 30% win rate
• 7:1 reward risk

They are risking $100 per trade, which is 0.5% of their account. They only win 0.3 of their trades, and lose 0.7. But their wins, $700 (because of the 7:1 reward/risk), are much bigger than their losses.

0.3 x $700 = $210 in wins

0.7 x $100 = $70 in losses

Profit = $140/day, on average.

Obviously, if they are only taking one trade per day, it is more likely to be daily profits and losses of -100, -100, +700, -100, and so on. But when it is all averaged out, it comes out to $140 per day.

You can play around with the numbers in any of these scenarios to see the profit potential. If you have a smaller account, reduce the account size. Input your estimated win rate or reward:risk to see how it affects performance. More trades mean more money, with a winning system, but you only want to be taking quality trades that don’t reduce your win rate or reward/risk.

Things to Keep in Mind about Trading Profits

In the above scenarios, you can input whatever you want and come up with some massive profits. But is it realistic? Here are some things to remember when trying to figure out your forex profit potential.

Ultimately, your strategy tells you your win rate and reward:risk. Theory doesn’t matter; you are only as good as your results.

In theory, it looks easy to make loads of money winning only 50% of trades and taking 10 trades a day with a 3:1 reward:risk. But can you actually find that many quality trades, while maintaining those statistics? Maybe… or maybe not.

Also, remember that each day is different. We can track our statistics and averages, but in my experience with almost 20 years of trading, my yearly income has never been the same.

It is always changing. Each month produces a different income than the last. And finally, past results may not be replicated in the future.