Take a guess. You’re way off.
On this episode of the Forex Q&A Podcast, I take a question I think we all need to understand going forward so we can manage our expectations properly.
And our question this week is…
“How much money do I need if I want to trade Forex professionally?”
Shawn – Boca Raton, FL
As always, you can listen to the podcast right here, or just keep on reading.
I will answer this in a way I’ll bet you aren’t expecting, but there are some things to get out of the way first, and it’s important you understand them as you go along.
There are few ways to answer this, depending on what you’re really asking here,
What is a “Professional Forex Trader”?
Well by the very definition of the word “Professional” if used as an adjective like Shawn did (click that link for the definitions), it can actually mean two things. I only referenced one on the podcast. I may have used a different site, but anyway…
The second definition, the one I would recognize as the best option, is “participating for gain or livelihood in an activity or field of endeavor often engaged in by amateurs, ie: a professional golfer”
So if you wanted to, I mean really wanted to, you can say by this very definition, anyone who trades a real money account is a Professional Forex Trader.
This doesn’t sit well with actual pros like me.
Now there aren’t many of us, but in almost every YouTube channel out there, and every dumb Facebook ad for some guy selling a trading course, you see them reference themselves as “Professional Forex Traders”.
I get it now. They aren’t really pros, but they aren’t lying either. Pretty slick. But not in a good way. Yet another way they like to mislead you.
“Hey bro, buy my course, because I’m a professional. Look at this lifestyle!”
The first definition is even more egregious:
Not to go against Webster’s Dictionary of all things, but come on now.
“b :” really gets silly. You are “professional” simply by being engaged in a profession? Am I blogging professionally right now? Did I cook professionally earlier today when I made eggs for breakfast?
I may have just forgotten how to read, but when you have definitions out there like this, people will take full advantage of them for their own gain, because if you were to ever call them out, they can legally cover their own asses with those definitions.
Minimum Deposits
So if you too want to be scammy, or impress people without completely 100% lying to them, most brokers will allow you to open an account with as little as $500 for the more reputable brokers, and even less in many cases. Less, because your smaller ones know that anyone depositing less than $500 is absolute dead money, and you will be giving it away in no time.
(You can however, make a minimum deposit and not be one of these targets. Episode 6 will show you how, stay tuned!)
I will give away part of Episode 6 however, and that is to NEVER open a real money account before you’ve done lots of demo trading first.
Acceptable Definition of a Professional Forex Trader #1
This is what happens when you ask me vague questions. I never quite know what you mean, I can only guess. And what I think Shawn meant was if you were going to live off of the money you make trading Forex, how much would you need?
Answer: Lots. Lots of fucking money.
Let’s math this out. And we’ll speak in USD for now.
Let’s say you have $100,000 in the bank, and you can afford to lose it if worse came to worse (so in other words, you’re in the top 1-2% of earners globally), and you use all of it to trade Forex.
And why not just keep fantasizing here, let’s also say your yearly ROI is about the same as Warren Buffet’s and you’re cranking out a 20% return year after year.
If both of those things are true, you’re making $20,000 a year trading. And if you use all of it, you no longer have a chance to gain compound interest on that money.
Is this the lifestyle you’ve always wanted? It could be, but I doubt it, and a lot of things would have to go right just to get yourself there and keep yourself there.
What $20K/yr gets you in California.
It’s sobering news, but if you’ve made it this far in the blog, or in the podcast, I have some good news for you.
Acceptable Definition of a Professional Forex Trader #2
You can take the route I took. I certainly did not have $100K in my bank account, but I still found a way to do this as an actual professional. And with somebody else’s money!
I don’t mean go and solicit money from strangers or even family members. I don’t want to touch people’s investment capital,I can’t even imagine doing that. I’m sure I’d make them very happy, but I just don’t have the stomach for it.
Trading a Prop Firm’s money on the other hand, is as good as it gets.
Prop firms hire traders to trade their money, and keep a percentage of the profits. You will always have to put some money forward, for training and for the firm’s own risk protection (Any firm would be stupid not to do this).
But from there, if you can trade well enough to cover their desk fees (Some desk fees are big, some are small. Do your research), you can make consistent money trading Forex with an 8 to 9-figure firm’s capital.
Understand however, that you actually have to be good, consistently good, for them to take you seriously and hire you. You will have to prove this, more than once. You will have to show them previous records of your success, and then they will almost always put you through their own trials just to make sure you can handle the pressure, and you weren’t full of shit.
You can also get a job at a hedge fund, bank, financial institution, etc, but I am less qualified to speak about this. What I can say is if you don’t have a degree (a ridiculous requirement in 2018 IMO), having a great trading record can sometimes overcome this.
If you’re not at that level now, that’s okay, you can get there. This is what I’ve been trying to do for you this whole time with the blog, the podcast, and the YouTube channel.
Conclusion
You can trade Forex professionally, and can do it with a firm’s money. This may take as little as nothing if you can do it demo trading and be convincing enough to a future employer, but putting as little as $500 in an account and building it can go a long way too because it shows them you’re consistent regardless of if the money is real or fake.
In going this route, you can keep your risk very small, and learn how to become an amazing trader during the process.
And the payoff for that, my friends, is worth any amount of time and money you initially put in.
— VP
You can ask me a question yourself! Just go here.