With the world population well over 7 billion and at least half earning some living, it’s clear to witness the number of careers is countless. Just a few decades ago, being involved in the workforce often required a high level of university education.
Thanks to technological advancements, the barrier to entry to putting food on the table have been drastically lowered. More and more people have flocked to remote work, and trading forex just so happens to be an avenue that’s been increasingly explored over the last decade.
It’s the dream of many aspiring and experienced traders to trade the markets full-time. The benefit of a leveraged financial market like currencies is, theoretically, there is no ceiling to your potential profits.
Trading forex is tremendously scalable with proper knowledge, experience, and intricate skill. Putting aside some of the prominent drawbacks, can someone realistically trade forex for a living?
This article will explore this simple yet critical question in more detail and provide some light at the end of the tunnel.
Redefining the ‘for a living’ ideology
In tackling this question, it’s beneficial to dissect the ‘for a living’ concept because it can be challenging to grasp in the context of an online-traded market. The definition of doing anything for a living means engaging in a job or career, whether full-time or part-time, providing one with a calculable earning stream.
Unfortunately, therein lies the problem; most people liken trading forex to a job, making it difficult for many to maintain consistent profits in the markets over time.
In many ways, a good full-time career provides more peace of mind as you have a predictable income source, whether over a few months or a few years. Of course, the drawback is the person’s earning potential is limited.
On the other hand, there’s much more scalability with forex. However, the big problem is one’s gains in the markets are highly unstable where you cannot predict what you can produce in a day, week, month, or even a year.
Consider this analogy: a trader who has returned 100% on a $10 000 account in a year may tell you they trade forex for a living. However, you might find many months of extended drawdowns.
If we averaged what that person gained daily (excluding roughly 104 days from the weekends [52 X 2 days]), the trader would have theoretically made $38 ($10 000 / 261 days). While this figure might be decent to some, this wouldn’t be money being directly credited to the trading account daily or weekly.
Dealing with the uncertainties of the market
We could liken trading forex to a waiter working at a high-end restaurant having no base salary but earning tips. On some nights, that person can pull in $1000, $2000 at another time; on some days, they may only make enough for travel fare.
Even if the effort involved in being the best waiter were at its peak, there wouldn’t be any guarantee of a set income every night. In a nutshell, trading forex is pretty similar because of market dynamics.
On one end, there’s flexibility in not being confined to traditional working hours. However, the issue is you only stand a chance of making money when the right opportunities appear. Unfortunately, these don’t come up often enough since no trader can influence price movements.
Market conditions are dynamic and constantly changing. Even when trading set-ups present themselves to a trader, the outcome of their positions is still 50/50 due to the thousands of variables at play in moving the markets.
The ultimate solution to this challenge is taking a long-term outlook. When traders develop a strategy, they’ve ideally observed many scenarios of one pattern working out repeatedly over a long time producing net positive results.
Consequently, you believe that if you trade the strategy long enough, you should come out ahead. However, results in the short term are pretty random, and no one has control over this factor.
A better approach
The simple truth is no retail trader is paid to trade forex. Therefore, it’s dangerous and impractical to use this investment vehicle for paying bills, maintaining subsistence, or even a basic lifestyle. Rather, it might make more sense to view forex as an investment, an avenue to accumulate wealth over time, or a secondary income source.
It’s not unheard of for many forex traders to speculate in other financial instruments like commodities, futures, options, stocks, and cryptocurrencies as part of their investment portfolio. The beauty is, of course, no one is chained to only following the forex market.
Also, many successful traders will likely have regular careers like doctors, lawyers, accountants, artists, writers, etc., and use trading to supplement their income. Regardless, it’s beneficial to have some outlet, passion projects, or other methods of making money aside from trading for numerous reasons.
Using this approach will undoubtedly alleviate any pressure you may feel when your trading performance isn’t as desirable. There are several reasons why the failure rate in forex is high, but one of the fundamental causes is a lack of patience leading to over-trading and over-leveraging.
More often than not, having the wrong expectations is the key deterrent in countless traders being unable to produce consistent returns over a long sustained period.
It’s frequently cited that one should treat trading like a business rather than a hobby. The point of this article is to redefine the ‘for a living’ idea practically and realistically. Making profits in forex is a lot more complex and erratic than most traditional endeavors.
Unfortunately, the online education and marketing aspect of forex often paints an unrealistic picture of what defines a successful trader. With an increasingly depressive economy and people seeking alternative careers, trading forex usually seems like an easy way out.
Trading forex provides numerous benefits and incredible earning potential. However, it’s an environment of high uncertainty and unpredictability at its core, meaning it’s an unusually structured career. Those who last in this business comprehend and appreciate these components without enforcing irrelevant expectations.