The forex market is one of the most significant places to make money in the industry. Many people want to know how to earn big and what separates amateurs from professionals. Below we go over the differences and what elements influence the earnings of professionals.
So exactly how much do professional forex traders make? Discover the answer to your question here.
How Does Forex Trading Work?
It’s necessary to understand how the forex market works before answering, “How much do professional forex traders make?”. Forex is regulated by supply and demand, which means value increases when the demand for currency goes up. You make money when the price decreases between buying and selling assets.
How Do Professional Traders Differ from Beginners?
The biggest difference between beginner and professional forex traders is how they monitor the market. Beginners tend to study the technical data, while professionals use fundamental and technical analysis tools to confirm the information on the charts.
Professionals are more at ease relying on what they see instead of sticking to predictions. They spend less time analyzing the market before deciding and don’t depend on technical indicators that could make it more difficult to read what’s on the charts.
Types of Professional Forex Traders
Professional forex traders are divided into two main categories: hedge fund traders and independent traders.
Hedge Fund Traders
Those who work for an investment bank or a hedge fund receive a salary with performance-based bonuses. Salaried traders have access to the best training programs, tools, and software that others may not. The money used in the transactions also belongs to the company, reducing personal risk.
There are a few drawbacks to working for a hedge fund. Clients can be demanding, and the hours are long. There is also the risk of losing your job if you cannot reach the company’s targets.
Those who work independently choose to work for themselves for many reasons. Working for yourself provides more flexibility in every aspect of the job. You also get to keep all your earnings rather than just a percentage when working for a hedge fund.
One of the most significant downsides is the risk. You’re trading with your own money and don’t receive a base salary you can fall on if you lose your earnings. You depend on trade earnings and can spend large sums of money on software and paid data streams.
How Much Do Professional Forex Traders Make?
Ultimately, the amount a trader earns will differ significantly based on several factors. Below are three of the most important.
Salary, commission, and bonuses depend significantly on the company. The Bureau of Labor Statistics reports the median pay for those in the trading industry was $98,030 in 2021. However, this includes both the base pay plus commissions or bonuses an agent may receive.
The differences in company structure help account for the wide range of salaries as reported by the Bureau of Labor Statistics: from $37,970 to $205,440. Whether someone works for a smaller firm or a big-name investor will determine where a trader falls within this range.
Similar to the difference between companies, seniority will play a large role in what a trader earns yearly. A junior trader is likely to earn a salary closer to the lower end of the pay range. However, with more seniority comes larger commissions and bonuses in addition to greater base pay. This will put a senior trader closer to the $200,000 yearly salary if not more.
The location also makes a difference in salary. In the United States, someone in New York or San Francisco will earn far more than someone in smaller cities. In the U.K, someone can make between £47,244 and £177,379 before commission and bonuses.
How Much Do Independent Forex Traders Make?
Monthly payouts can be similar to the base pay of a hedge fund, but the level of risk is high, so you can easily lose more than you have. Without the security of a company job, it can be difficult to be certain of your finances.
Professionals must understand money and risk management, risk to reward ratios, and many other elements that lead to long-term growth over loss.
Your experience, who you work for, and your location have a major impact on monthly earnings as a professional forex trader. Monthly profit isn’t guaranteed, especially as an independent trader. Predictions are difficult to make, so research is key to understand where you might fall in the industry as a trader.