Is forex or currency trading worth the risk? This is one of the most popular questions a lot of individuals ask when considering trading forex. They do so because currency trading is among the top lucrative jobs in finance around the world.
Data obtained from salary.com revealed that the average foreign exchange trader’s salary at the entry level in the world’s biggest economy was $76,458 as of July 27, 2020. However, the range typically falls between $42,048 and $97,964 for the rest of the world.
It should be noted that currency trading is among the top lucrative jobs. Bank forex traders only make up 5% of the total number of currency traders around the world, with other retail forex speculators accounting for the remaining 95%. But even at that, these few bank traders account for 92% of all forex volumes globally.
So, how can one become a good Forex trader?
Michael Chukwuka, a currency trader at a leading Nigerian bank who spoke to Nairametrics, shared insight on what it takes to be a Forex dealer at a bank. He said:
“In my years of being a banker and a forex trader, I would say it has been an interesting one for me. But what I tell a lot of people who have exclaimed ‘Oh wow!! I hear you guys make a lot of money trading,’ is that well, true there is a lot of money to be made in any business venture you go in and also so much money to be lost. This all depends on the will power to learn, understand, and have the will power to be guided properly with a goal in mind not just I want to be a Forex Trader.”
Micheal also stressed that currency trading is not for the faint-hearted. In other words, you must be emotionally strong and have proper risk management in place. He continued by saying:
“Trading in the banking space is a whole different ball game than trading for your own self. The same techniques are used from Price Action Trading, Trend Trading Strategy, Position Trading, Forex Scalping Strategy and a whole lot more, but you first of all need to know in-depth what you are about to start and be willing to go down the tunnel because you would make losses which most times scare people and they give up. In the same vein, you can make so much profit as you see everywhere today on the internet, but mind you, the losses are real too.”
He rounded up by advising that as a matter of importance, those who want to learn forex must have proper risk management in place. He said:
“We would keep this short, but I would advise you to learn the first basic steps to guide a forex trader on the right path. A few of these tips can be read about to get a full understanding of what it entails as it guides you along the path of being a forex trader. Knowledge is power, set aside funds, set aside time, start small, time those trades, cut losses with limit orders, be realistic about profits (This isn’t a Ponzi scheme).”
Lukman Otunuga, a Senior Research Analyst at ForexTime (FXTM), spoke to Nairametrics from his London office, on why discipline is paramount in trading forex. He said:
“When going head-on with the largest and most liquid market in the world, one needs to have faith in their trading strategy. Discipline is critical and sticking to the game plan is the real test, especially when things do not go your way. Aim for positive risk/reward setups as trading is a numbers game. Most importantly, respect the volatile and unpredictable nature of the markets.”
Opeoluwa Dapo-Thomas, an independent oil trader, in a phone chat interview with Nairametrics, laid emphasis on the importance of having a good strategy when trading Forex. He said:
“What makes professional traders stand out is their stance on risk management. Every trader has a strategy and a plan. Executing these plans is one thing, managing it is another kettle of fish. With proper risk management, professional traders try not to over-leverage while trading and still target decent returns.
“For example, 30-40% returns in a year from trading out do return on most risk-free investments and portfolio benchmarks. New FX traders ignore proper risk management and target 200-300% returns which most times ends up disastrous for their accounts.”
Finally, it’s very important to note that the present world can boast of less than 5% successful Forex traders. Therefore, to be among these elite class of traders, you must have a very good strategy, proper risk management plans, be highly disciplined, have the ability to make snap judgment calls, and great knowledge of currency markets.