When considering the profits to be derived, forex trading is no different from any other investment activity which you may choose to undertake. In theory, the opportunity to enjoy profit from your activities is limitless; in practice, however, the net gain that you can achieve is simply a direct function of the investment of time you are willing to make. The more time that you are capable of devoting to research, to constructing your trading strategy and to implementing that strategy, the higher your profits most likely will be.
As with all investments, profits should be calculated utilizing a long-term perspective. This is particularly true of forex trading, where one short day of movement against your position can serve to wipe out several days’ worth of profits. Although practicing good trading habits—such as monitoring your trades in order to adjust your stop-loss point, if necessary—will limit these hopefully temporary setbacks, the correct placement, monitoring or adjustment of your take profit points will also assist you in maximizing your returns.
If you are inclined toward taking a more short-term forex trading position, you may be able to maximize your profits by making use of one of the multiple ‘electronic assistants” available for purchase. These “assistants”, or “robots”, are forex trading programs that react to short-term movements in currency pairs based on both programmed historical data and on parameters pre-set by you. Many traders have found these robots to be useful in providing a measurable net boost to their trading profits, however, because these forex trading robots cannot react to changes in market conditions, they must be monitored by you regularly to ensure that they are executing your trades at the correct pip increments. In addition, you must remember to factor their cost into your overall net profit calculations.
Your chances of reaching optimal returns are also vastly increased if you base your trades on common sense, thorough research and a solid trade support network. Avoid trading with real money until you have gained enough knowledge, expertise and practice by opening and using a demo trading account with one of the reputable forex brokers. Identify a broker whose operating procedures suit your trading style, whose reputation is unsullied and whose fee structure suits your profile. Trade only in currency pairs that you understand, avoiding the lure of theoretical higher returns to be made from trading in exotic, difficult-to-grasp currencies. Utilize valuable analytical tools as candlestick charts to spot trends and down-market indicators. Learn chart patterns so that upon recognizing certain meaningful shapes, you are able to interpret and act upon their implications in a swift and responsive manner. Remain impassive through minor losses, yet avoid irrational exuberance when your currencies move in your favor; the forex markets are characterized by swift price movement, and you should not be too quick to change either your stop-loss or take profit points unless you are certain that a trend is about to reverse. Resist the temptation to get caught up in the easy leverage so readily offered by brokers to their forex-trading clients, and instead, grow your profits by reinvesting your gains back into your trading activities. Treat your trading as you would any other legitimate business.
How profitable is forex trading? The proverbial sky is, essentially, the limit. In realistic terms, however, forex trading is as profitable as you make it, and you make it profitable by following sound and reasonable guidelines such as those outlined above, and by devoting your best efforts and full attention to achieving your goals. Good luck!