We have heard stories of young people coming from disadvantage backgrounds that have made millions trading forex. There seems to be more and more of them in social media, we see them flashing their cars on Instagram. This has caused a lot of people to run towards forex trading in the hopes of seeing the same success. Maybe you’re one of those people. This is a guide on how much money you can make with Forex in South Africa.
Real life stories of these people who became millionaires overnight by trading forex are very inspiring. But for every one of these stories, there are untold stories of people who have lost all their money on Forex. People who have blown their entire accounts. It’s important to understand that Forex is not a get rich quick scheme. It should be treated more like a business instead of gambling.
Misconceptions
There is a common misconception that you can start trading with R5 000 then turn it to a million within a year. That’s not how it works, a lot of people expect to see returns over 100% per day when trading Forex. The reality is that you won’t grow your R5 000 to R1 million within one year, the mathematics is just not on your side. You have a higher chance of blowing out your account than growing it at that percentage.
There are Forex gurus that promise 80, 50, 30, 20 percent returns per month; if you subscribe to their signals or join their course. The reality is that those numbers are so out of touch with reality, you might be luck once or twice but you will definitely blow your account. Those numbers put you at a high risk of blowing your Forex account, because they expose the amount of money that you stand to lose.
Reality
The reality is that vast amounts of successful Forex traders make less than 10% returns per month. Some make as little as 1% while most hover between 5 and 6%. These are still pretty good returns; this means that you make 60% per year if you consistently make a return of 5% per month. Most traditional investments barely make 10% per year.
As a new Forex trader, you will likely make returns of 3 to 5% per month, that is how much you can realistically make. This assumes that you will be adhering to all the best trading practices.
Win rate
The win rate is the amount of trades that you win out of the total trades that you have made. Again, this is where a lot of people make a mistake, they think that they will win 90% of the trades. That’s not how it works, you won’t win that many trades, it’s important that you know this information so that you don’t get easily depressed when things don’t go according to plan.
55% is considered to be a good win rate in Forex, even 50% is acceptable if you win more money than you lose. You should never lose more than 1% of your total balance on a single trade, you can prevent this by placing a stop loss.
Charges
Overnight charges can influence your profitability, most brokers charge overnight charges. This means that you will incur charges each time you let you trade go over a night without closing it. Some trades take days to materialize and by the time they materialize you might find that the charges are bigger than the profit you made on that trade.
Education
The level of education you have will definitely impact the amount of money you make in Forex in South Africa. It’s important to first learn Forex and how it works before buying courses that are sold by gurus; promising you unrealistic returns.
There are multiple free resources online that teach you everything you need to know about Forex. Our favourite is BabyPips. Knowing how Forex works will prevent you from taking uncalculated risks in the hopes of making millions.
How much can you make?
Assuming that you make a return of 5% per month, the amount of money that you will make will depend on the size of your trading account. 5% of R1 million is not the same as 5% of R5 000.
However, if you don’t know what you are doing; you will likely lose money as opposed to making money in Forex. It’s so important to try and get better at trading, getting good at trading will automatically increase your returns.
Trillions of monies are traded daily on Forex, there is no limit to how much money you can make.
Conclusion
This was a guide on how much you can make trading Forex in South Africa. Forex trading is difficult and requires extremely hard work, it’s important to put in the time and effort to learn how it works. Do you have any thoughts or questions? Comment below.
