A career as a forex trader is often seen as a great way to earn an above-average income, but what exactly is the average income of a forex trader?
Pursuing a career in forex trading can undoubtedly be a very lucrative path. Especially when you become an experienced trader who really knows its craft. While having the right trading strategies, and performance means you will get a higher income, there are other factors that influence your salary.
In this article, we will cover in detail topics related to the income of a forex trader.
How much do forex traders really make?
Since there are retail traders and those that work for forex brokerages, the income earned by traders varies. As mentioned earlier, traders with roles in forex trading firms tend to have higher earnings than retail traders. Because retail traders need to factor in trading costs while traders working with firms only need to be worried about their performances.
But whether as a retail trader or working with a forex trading firm, the general average base income figure for forex traders in the United States stands at $70,000 annually with figures ranging between $34,000 and $150,000.
This is not to say that there are traders that do not make beyond this average income but this figure serves as the benchmark of what to expect if you are interested in pursuing a career in forex trading.
Factors that determine the income of a forex trader
There are several factors that influence the income a forex trader may be able to generate while working for a company. Here are the main factors:
- Employer goals
- Returns generated
- Size of the portfolio
Having significant experience as a forex trader is one of the ways of having a higher income. Usually, more experience will also mean that you will be taking higher roles in the corporate hierarchy, which also comes with more responsibilities. This ends up being rewarded in the form of a salary and bonuses.
There are several different roles for forex traders, and it all boils down to experience. Some forex traders start as analysts or junior traders and eventually progress into senior roles at the company.
It is important to note that the difference in a forex trader's income can vary by over 500% depending on its role and importance to the organization.
While some corporations will pay a hefty sum for traders, some actually do not pay as well. In fact, some companies only pay about 50% of the average salary. The reason is that when it comes to forex trading there are two main types of approaches corporations choose to follow.
They are either trying to generate a profit, and this includes banks, funds, and other asset managers. There are also just regular companies using forex as a way to hedge their currency exposure, and reduce currency risk. Depending on the company you work for, your income will vary.
These different approaches can have a significant influence on the level of income of forex traders. Working as a forex trader as a way to seek profit can be a lot more rewarding since your performance will have a direct impact on bonuses and other perks.
Conversely, in a traditional company just using forex as a way to reduce their currency risk, the income levels tend to be lower.
Another factor that influences the level of income is the returns generated, which can deeply affect how much money you bring home. If you are able to have a great performance you will be rewarded for that. If you do not perform accordingly, you might even face losing your job. This shows you how forex trading is an extremely demanding career.
Size of the portfolio
The size of the portfolio you manage is also going to affect your income level as a forex trader. Traders that run large portfolios will often have a much higher income, reflecting the increased amount of responsibility.
Additionally, some bonuses based on performance can vary depending on the size of the portfolio. Even if you generate the same return as a trader with a smaller portfolio, you are still expected to have a higher bonus.
The location of the company will also influence your income as a forex trader. According to Indeed, the annual average base salary of a forex trader in the US is $70,820. However, from one city to another the average salary still varies. Here are a few examples:
- San Francisco, CA - $87,164
- New York, NY - $81,865
- Washington, DC - $81,840
- Boston, MA - $80,829
- Chicago, IL - $76,632
- Philadelphia, PA - $74,383
- Atlanta, GA - $74,116
- Charlotte, NC - $72,142
- Houston, TX - $71,990
In the United Kingdom, the average income for forex traders is £54,249 according to data from Glassdoor.
Unlike in the US, usually, there is no additional pay in the payment structure. It is just the base pay of £54,249 with the general annual figures ranging from £41,000 to £72,000.
It is clear that location plays a huge role in the amount of income a forex trader earns.
Do forex traders make millions?
While it is thrown around that people make thousands to millions of dollars every year, there is no sufficient data to back up many of those claims. Forex trading may indeed be a very lucrative career, but in order to make millions, you need to either have a very important role in an organization or manage your own money or clients' money.
Can you make a living as a forex trader?
It is clear that you can make a living as a forex trader. You just need to be certain about your trading strategy as well as whether you want a role as a trader in a forex brokerage firm or you intend to trade independently.
You also need to be able to have the right trading mindset, and constantly improve your strategy. Another important thing is your location as the article has shown that it plays a key role in the salary of forex traders.
You also need to understand that despite the obvious potential profit that forex trading holds, you will still have to design a solid strategy that encompasses trading practice, risk management, and preparation.
This will increase your chances of having more profits than losses thus allowing you to earn substantial income from forex trading.
Furthermore, you should also keep an open mind that will allow you to learn from each trading experience which will make it possible to enhance your trading skills and keep improving as a trader with each passing day.
Without constant learning and improvement, it will be extremely difficult to make a living from forex trading because the losses will just keep accumulating and you will find yourself without any capital to trade anymore.
Therefore, stay calm and composed and be prepared to adapt to unpredictable situations that the market might bring before you.
How many hours does a forex trader work?
There is no straightforward answer to this question as the number of hours will depend on the trader’s strategy, and type of work.
Each trade that is executed, starts with research. This is followed by managing the trade which will involve observing charts and seeing how the market is behaving to determine the best course of action.
Once the trader exits the trade, the trade needs to be reviewed so that mistakes can be noted and improvements can be made. There also has to be a trading journal to record all the trading activities for future reference.
Carrying out all the above activities will take specific timeframes which is why the trader needs to decide the amount of time needed for each activity. The good thing is that forex traders who work independently can decide the number of hours they wish to work.
This allows them to design a trading strategy that fits the timeframe they are willing to dedicate to trading and it can vary from around 8 hours to 20 hours each day depending on the kind of forex trading the trader chooses.
We have seen how important factors like location and experience can have on the average income of a forex trader. Remember that above all, one of the most important aspects is that a trader needs to be profitable and have the right risk control.
Without being able to master all of these aspects, it will be difficult to succeed as a forex trader.