Professional is often portrayed forex traders as people making millions and living a life many people dream of.
On the other hand, you have different statistics plastered around forex broker websites stating that 75-80% of their clients lose money.
So, how much do professional traders actually make monthly?
Professional forex traders in the US working with hedge funds make around $7,500 per month or $91,000 per year on average. This is the base salary they receive and doesn’t include any bonuses for yearly results. Independent professional traders don’t have a guaranteed monthly income.
Are you considering becoming a professional forex trader to make passive income?
The rest of the article will cover all you need to know about professional forex trader incomes.
Monthly Income of Employed Professional Forex Traders
Employed professional forex traders work in an investment bank or hedge fund as quant traders, hedge fund managers, and day traders. They receive a base salary every month in addition to performance-based commissions at the end of the year.
These traders enjoy many benefits, including:
- Use of proven and tested trading strategies and tools.
- Fixed salary.
- Regular training and mentorship.
- Zero risk to personal capital.
- Opportunity for career progression (managing larger and larger accounts).
On the flip side, forex traders have to deal with the following:
- No flexibility to make trading decisions.
- Increased restrictions after a poor performance.
- Regular office politics and dealing with clients.
However, these traders make more money on average than independent traders.
According to Indeed, they make around $91,000 a year or $7,500 per month as base salaries.
When adding the average bonus of $30,000 a year, the monthly income comes out to around $10,000!
The average monthly earnings increase as the trader moves up the professional ladder and continues to meet performance targets.
Monthly Income of Independent Professional Forex Traders
Independent professional forex traders don’t receive a monthly salary. If you’re in this category, you have to trade your own money, then pay yourself a salary from the profits.
These traders enjoy the following benefits:
- More flexibility in the trading strategy and style.
- More flexibility in the number of hours invested into trading per week.
- No limit on earnings.
However, the independent professional forex trader lifestyle isn’t without its downsides. They include the following:
- More stress due to having your funds at risk.
- No financial security due to the lack of a base salary.
- No support system.
- More stress researching new tools and strategies to improve trading performance.
Looking at the above pros and cons, it’s clear to see why it’s hard to put a number on the monthly income of independent professional traders. While some traders post average monthly incomes of 2-20% of their trading capital, others end a trading year in the red.
As stated earlier, data from retail brokers mandated to publish their profitability numbers show that only 20-25% of traders make money every year.
Of course, the statistics include newbie retail traders who don’t qualify as professionals, but that should give you an idea of what to expect as an independent professional trader.
If you make a consistent 2-20% of your trading capital every month on average, you’re among the privileged minority.
Factors That Determine the Independent Professional Forex Trader Salary
The factors that determine how much you can make as an independent trader include the following:
The Trading Strategy
Let’s assume you have a quality trading strategy with a 40% win rate.
The strategy incorporates a 1:2 risk-reward ratio and delivers an average of 100 trades a month, risking 0.25% per trade.
You’ll average 16% profit–a fantastic result most professionals can only dream of.
If you have the same strategy, but with a negative risk-reward ratio where you lose twice the profit on a bad trade, the numbers turn bad immediately. As you can see, it’s all in the strategy.
The Trading Capital
Once you have a working strategy, your monthly salary as an independent forex trader will come down to your trading capital.
Going back to the example above, 16% of $20,000 is $3,200 a month.
That comes out to about $40,000 a year, which isn’t enough to live comfortably in states like California or New York.
However, that return on a $50,000 capital automatically puts you close to the monthly salary of employed professional traders.
So, before you ask how much monthly salary you can expect as an independent trader, you need to first work out your trading capital.
The Prevailing Market Conditions
It’s fun to draw up hypotheticals and nice estimates, but there’s a reason most professional traders only focus on averages. No two months are the same in forex trading. A trader averaging 16% every month over the last year probably has a few months where they didn’t make any money or even lost money.
The forex market is very turbulent and rarely moves in a straight line.
This means that your strategy likely won’t make money every month. Even if you’re yet to have a losing month in the last three years, you can see that some months meet or surpass your target while others are barely in the green.
The uncertainty of market conditions is why you need to maintain a strategy, practice strict money management and stay disciplined. The good trades will balance out the bad ones, keeping you profitable in the long run.
You don’t qualify as a professional forex trader if you don’t have a strategy and can’t stay disciplined.
Professional forex trader salaries are hard to estimate. Many factors impact how much a trader can make in a month. Employed traders working with banks earn a regular monthly income, while independent traders don’t.
Traders working for hedge funds and banks make around $7,500 per month on average before adding bonuses. Independent traders don’t have any fixed monthly earnings. They can make up to 20% of their trading capital or more in a month. If you’re thinking of saving up for trading capital, then check out this post on how to save $10,000 in a year.