Day trading is a Forex trading strategy where you make at least 2 -3 trades on a daily basis that increase the value of your investment portfolio. The trades are usually small in value compared to your overall investment, not more than 1 – 2 percent of the total value of the portfolio.
It is a high-risk, high-return strategy. It involves spending a lot more time on researching the market, usually 3 – 4 hours each day. This strategy should only be used by serious Forex traders who can devote the time and effort to researching market trends. People who are looking to switch to Forex trading full time can follow this strategy while they are still working at their job.
How Much Do Forex Traders Make a Day
There are two main factors to consider here.
The first factor is the day trading success rate. This is the rate of how many profitable trades you make each day. Let’s be clear here. No one makes 100 percent good trades. Even the most successful and famous day traders with six-figure salaries make 70 – 75 percent good trades in a given day. Around 25 – 30 percent of their trades end up in losses.
As someone new, you should aim for a day trading success rate of 55 percent or above. It isn’t great, but it will help you stay in the positive.
The second factor is the profits/losses ratio which should be over 1. This is the value of your profitable trades compared to the value of your losing trades. You will make a profit when the total value of your profitable trades is more than your losing trades.
Example of a Day Trading Action
Suppose that you are trading with an initial investment of $10,000. Each trade is no more than 1% of your total investment. Hence, each of your trades is for $100. You make 4 trades each day with a win rate of 55% and your profit ratio is 1.25. You trade 20 days in the month, making your total number of trades 80 for the month.
You use a day margin with a leverage of 3:1 which means you can trade with up to $30,000 each day, based on your deposit of $10,000. This takes your total investment capacity to (4 x 20 x $300 = $24,000). You pay a commission of $30 per completed trade.
With these base numbers, you could potentially make the following profits.
- 55% profitable trades with 1.25 win ratio for maximum investment of $24,000 = $16,500
- 45% losing trades with lose ratio of 1 for investment of $24,000 = $10,800
- Gross profit $16,500 – $10,800 = $5,700
- Net profit after deducting commission from gross profit of $5,700 less commission ($30 x 80 trades = $2,400) = $3,300 per month.
The net profit per day is $3,300 / 20 = $165.
These calculations are based on moderate trading (4 trades) each day where you trade partially during the day. Most full-time day traders usually make 8 – 10 trades each day, have a higher win ratio and rate. You can make good money on Forex day trades if you invest enough time and have the experience and knowledge.
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