How Much Can You Earn With Forex Trading?

As with almost any financial market, the possibility to earn large amounts of money is always present. The key question of course - instead of how much can I earn, is: "what are the chances of earning a high return from Forex"?

The answer to this is that given the right skills, patience, and market knowledge - the chances of a solid financial return are greatly increased in comparison to other markets. After all, the FX markets are a 1.2 trillion pound per day market.

The Power of Leverage in Forex

Leverage is the key driver of profit in Forex trading. Without it, the returns you make wouldn't really be worth your time and effort. Thus, it is worth explaining exactly how leverage works so that you have a good idea of what is going on.

Leverage is, in effect, a multiplier of your earnings. Essentially, it allows you to "lever up" the amount that you have in your account as capital - and use this to make larger proportional profits (and also potentially larger losses) whilst trading.

Let's look at an example of how this works:

Let's say that you want to trade the GBP/USD. You only have $200 in your account to use as capital however. If you were to go in to your bank with $200 and ask them to change the pounds in to USD (which is essentially what we are doing by trading the GBP/USD) - they would happily do so.

However, if the rate of the currency moved over a week or so, the gain or loss on your $200 would be so minimal that there would almost be no effect whatsoever. Hence - your actions might yield just a few pence in return - which is not an extraordinary profit at all.

Alternatively, if you use a Forex broker and utilize the power of leverage, you will see a much greater effect. At 100:1 leverage (which is standard in the FX market) - your $200 would turn in to $20,000. Hence, trading with $20,000 will obviously yield you a far greater return on your money than in the previous example.

24 Hour Earnings Opportunities

The great thing about the Forex markets is that they are truly international. There are no time zones/opening hours. There are no lunch breaks or holidays. Forex markets are open 6 days per week - 24 hours per day - regardless of what is happening in a particular country. Therefore, there is always the opportunity to gain from the market.

Another wonderful feature of FX trading is that there are no commissions. Brokers take a "spread" instead of a commission, thereby reducing your overall trading costs and making the entire industry more competitive.