I’m sure you want to know *how much money can you make from forex trading*, right?

After all…

You’ve heard of traders making millions in the financial markets.

But here’s the thing:

You can’t compare yourself to them.

Why?

Because you’ve got different account size, risk appetite, risk management, trading strategy, and etc.

If you do so, it’s like comparing an apple with an orange (it’s silly).

That’s why I’ve written today’s post to explain how much money can you make from forex trading — with objective measures.

No more second guesses. No more ridiculous projections. No more illusions.

Just statistics, numbers, and the cold hard truth.

Ready?

Then let’s begin…

**The most important metric in your trading career**

Here’s the thing:

You can have a 1 to 2 risk to reward on your trades. But if you only win 20% of the time, you will be a consistent loser.

Now obviously your risk to reward isn’t the answer. Then what is? Your win rate?

Let’s see…

Perhaps you have a 90% win rate. But if you lose $0.95 for every dollar you risk, you will also be a consistent loser.

So, what’s the solution?

Clearly, your risk to reward and win rate are meaningless on its own.

Well, the secret is this…

…you must combine both your win rate and risk to reward to determine your profitability in the long run.

And this is known as your **expectancy**.

Your expectancy will give you an expected return on every dollar you risk.

Mathematically it can be expressed as:

**E= [1+ (W/L)] x P – 1**

Where:

W means the size of your average wins

L means the size of your average loss

P means winning rate

Here’s an example:

You have made 10 trades. 6 were winning trades and 4 were losing trades. That means your percentage win ratio is 6/10 or 60%. If your six trades brought you a profit of $3,000, then your average win is $3,000/6 = $500. If your losses were only $1,600, then your average loss is $1,600/4 = $400.

Next, apply these figures to the expectancy formula:

E= [1+ (500/400)] x 0.6 – 1 = 0.35 or 35%.

In this example, the expectancy of your trading strategy is 35% (a positive expectancy). This means your trading strategy will return 35 cents for every dollar traded over the long term.

Let’s move on…

**Why you must play more to WIN more**

Have you realized this?

The majority of casinos operate 24 hours a day, 365 days a year. Why?

Because the more they play, the more they make — and it’s the same for trading.

You’re might wonder:

“How does this relate to trading?”

This means the frequency of your trades matter. The more trades you put on, the more money you’ll make (albeit having a positive expectancy).

Imagine this:

You have a forex trading strategy that wins 70% of the time, with an average of 1 to 3 risk to reward.

But here’s the thing…

…it only has 2 trading signals a year.

How much money can you make from this forex trading strategy?

Not a lot, right? Heck, you might even lose in that year since there’s a 9% chance of losing two trades in a row.

Can you see how important this is?

Now:

The frequency of your trades is important but it’s not enough to determine how much money you can make in forex trading.

There are still a few more factors that play a major role. Read on…

**Why money is the life blood of your Forex trading business **

You’ve probably heard of stories where a trader took a small account and trade it into millions within a short while.

But what you don’t hear is that for every trader that attempts it, thousands of other traders blow up their account.

So…

Let’s not treat trading as get a rich quick scheme. Instead, treat it as a business you’re looking to grow it steadily over time.

Now, let’s say you can generate 20% a year (on average).

With a $1000 account, you’re looking at an average of $200 per year.

On a $1m account, you’re looking at an average of $200,000 per year.

On a $10m account, you’re looking at an average of $2,000,000 per year.

This is the same strategy, same risk management, and same trader.

The only difference is the capital of your trading account.

Can you see my point?

Now…

That’s not to say you can only make 20% a year because, for a day or swing traders, the percentage could be higher (as you have more trading opportunities).

But no matter what strategy or system you’re using…

…the bottom line is you need money to make money in this business, period.

**Why your bet size determines how much you can make**

You’ve probably heard this before…

“The bigger you risk, the higher your returns.”

So is this true?

Well, yes and no.

**Here’s why I said yes…**

Let’s say your trading strategy has a positive expectancy and generates a return of 20R per year. Also, you have a decent size $100,000 trading account.

So, how much can you make from your trading?

Well, this depends on how much you’re risking per trade.

If you risk $1000, then you can make an average of $20,000 per year.

If you risk $3000, then you can make an average of $60,000 per year.

If you risk $5000, then you can make an average of $100,000 per year.

This is the same strategy, same account size, and same trader.

The only difference is your bet size (or risk per trade). The bigger you risk, the higher your returns.

Now…

**Here’s why I said no…**

If your bet size is too large, the risk of ruin becomes a possibility. This means you have a higher risk of blowing up your trading account — and it reduces your expected value.

If you want to understand the math behind it, go read this risk management article by Ed Seykota.

Moving on…

**Do you withdraw or compound your returns?**

If you make an average of 20% a year with a $10,000 account, after 20 years it will be worth… **383,376.00.**

But what if you withdraw 50% of your profits each year?

This means you will make an average of 10% a year and after 20 years your account will be worth… **$67,275.00.**

Now clearly, compounding your returns will generate the highest return.

But whether it’s feasible or not depends on how you manage your trading business.

Here’s why…

If you’re a day-trader, then chances are trading is your only source of income. You have to withdraw from your account to meet your living needs.

But if you have a full-time job and you’re trading on the sides, then you don’t have to make any withdrawals and can compound the returns in your account.

Now…

There’s no right or wrong to this. Ultimately, you must know what you want out of your trading business — and understand how withdrawals will affect your returns over time.

**So, how much money can you make from Forex Trading?**

Now…

You’ve learned the key factors that determine how much money can you make from forex trading. Next, let’s see how to use this knowledge and calculate your potential earnings.

Here’s an example:

*Trading expectancy – 0.2 (or 20%)*

*Trading frequency – 200 trades per year*

*Account size – $10,000*

*Bet size – $100*

*Withdrawal – None*

Once you know your numbers, plug and play them into this formula…

**Trading expectancy * Trade frequency * Bet size**

And you get:

0.2 * $100 * $200 = $4000

This means you can expect to make an average of $4000 a year (with the above metrics).

Now if you want to convert to percentage terms, then use this modified formula…

**[Trading expectancy * Trade frequency * Bet size] / Account size**

And you get:

[0.2 * $100 * $200] / $10,000 = 40%This means you can expect to make an average of 40% a year.

**Summary**

So, how much money can you make from forex trading?

Well, there’s no one factor that determines how much money you can make in forex trading.

Instead, you must look at these 5 metrics:

- Trading expectancy
- Trading frequency
- Account size
- Bet size
- Withdrawals

Then apply this formula… **Trading expectancy * Trade frequency * Bet size**

And you’ll have an objective measure of how much money you can make in forex trading.

Now, here’s my question for you…

How much do you expect to make from forex trading?

Leave a comment below and let me know.

**Do you want to learn a new trading strategy that allows you to profit in bull and bear markets? **

**In my FREE trading course (valued at $48), ****I will teach you this powerful trading strategy step by step, along with charts and examples.**

**You can download it here for FREE.**

jason says

It took me 4 years to understand this over and over again. Coz the market and charts somewhat deceiving…

Rayner says

Better late than never!

Peter Wong says

Thank you for this wonderful article. In fact, I figured out myself these 5 metrics in the past few months, but you have put it in a formula. That’s really cool. Thanks Rayner.

Rayner says

You’re welcome Peter!

tim says

Excellent and informative article Rayner. Thanks for sharing this knowledge.

Rayner says

The pleasure is mine, Tim

GotlandTrading says

Great article! I remember when starting, i calculated to be a millionaire within 2 to 3 years… Hehe, well i still have a bit to go after X years of trading. I must say that your longer time frame approach really has helped me improving my results, since i have adopted your style of Forex trading as much as possible. Brgds and thx.

Gotland Trading.

Rayner says

Cheers Gotland

Neil says

Superbly put.

Rayner says

Thanks Neil!

Amanuel says

Hi Rayner from the time following your article which is “How to be a profitable Trader Within the next 180 Days “from the bigning of thise month july 2017 i made 16 trades which 11 winning and 5 lossing trades .and with tis article you wrote the winnig expectancy formula: i am doing well which is E = 0.17 or 17%.

Again Rayner i thanks you for you give me your exprence and trading formula even i will update you as my promise when the 180 day trade experment proformance after i finsh them.

with love

Amanuel

from swiss

Rayner says

Awesome to hear that! Keep me updated of your progress bud.

Sina says

Hi Rayner

Wonderful article, thank you.

I just want to point out that, if set the size of the bet as a percentage of your account ( let say 2%) instead of fixed bet size, the result would be very much different.

Thank s

Rayner says

Yes, I would agree.

Reynaldo says

Hello Rayner,

Most of the time I trade in demo account and still not profitable, every 10 trades 8 lost and 2 win.

Presently my broker is FxPro.

Rayner says

This post here will help…

https://www.tradingwithrayner.com/profitable-trader/

Marzi says

Nice article again Raynor. Thanks for sharing !!

– Marzi

Rayner says

You’re welcome Marzi

Steven Loh says

Great article. You are right about the number of trades will help to increase total profitability, but traders must be mindful that every transaction costs money in spreads and slippages. A retail trader that make 4 trades positions a day, loses about US$100 to the brokers in spreads. So the expectancy calculation must include all those cost.

Rayner says

That’s a great point, Steven.

peter says

Another excellent article, thanks Rayner!

I average 1 to 10 trades per day and use a risk of ruin calculator to compute my position size once weekly. My goal is to slowly increase my bet size and eventually make 1000k per day.

Rayner says

Nice, keep on going!

Rameshrao says

Another excellent and very informative article. Thanks you so much Rayner

Rayner says

The pleasure is mine buddy

William says

Rayner, once gain Than You for the great article.

I have been looking at Risk:Reward as the means to being profitable.

I don’t trade that much my objective is $700.00 per month.

I will take this new information to help me reach that goal.

Once again

Thank You

Rayner says

Cheers William

YJ says

I can’t keep the money with my broker. I will withdraw it monthly if there is a profit regardingless of how much. My inner evil will grow (greedy and superhero gut) and ruin the account.

Basically i feel i can only trade the money i am willing to lose, instead of growing it. So i prefer to deposit more money into the trading account when i am afforded to do so.

Yes. Totally agreed with the number of trades will increase the probability of profit if your winning rate is greater than losing. Eventually the losing trades will be covered by winning trades. But, sometime it will be a chance of drawdown and happen the opposite way.

Hence, remember to trade at the most crowdest zone..

Thanks.

YJ

Rayner says

Thanks for sharing YJ. Hope you found something that works out for you.

O Utan says

I was confused by the RRR measurement until I know how to use “expectancy” to evalute my trading.

And in this article you have put everything together with a formula. Great Job! Thanks Rayner.

Rayner says

Awesome to hear that, O!

Lee choon moi says

Always enjoy reading your article.. simple English great explanations and illustrations on how and why. This really helps for a new learner. You answer many of my questions, thank you for the sharing.

Rayner says

I’m glad to hear that Lee.

Don’t hesitate to let me know if you’ve got any questions, I’ll be glad to help.

Dave uk says

Hi Rayner,

Top Question and at the front of the queue with any new Trader.

The way I see it is im unlikely to have the kind of account size to earn a living from trading around my current job. BUT heres the thing, its about consistency! If you can become consistently profitable with a small account, you can be consistent with a larger account. Ok you might not have that money lying around but dont think about that, its not important. Whatever account size you have doesnt matter. Think consistency and nothing else.

Heres my point,

If you can trade consistently with a small account you can scale it up. ok get a journal and track record and approach a proprietary trading firm. Do for them what you do with your account and they will throw money at you and give you half of what you make them.

Consistently Profitable. If I had a trader working for me who could make say 10% profit month on month I would employ them and the more I gave them to trade the more Id make.

Rayner good post again bud.

I hope this take on it helps out.

Rayner says

Well said, Dave.

I totally agree.

Zac says

Hi Rayner

Great post!!

For Trading expectancy * Trade frequency * Bet size

How to calculate if the bet size (which I assume is an amount) is not fixed, say 1% of funds in account that fluctuates from trade to trade?

Rayner says

Hey Zac

Just round it to the nearest number to make it easy on you.

Jay says

Great post Rayner! When I first learned about expectancy it was like a light switch that went off. All of a sudden everything made sense to me, and I had much more confidence in my trading system. It does take time and practice to figure this out, but it’s a great area to focus on. Thanks again for your trading insights!

Rayner says

You’re welcome, Jay.

Glad to hear it’s helping. cheers bud