On the one hand, we have films like The Wolf of Wall Street and television dramas like Billions, in which great traders earn millions and live extravagant lives. On the other hand, data shows that the vast majority of day traders lose money. So, what is the average salary of a Forex trader? We examined traders who work for firms and banks, as well as individual investors who trade on the markets with their own money. So, if you’re wondering how much money traders make, you’ve come to the perfect place.
Let’s get started!
Who Is a Forex Trader?
Buying and selling financial instruments within a single trading day is what forex day trading entails.
As a forex trader, you employ tactics that allow you to profit from intraday market swings.
Beginners in forex trading typically want to know where to begin.
A day trader seeks to profit from price swings in a short period of time. A day trader buys currencies or stocks and holds them for a short period of time.
for a very short time and then resells them before the end of the business day
So, do you prefer to enter and exit a transaction within a single day? Can you accurately forecast market price movements by the conclusion of the business day? Or do you have time to examine and monitor markets all day? Then you can turn into a forex day trader.
Now that you know what a forex trader is, you can figure out how much money they can earn.
What Is the Average Salary of a Forex Trader?
Before we can calculate the average salary of an engaged forex trader, we must first examine what constitutes that salary and what factors may influence its amount.
What Makes up a Forex Trader’s Salary?
If you work as a forex trader for a living, your salary will be made up of the following components:
- A base salary is what you will be paid every month, regardless of your performance.
- Bonuses and commissions – These will be based on your performance, the performance of the organization’s trading team, and the company’s turnover.
- You may also be offered employee perks such as health insurance, a vacation allowance, a profit-sharing plan, or a 401(k) pension plan.
What Factors Influence a Forex Trader’s Salary?
A forex trader’s base salary might vary for a variety of reasons, including:
- Your level of knowledge of the forex market and trading experience
- General and financial education
- The financial institution for which you work
- Your workplace’s geographical location
- Your forex trading position’s length of service and seniority
There are many factors that affect bonuses and commissions, including:
- Your performance is excellent.
- The overall performance of the trading team
- Turnover at the company
- The current economic and political environment
- How much do other similar organisations pay?
An Employed Forex Trader’s Average Salary
For numerous reasons, determining the average employed forex trader’s salary might be challenging.
- The variation in base pay as a result of the aforementioned elements
- Similarly, the variation in bonuses and commissions
- Distinctive practices across financial institutions
- The extent to which bonuses and commissions can raise a forex trader’s salary from a five-figure figure to a six- or seven-figure figure.
- There is a scarcity of information available about forex traders who work for private hedge funds.
Even organisations that can generally be counted on to offer average salary numbers for other professions do not appear to agree on average forex trader compensation.
For example, the recruiting website Indeed estimates that the average base salary for a forex trader in the United States in 2023 will be $91,050, with an annual commission of $25,000.
Payscale, on the other hand, promises an average salary of $80,935 for the same period, with a commission of $21,000 and a bonus of $14,916.
These average values, however, are collected from all levels of seniority of forex traders, a wide range of financial firms, and various locations in the United States. The six or seven-figure salaries that senior traders can earn are likely to inflate them.
What Is the Average Salary of a Home-Based Forex Trader?
Independent (at-home) forex traders trade currencies with their own money, bearing the entire risk but also keeping the entire reward.
An independent forex trader may generate their entire income from trading currencies or use forex trading to supplement their income from other sources.
As an independent forex trader, you have the option of taking your entire profit from currency purchases and sales as salary, taking only a portion of your profit as salary and reinvesting the remainder, or reinvesting continuously over a longer period to achieve a higher profit and, as a result, a higher salary.
Your final profit number is calculated by taking the following things into account:
#1. ROI (Return on Investment)
Your ROI is the amount of profit you make from forex trading. Your investment amount, whether you are a short-term or long-term investor, the quantity of deals you make, and your proficiency with the forex market all have an impact on this statistic.
#2. The Amount of Cash You Begin With
As an independent forex trader, the amount of initial capital you have to invest in currencies can make a significant difference in your profit and salary.
An initial 5% return on a $4,000 investment is $200.
If you can achieve that return on a monthly basis and reinvest it, your annual profit will be $3,183.42 ($7,183.42 minus $4,000).
In comparison, a 5% first return on a $80,000 investment is $4,000.
Again, if you can maintain that monthly return and reinvest, your annual profit will be $63,668.51 ($143,668.51).
If handled correctly, the amount of initial capital you have to invest could mean the difference between having some additional money on the side and sustaining yourself exclusively from your revenue as an independent forex trader.
#3. Costs Associated with Forex Trading
As with any business, there will be expenses associated with working as an independent forex trader. This may include fees paid to your broker.
If you are self-employed and trade currencies as a business, you may additionally have to consider the following common business costs:
- Furniture and equipment, such as a computer
- Broadband and a phone line
- Insurance for businesses
- Accountancy charges
- Finally, as with any other kind of income, your earnings from forex trading will be subject to income tax. If you use forex trading to earn your money, you may find yourself in a higher tax band.
For example, if you already earn $25,000 and your additional profits from forex trading total $15,000, you will move into a higher tax bracket, paying 22 percent income tax instead of 12 percent.
$25,000 after a 12% tax deduction: $25,000 minus $3,000 equals $22,000
$40,000 (employee earnings of $25,000 and forex trading income of $15,000) with a tax reduction of 22%: $31,200 = $40,000 minus $8,800
#4. Profits Earned by an Independent Forex Trader
To put the preceding into context, below is an illustration of how much profit an independent forex trader could make with various starting capital amounts and investment lengths.
This example implies that profit will be generated at the same ROI each month.
Over the course of a year, an independent forex trader has $500 to invest. If they invest that money, earn a monthly ROI of 5%, and continue to reinvest that 5% (adding it to the initial starting capital each month). They will have generated a profit of $397.92 ($897.92 – $500) by the end of the year.
For example, investing $10,000 for a year under the same conditions would result in a profit of $7,958.56 ($17,958.56 – $10,000).
If that same independent forex trader continued to invest and receive the same monthly 5% ROI for another two years, a $500 investment would result in a profit of $2,395.90 ($2,895.90 – $500) at the end of three years. So, a $10,000 investment would result in a profit of $47,918.16 ($57,918.16 – $10,000).
The percentages above, however, are based on earning a 5% ROI on a monthly basis.
An Independent Forex Trader’s Average Salary
As you can see, the amount of money you invest, your trading strategies and approach, whether you are a short-term or long-term investor, the forex market, any expenses or losses you may incur, and how much of your profit you decide to keep as a salary all affect the average salary of an independent forex trader.
The scenario is entirely unique to you and your Forex transactions.
How many hours will you be required to work?
The forex market is open 24 hours a day, seven days a week, and there may be some overlap at the start and end of the working week depending on the currencies you are trading in relation to the country you live in.
As an engaged forex trader, your working day may be extended to 12 hours, or you may be required to work on a shift basis so that one or more of the traders at your business have their eyes on the forex market at all times. You may also be required to work on weekends.
As an independent forex trader, you have some leeway. It is entirely up to you how much time you spend working on your forex investment.
If you are employed elsewhere and this is a secondary source of income, you may be limited in the amount of time you can devote to your forex trading; nonetheless, it is feasible to be a successful part-time forex trader.
How Does a Forex Trader Salary Vary Based on Location?
Aside from local living costs, the salary of an independent forex trader is largely unaffected by location.
Employed forex traders’ salaries, on the other hand, can vary substantially depending on where you work in the United States.
A forex trader in New York, for example, might expect to earn more than twice as much as a similar trader in Nevada.
A forex trader’s average salary outside of the United States could be as follows:
- In England, the average salary is £34,668 (roughly $44,581).
- In Germany, the price is €71,599 (roughly $83,798).
- Switzerland, 130,000 FR (roughly $140,967)
- In Canada, the price is CA$ 99,975 (roughly $74,746).
- In France, the price is €64,473 (roughly $75,449).
Employed or self-employed? The Benefits and Drawbacks
The biggest advantage of working as an employed forex trader is the certainty that you will receive your base salary and maybe some employee perks regardless of your performance. Furthermore, bonuses and commissions can significantly enhance your annual earnings from five to six or seven figures. However, that security comes with long hours and meeting your employer’s goals and expectations.
In comparison, the key advantage of working as an independent forex trader, whether full-time or part-time, is flexibility (hours, amount to invest, what to invest in, and when to purchase and sell) and the ability to keep all profits made. However, the fact that you are risking your own money comes along with these advantages. You are also liable for all associated costs.
Conclusion
As a working forex trader, your salary will depend on your trading performance, the company you work for, where you live in the United States (or the rest of the world), and your career stage.
How much money you have to spend, your investment strategy and any associated fees will all affect your salary as an independent forex trader.
It is difficult to say what an average salary will be as an employed forex trader or as an independent. However, there is the potential to make a good salary if the trades go in your favour.
Forex Trader Salary FAQs
Can you get rich by trading forex?
If you are a hedge fund with big pockets or an exceptionally adept currency trader, forex trading might make you wealthy. However, rather than being an easy road to riches for the average retail trader, forex trading can be a rough road to massive losses and potential penury.
Is forex trading a gambling?
You should keep these considerations in mind at all times, and keep in mind that forex trading is not gambling. When you accept this, your decision-making improves, and you can learn how to construct techniques for lucrative trading positions. Forex trading is not the same as playing a slot machine.
Can forex be a full time job?
To become a full-time forex trader, you must have extensive trading expertise as well as a strong desire to trade. Trading forex can be a full-time profession, but it requires a lot of focus and effort. Before you can join the ranks of full-time traders, you must first develop a solid plan.
