A lot of questions that come my way have to do with the topic of profitability…
How much can I expect to make if I take X trades every week?
How much have you made with your strategy this year?
If I am trading with X amount of money, what can I earn?
Sure, I can give projections based on the numbers – but that is going to do nothing in helping you actually achieve profitability.
There are several key things to consider when you start looking at profitability in forex trading.
If you take a look at these points, you will be well on your way to understanding exactly what it is you need to pursue in order to achieve your goal of being profitable.
Consistency in Profitability
Perhaps one of the biggest misconceptions in trading is pursuing the goal of consistent profitability.
Earning 10% of your account every month as a goal may seem achievable, but the reality of trading is different. The most experienced traders will not achieve this goal.
The simple reason is that losing is a common occurrence in trading – we have an entire article dedicated to this topic which you can check out here.
You have to set your sights on a larger time frame and accept the reality of losing. Some months you may lose 10%, whilst the next one you see a profitable month of 15%.
Ultimately, you need to set your sights on an annual goal when it comes to looking for consistency.
Even then, the word consistency is still misused. Some years you may not have account growth because it is a difficult year to trade, like 2019.
When it comes to profitability, the most important thing that needs to be consistent is your daily trading process and approach.
If you can find consistency in your method, you will be much better placed to make adjustments and comb through your results to adjust. This is essential if you want to achieve profitable results because you need to play to your strengths, not your weaknesses. Having a journal lets you do that with great precision.
Trading is a numbers game and with the Forex4noobs price action trading strategy, we structure the strategy in a way that those numbers are in your favour.
If you stick to a minimum RR (risk-to-reward ratio) of 1:1.5, your win rate doesn’t even need to be over 50% in order to be a profitable trader!
This highlights the previous point that you need to be open and accepting to the reality that you will lose.
If you can master this, you will find freedom in your trading and overcome the psychological stress that comes with losing. Our society shuns losing, making it harder to accept it.
But in trading, losing is a regular occurrence.
And that is fine!
Do you want to be a trader with a positive win rate but still be losing money?
Because that is possible… If your average target is below your average stop loss size, that will end up happening to you.
Whereas you can instead be consistent and stick to the numbers game, achieving profitability. If your average target profit is 1.5 RR, you only need to win 40% of trades to break-even – anything higher and you are profitable!
So don’t get distracted by conventional ideas of success and instead, focus on the numbers game.
Finding Your Style
Over your trading career the most important long-term process you will go through is finding your trading style.
This is why there isn’t a golden ticket strategy that anyone can use and make money from.
We all assess risk differently, prefer different risk levels, prefer certain time frames and styles of trading like day-trading, scalping, or longer-term approaches.
Simply put, what works for me may not work for you.
The great thing about the strategy of Forex4noobs is that it provides you with the foundations of a strategy that you can then build upon.
Flexibility and adaptability is really important with strategies, in my experience. If mine wasn’t flexible and open to different interpretations, I wouldn’t have thousands of students.
I have seen hundreds of variations on my strategy now that Forex4noobs students have cultivated it over time. As they have understood themselves more as traders, the strategy adapts and grows with them.
Tweaking a strategy is a more advanced aspect of trading because it needs to be balanced with a consistent approach.
However, when done right, it is extremely profitable, both metaphorically and literally. I go over how to experiment with your strategy if you want to read more about this area of trading.
Experience is necessary in order to find your style, so don’t rush into this aspect of your trading journey and be patient.
Gaining experience is something you can’t rush – you have to put in the time and effort…
Time and Effort
Look, independent forex trading has to be given the proper amount of time and effort.
Too many people come into this career with misconceptions about the ease of earning money.
It isn’t their fault! Unfortunately, there are a lot of influential people that feed people these misconceptions in order to push a signal service or a product.
The fact of the matter is that you have to dedicate time and effort into forex trading if you want to have any hope of finding financial freedom.
The majority of trading accounts in the UK lose money. That is a reality. Do you want to be part of that pile? Probably not. This is where failing to prepare is preparing to fail.
One of my mantras is that ‘Discipline Equals Freedom’.
You essentially should treat your trading as running your own business.
Yes, that comes with responsibility and accountability. Yes, you need to become reliant on yourself and dedicate time and effort in order to find success.
You are also your own boss. You can decide when to trade, how to approach the market, what works best for you.
If you put in the time and effort, you will very much reap the benefits of being a successful forex trader. But that doesn’t come without sacrifice, without the proper planning, or without high expectations of yourself.