There is serious earning potential at hand when you choose to trade currency, something that every investor should be trying to unlock. Looking at the scale of forex trading, it’s certainly worth knowing not only what the top traders are making, but also how they are making it and how top traders differ from the rest.
While most forex traders leverage their free margin to maximize trading power—and, thus, their earnings potential—margin trading is only one aspect of their success. What is free margin in forex? Basically, it’s the amount of available equity you have in your account to open a position using the borrowed margin offered by your online broker.
Again, this is just one characteristic of high-earning forex traders. Here’s a look at some of the other traits that are common among the world’s top forex trading professionals.
Looking at the Numbers
While everyone’s forex trading experience will be different, if you are looking at the true upper echelon of forex traders, you’ll find that the percentages being turned over on a yearly and monthly basis truly are astounding. Most traders will look at their margins monthly, and it wouldn’t be surprising to see a professional trader generate profit between 5-15% per month over a year with a few lesser months scattered in between.
With that in mind, with an average monthly profit of 10% over the course of a year, a top trader would generate a profit of 120% overall. This would mean that £100,000 in total capital could be flipped into a £220,000 figure for a £120,000 profit. This is just an example, but top forex traders tend to earn six figures (or possibly more) per year, with the aforementioned explaining how that can come about.
Determining What Factors Are Related to Trade Performance
How much capital you have is going to have a direct impact on how much you can make when forex trading. As you’ve seen from the above example, the top earners are able to play the percentages and generate big returns because they have a large amount of capital to work with. You can absolutely build things up slowly, but large capital is intrinsically linked to the top traders for a reason.
Mastering the use of leverage is also important for anyone who wants to successfully rank as a top-earning trader. When used, it means that you can make trades for more capital than you actually have. The use of leverage in any capacity is linked to your attitude to risk. If you want to use leverage on a large scale in an attempt to push your profit levels up, you’re going to need to take bigger risks, which can result in both negative and positive account fluctuations.
Finally, the currencies you actually trade will have a huge influence on your profit and loss levels. Some currencies are slow burners, which makes them favorites of beginners and large-volume traders, while others have a real “snap,” which means volatility, risk, and potentially bigger profits when trading them.
Examining How Professional Traders Differ from the Rest
It has been said before, but it certainly stands to reason: Professional forex traders represent the 1%, while casual traders represent the other 99%. This is because professional traders approach the market in a distinctly different fashion from casual traders. Looking at how professional traders differ from the rest, you will find that a large degree of this comes in the form of mentality and focus.
Casual traders are known not to be selective when entering trades, showcasing impatience. They also have a track record of letting emotion, fear, and greed take over, diverting away from what otherwise might be a solid trading strategy. Casual traders can certainly turn a profit—in fact, many do—but letting the heart rule over the head, along with always looking for the next “quick fix” position in the market, usually hampers performance.
When forex trading on a professional level, patience and discipline are unequivocally key. Top traders have an understanding of the damage that emotion, fear, and greed can have, thus they don’t hit the panic button when they see volatile price movements. Arguably remaining stubborn at times, they stand by a system and follow a trading plan through. Rather than jumping on every common trend that comes along, buying and selling in a flash, they instead assess their success or failure based on a series of trades rather than any single individual trade.
The above is just the tip of the iceberg when it comes to what professional traders do differently from the rest. But as you can see, mentality is what allows top traders to succeed and arguably gives them the edge over others within the forex market.
Understanding the Top Forex Indicators That World-Class Traders Rely On
While you might expect top-performing traders to rely on obscure indicators that have guided them to stunning success, the indicators featured in these strategies tend to be remarkably ordinary. It’s possible that you are already using some of the forex indicators that are favorites of these world-class forex traders, in large part because the reputation of these indicators, and their accuracy over time, have been proven to both elite forex traders and the forex community at large.
Here’s a look at a few of the top indicators used by top forex traders:
Top traders make use of the moving average for several reasons. First, moving averages can be customized to evaluate different time frames for a currency pair, offering flexibility to match the trading window under consideration. Moving average is also easy to combine with other indicators to see if these indicators confirm the trends suggested by one another. And, with more than 100 years of use in forex markets, the moving average has a large body of proof that its indications are valuable.
Relative Strength Index (RSI)
Developed in the 1970s, this is one of the most popular oscillator tools because of its value in reflecting the strength of an emerging trend. Top traders use this to not only identify entry and exit positions but also to calculate when and where to place trailing stop-losses as they seek to maximize profit while minimizing risk.
Bollinger Bands were first developed in the 1980s and have since become a staple indicator for forex traders of all experience levels. While Bollinger Bands are an accurate measure of volatility for a currency pair, the true value of this indicator is in the way it adjusts to changing market conditions, providing more timeline insights and price data that traders can use to make informed, responsive decisions.
Exponential Moving Average (EMA)
Similar to Bollinger Bands, the exponential moving average (EMA) of a currency pair charts the volatility of price changes while also averaging out that volatility to illustrate price trends clearly and without giving too much weight to price extremes. EMA is easy to chart and interpret, making it popular for forex traders of any experience level, and it can be adjusted to different time frames depending on the type of trade and period of volatility you’re interested in analyzing.
While many forex experts question the reliability of Fibonacci extension and retracement levels as an exact forex science, top traders are always paying attention to not only the price action of a currency pair but also the trading activity around these positions. Given the widespread use of Fibonacci levels, top traders are more likely to play a psychological game in which they forecast price action by anticipating how traders will act based on these support and resistance levels.
While these indicators can be helpful in developing your own trading strategy, it’s important to keep in mind that no world-class forex trader made their fortune off of one or two stand-alone indicators. Instead, top-performing traders built their success by developing an evaluation strategy that utilizes multiple indicators alongside other relevant forex data, including global economic news.
Reviewing Economic Events Followed by Top Traders
Technical indicators are just one way top traders evaluate trade opportunities. Economic events are also crucial to follow, which is why you see many top forex traders displaying a broad knowledge of geopolitical and economic activity.
The more you understand global events and their impact on currency values, the more equipped you will be to leverage this news to maximize profit potential. Here are some of the top economic events to follow:
Gross Domestic Product (GDP)
GDP reports are one of the best ways to gain a snapshot view of economic activity in a country. These reports typically have a significant impact on how traders at large will value a given currency, so top traders will be evaluating GDP not only to understand that country’s currency strength but also how other traders might respond.
Non-Farm Payroll Report
Experienced forex traders are always on the lookout for economic information that can indicate changes in forex price levels. One of the best sources of domestic economic data is the U.S. non-farm payroll report. This monthly report offers important insights into economic trends shaping the U.S. economy, all of which can affect currency pairings and forex account balances. The most important data found on the non-farm payroll report includes overall payroll numbers in the U.S. and the unemployment rate, among other factors.
Jobs reports are another simple indicator of economic activity because jobs tend to be highly correlated with economic health. In many cases, declining jobs can be a harbinger of more economic strife to come, which could trigger a decline in currency value.
Consumer Confidence Index (CCI)
The CCI is a metric quantifying consumer confidence in their own income and the economy as a whole. This metric can help top traders understand economic conditions based on information that might not appear on other economic reports. If the consumers in a country are being more cautious with their money and cutting back on spending, there is likely a good reason for that impulse.
Managing Your Emotions and Overcoming Fear
Perhaps the greatest pitfall of amateur traders—other than a lack of market knowledge—is the risk of making trades based on an emotional response rather than a rational response.
Forex traders invest a lot of time and energy into developing a trading strategy that takes an objective, data-driven approach to analyzing trade opportunities. But when you allow your emotions to take over—ignoring signs you should exit a position in hopes of chasing more profits, for example, or making an ill-advised trade in an impulsive effort to win back your losses from a past trade—you can end up digging yourself into a much deeper financial hole.
Top forex traders have learned how to avoid impulse decisions pushed by emotional, fear-based trading. They’ve achieved this by developing an iron-clad strategy to evaluate trades without any emotional input. And they’ve trained themselves to stick to that strategy, despite their strongest emotional impulses to chase potential earnings on a gut feeling. This emotionless approach to forex trading is something every professional trader should strive to achieve.
Stepping Up into a Position as a Top Trader
If you’ve committed time to forex trading but haven’t exactly found your account overflowing with profit—or you’ve simply found yourself asking, “What’s next?”—then it’s worth making the step up to a professional trader position. Anyone looking to trade professionally needs to understand that it’s more or less a full-time commitment. The importance of monitoring the markets can’t be understated.
Beyond a shift in mentality—which will take time—you also need to be willing to alter your trading approach. Any professional trader can implement the basics better than most, but what this should be used for is a foundation, not an end goal. More complex trading systems and strategies are generally considered out of reach for a casual trader, but professional traders will know how to implement them at will. Research, education, and practice can help you acclimatize to advanced-level trading systems that can transform your forex trading success rate.
Other factors that any casual trader with professional trading aspirations needs to address include the reuse of profits, investment capital levels, and risk management practices. Stepping up into a position of a top trader is certainly plausible, but it is by no means something that anyone can take lightly because it can be a rather intensive process.
The top traders may earn six figures a year or more, but this doesn’t happen by chance. The reason this bracket of traders is able to reach such heights is that they approach the market differently. So, if you want to start earning the same as what the top traders make, you should be prepared to build, alter, and overhaul your forex trading efforts.
The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.