Become a Forex Millionaire

Trading strategies for becoming a forex millionaire

Various trading strategies can be used to earn substantial profit in the forex market, perhaps even earning you that millionaire status. Every trading strategy depends on the trading style, technique, market conditions, risk appetite, starting capital and leverage. This section will highlight the most common trading strategies used to become a millionaire forex trader.

Let’s explore four different strategies and understand how they could be used to earn a million dollars trading forex.

Using high leverage for quick forex profits

A common approach new traders take to maximize forex profits is using substantial leverage on small accounts. Some brokers offer leverage up to 1:2000, meaning traders only need $500 of free margin to open a million-dollar position. Just because you’re trading million-dollar positions doesn’t mean you’re close to becoming a millionaire yourself; you’ll need to gain approximately ten thousand pips to earn a million dollars. List of US Forex brokers with high leverage.

If we suppose the following:

• You’re trading EUR/USD with a daily range of 70 pips
• You’re placing a 10-lot trade per day and gaining 70 pips each day
• Every trade is successful

Based on the above, very unrealistic assumption, it would take just over six months to earn a million dollars.

Now, let’s accurately assume you don’t win every trade, along with the following:

• You’re trading EUR/USD with a daily range of 70 pips
• You’re placing a 10-lot trade per day with a take profit of 50 pips and stop loss of 25 pips
• You win 60% of trades consistently

Based on the above, which would require substantial skill or luck, it would take almost two years to earn a million dollars if six out of every ten trades were profitable.

Keep in mind that a 60% win rate in this scenario means 300 successful trades and 200 losing trades. All it takes is your first 19 trades to be loss-makers to blow your account.

Martingale strategy

A martingale strategy is a technique that doubles the risk after each losing trade to double the potential reward for the next trade. The idea is that when you eventually win, and the profit will offset the previous losses. Although this might sound fool proof, the downside is that an extended series of losses can quickly burn through your entire capital, leaving you with nothing.

If we suppose the following:

• Your account balance is $5,000, and you’re using 1:500 leverage
• You’re trading EUR/USD
• You start with a one-lot trade with a take profit of 50 pips and stop loss of 25 pips

Luckily the fourth trade was profitable because if it weren’t, the account would be left with just $1,250, which wouldn’t be enough margin to open the next 16-lot position in the sequence.

Compounding forex strategy

The principle of a compounding forex strategy is essentially reinvesting your profits to increase position sizes instead of withdrawing profits. Increasing position size doesn’t translate to increased risk as risk, reward and position size ratios mean if your account balance grows, so should your position sizes. For example, if you risk 1% of your account on each trade, once your $5,000 account becomes a $10,000 account, doubling your position sizes would still be a 1% risk.

Consider starting with $5,000 in your trading account, and you consistently make 10% every month; you’d be able to withdraw monthly profits of $500, after five years, that’s $30,000. Now consider not withdrawing the profit each month. After 56 months of compounding 10% each month, you’ll theoretically have an account balance of more than a million dollars.

Risky forex trading strategies

Risky forex trading strategies are the quickest ways to make substantial money in the forex market if you’re fortunate enough to be profitable. The reality is that the riskier a strategy is, the greater the chance of losing money.

All of the examples given in this article are presumptuous and very unrealistic. Nor do they consider profit eating costs like commissions, spreads and swaps.

Can anyone become a forex millionaire?

The forex market is one of the most accessible ways to speculate on the financial markets, and almost anyone can participate. Just because you can play the game doesn’t mean you will win. Becoming successful at anything in life requires hard work and perseverance. If you’re serious about growing wealth by trading forex, think about sustainable, low-risk trading strategies, such as compounding. Risk is an inherent part of investing, but that doesn’t mean it should go unchecked. You should control risk and ensure any risk you take is worth your while.