A forex trader may be:
Employed by a financial organization, such as a hedge fund or an international bank Employed by a group of clients to trade on their behalf Self-employed as an independent trader Acting as an independent trader as an additional source of income
What Is the Foreign Exchange Market?
The foreign exchange (forex) market is the largest global market to the value of over $5 trillion. The forex market is a network of brokers and financial institutions, covering both over the counter (OTC) transactions by individuals involved in forex trading and interbank transactions carried out by large banking organizations. The most traded currency on the forex market is the US dollar.
Forex Analyst
A forex analyst researches currency markets and political/economic factors that may affect the Forex to inform their employer and clients on the most advantageous investments to make. This role is also sometimes known as a currency researcher or a currency strategist.
Forex Account Manager/Trader
Dealing with one or more clients, an account manager is responsible for making buying and selling decisions on their clients’ behalf and handling large amounts of money. They are expected to meet profit targets and, often, to already have a high level of forex market experience.
Forex Exchange Operations Associate
A forex exchange operations associate supports the forex trader by providing a customer-service role, carrying out the necessary administration tasks; for instance, verifying customer ID and processing customer withdrawals and deposits.
What Is the Average Salary of an Employed Forex Trader?
Before we can arrive at the average salary of an employed forex trader, it is necessary to look at what makes up that salary and what could affect the level of that salary.
What Makes up the Salary of an Employed Forex Trader?
If you work as an employed forex trader, your salary will be made up of:
A base salary – This is what you will receive each month, regardless of your performance Bonuses and commission – This will be based on your performance, the performance of the team of traders within the organization and company turnover You may also be offered certain employee benefits, such as health insurance, holiday allowance, profit-sharing scheme or 401(k) pension plan
What Might Affect the Salary of an Employed Forex Trader?
Forex trader base salaries may vary for several reasons:
Your level of forex market and trading experience Education, both general and financial The financial organization you work for The geographical location of where you work Length of service and the seniority of your forex trading position
Factors affecting bonuses and commission include:
Your performance Performance of the entire trading team Company turnover Current economic and political climate What other similar organizations pay
The Average Salary of an Employed Forex Trader
The average employed forex trader salary can be difficult to tie down for several reasons:
The variance of base salaries based on the factors mentioned above Equally, the variance of bonuses and commissions Differing practices between financial organizations The extent to which bonuses and commission can inflate a forex trader’s salary, sometimes moving it from a five-figure number to a six or seven-figure number The lack of information available about forex traders involved with private hedge funds
Even organizations that can usually be relied on to provide average salary figures for other careers, do not appear to agree on average forex trader salaries. For instance, the recruitment website Indeed sets an average base salary for a forex trader in the US at $91,050, and annual commission at $25,000 in 2020. In comparison, Payscale offers an average salary figure of $80,935 for the same period, with $21,000 commission, and a bonus figure of $14,916. These average figures, however, are drawn across all levels of seniority of forex trader, a vast array of financial organizations and throughout different parts of the US, and are likely to be inflated by the six or seven figures that senior traders can earn.
What Is the Average Salary of an Independent (at Home) Forex Trader?
Independent (at home) forex traders use their own money to trade currencies, taking the entire risk on their shoulders but also retaining the entire profit. An independent forex trader may make all their earnings from trading currencies or use forex trading as a way to make additional money over and above their employment in some other capacity. As an independent forex trader, you have the choice whether to take the entire profit you make from the purchase and sale of currencies as your salary, take only a portion of your profit as salary and reinvest the remaining profit, or continually reinvest over a longer period to achieve a higher profit and, as a result, a higher salary. Your final profit figure is arrived at by taking into account the following factors:
Return on Investment (ROI)
Your ROI is the amount of profit you make from trading currency. This figure will be affected by how much money you invest, whether you are a short-term or long-term investor, the number of trades you make, and your ability to efficiently analyze the forex market.
The Amount of Money You Start With
The amount of starting capital you have to invest in currencies can make a vast difference to your profit and salary as an independent forex trader. An initial 5% return on an investment of $4,000 is $200. If you can manage that return monthly and re-invest, your annual profit would amount to $3,183.42 ($7,183.42 – $4,000). In comparison, an initial 5% return on an investment of $80,000 is $4,000. Again, if you can maintain that return every month and re-invest, your annual profit would be $63,668.51 ($143,668.51). The amount of starting capital you have to invest, if handled successfully, could make the difference between having some extra money on the side and supporting yourself solely from your income as an independent forex trader.
Costs Incurred Through Forex Trading
As with any business enterprise, there will be costs involved in operating as an independent forex trader, such as fees paid to your broker. If you trade currency as a business and are self-employed, you may also have to factor in any of the following general business costs:
Furniture and equipment; for instance, a computer Telephone line and broadband Business insurance Accountancy fees
Finally, as with any income you earn, your salary from forex trading will be subject to income tax. If you use forex trading to earn extra income, then you may find that this pushes you into a higher tax bracket. For instance, if you already earn $25,000 and your additional earnings from forex trading amount to a further $15,000, you will move into a higher tax bracket, paying 22% income tax instead of 12%. $25,000 with a 12% tax deduction: $25,000 – $3,000 = $22,000 $40,000 ($25,000 employed earnings and $15,000 forex trading income) with a 22% tax deduction: $40,000 – $8,800 = $31,200
Examples of Profit Earned by an Independent Forex Trader
To put the above into context, here is an example of what profit an independent forex trader could make using different starting amounts of capital and length of the investment. This example assumes that profit will be earned at the same ROI for every month. The above figures are, however, dependent on consistently receiving a 5% ROI each month. By comparison, investing $10,000 under the same conditions for a year would yield 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 a further two years, a $500 investment would see a profit of $2,395.90 ($2,895.90 – $500) at the end of the three years, and $10,000 would see a profit of $47,918.16 ($57,918.16 – $10,000).
Average Salary of an Independent Forex Trader
As you can see, the average salary of an independent forex trader will depend on how much you invest, your trading methods and approach, whether you are a short-term or long-term investor, the forex market, any costs or losses you may incur and how much of your profit you decide to take as a salary. The situation is completely individual to you and your forex dealings. As an employed forex trader, your working day could be expected to stretch to 12 hours, or you could be asked to work on a shift basis so that one or more of the traders at your workplace have eyes on the forex market at all times. You may also be expected to work on a weekend. As an independent forex trader, you have a level of flexibility. The choice is yours as to how much time you spend working on your forex investment. If you are employed elsewhere and this is an additional source of income, you may be limited on how much time you can spend on your forex dealings; however, it is possible to be a successful part-time forex trader.
How Do Forex Trader Salaries Differ by Location?
The salary of an independent forex trader will generally not be affected by location, other than local living costs. Employed forex trader salaries, however, can vary greatly depending on where in the US you work. For instance, a forex trader working in New York may expect to reasonably earn over twice the salary of a similar trader working in Nevada. Outside of the US, an average salary for a forex trader could be around:
£34,668 (approximately $44,581) in England €71,599 (approximately $83,798) in Germany 130,000 FR (approximately $140,967) in Switzerland CA$99,975 (approximately $74,746) in Canada €64,473 (approximately $75,449) in France
Employed or Independent? The Pros and Cons
The main benefit of working as an employed forex trader is the security of receiving your base salary, and possibly employee benefits, regardless of your performance. In addition to this, bonuses and commission can greatly increase your annual earnings from five to six- or seven-digit salaries. However, along with that security comes long hours and working to your employer’s targets and expectations. In comparison, the main benefit of operating as an independent forex trader, whether full-time or as an additional source of income, is flexibility (hours, amount to invest, what to invest in, and when to buy and sell) and the opportunity to keep all of the profits you make. Hand in hand with these benefits, however, is the fact that you are putting your own money at risk. You are also responsible for all the costs involved. According to Indeed, the average salary of a forex trader is $98,652 per year plus $25,000 in commissions. The commissions are what the forex trader primarily relies upon. Basic earnings are usually reinvested into stocks to continue to trade. For instance, if a good forex trader invests $1,000 into a trade, they can expect to earn at least $10 to $50 on this trade. This may not seem like a lot, but if they are trading with high financial thresholds, they can expect to earn a lot of money. Therefore, the top forex traders are usually wealthy individuals or have investments in large companies. They can afford to put a lot towards a trade to get a good return. Forex trading is a regulated and international form of trading that has been in operation for over a decade. Ethical practices have been enforced across the globe, and it is as ethical as any other form of monetary trading. There may be individuals that bend the rules to fit their practices, but the overall practices of forex are ethical, meaning it is not unethical if you partake in this form of trading. Once you have learned the foundations of forex trading, you must set yourself an initial trading budget. Practice demo trades with a small budget and develop a trading strategy on a market that supports these options. After you have gained good experience, you can begin investing more in markets that require higher deposit thresholds. Kathy Lien is a successful forex trader who started trading on wall street when she was just 18. Other females include Jennifer Fan who is a hedge fund manager and a specialist in agricultural markets. The reason why it takes a substantial amount of time is that traders need to learn and develop an effective trading strategy. They must also locate the right markets and the currencies that they wish to trade in. If you have experience in trading shares or the CFD market, you will likely pick up forex trading quicker. This may sound a lot, but most earnings are reinvested. A competent forex trader can expect to earn $1,000 to $5,000 daily. Successful forex traders are also invested in other forms of trading, meaning that the income they derive from forex trading is only one part of their overall income. The top forex traders should only expect around 5% profit on their investments, and so they will need to put in a lot for it to be substantial enough to live on. You will also need to locate a social market that you can rely upon and that you are familiar with. On top of this, you will also need to educate yourself properly to derive a successful trading strategy. The top forex traders in the US earn over $10,000 per month on their investments, whilst the 25th percentile (lowest 25% of forex earners who do it full time) earn around $2,708 per month. There are no guarantees in trading and significant loses can be made. The profit margins of forex trading are quite low, and it is not easy to learn for beginners. You must also have some savings or money to invest initially to get your stocks running. Without adequate investment, you will not make enough money for it to be considered a job. The reason why you need double is that you will be re-investing at least half of your trading profit back into the forex market. You must also ensure that you have no debts or outstanding payments to make when you make this decision. Trading can be precarious and market volatility may impact your trading earnings. In this case, you do not want any outstanding debt if there are considerable changes to the market. George Soros is known as one of the world’s best currency traders. He has been known to make over $10 billion on trades, but this is an exception rather than the rule. Professional traders make up around 1% of traders and they dedicate their whole income and time to the forex market. However, this does not mean that you must be a professional to make a profit. It is very possible to make a profit from forex trading (although significant loses can equally be made), but you may not have the resources to turn it into a full-time occupation. You have to be earning a lot of money as a forex trader to retain and pay off a mortgage. Trading is a high-risk form of income because of market volatility. Because of this, banks and lending agencies may be reluctant to grant you a mortgage. If they were to publish their buys and picks, they would reduce their chances of generating income. On top of this, they would be giving away trading strategies they may have spent years learning. It is possible to get forex and stock traders to share their trading information with you, but you may have to pay a price. Most companies and trading experts state that you need at least a year of salary earnings to invest in forex trading. You must also be willing to dedicate some time towards studying the forex market. According to a study conducted on wealth in Germany in 2012, only 2.4% of millionaires made their income from stock investments. As well as this, there are only around 2,755 billionaires in the world. Forex trading can be profitable, but do not expect it to put you in the billionaire category. You should not focus on becoming a billionaire as forex trading can result in significant loses as well as gains. Women favor forex trading over other styles of trading, and they make up a total of 10.9% of forex traders. This amounts to 30.71% of women that trade. As an independent forex trader, your salary will rely on how much you have to invest, your investment strategy and any involved costs. Whether you work as an employed forex trader or an independent, it is difficult to state what an average salary will be, but there is the potential to make a good salary if the trades are in your favor. *WikiJob does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
