Two groups of Forex traders google for methods of calculating Forex profit. The first group are the Forex traders who want to know how much profit they will make with the positions they want to take or they have taken. The second group are novice Forex traders who want to know how much profit Forex makes as a full-time work and in long-term. To any of these groups you belong, I recommend you to read this article entirely because it will open your eyes to some facts that you didn’t know before. These facts will make some big and positive impacts in your Forex trading results. When you know these facts, you will have more enthusiasm to continue, and you will know how rich you are going to become through Forex trading, and what you should expect for if you become a Forex trader. So, make sure to read this article to the end.
Calculating Forex Profit
Forex trading covers so many things now. From trading currencies against each other, to trading metals, CFDs, indices, grains, cryptocurrencies, etc. However, Forex traders are mainly interested in trading currencies against each other, and so they want to know how much profit they make through it.
In Forex trading, we deal with currency pairs like EUR/USD, USD/CHF, GBP/USD, USD/JPY and etc. Each currency pair has a different pip value. Each pip is 1/10,000 of the price in currency pairs like EUR/USD and GBP/USD that USD is at the right, and 1/100 of price in currencies like USD/JPY or USD/CHF that USD is at the left. In currency pairs, the first currency is known as “commodity”, and the second one as “money”. Therefore, in EUR/USD, Euro is the commodity and USD is money. Now, let’s say the EUR/USD price or exchange rate is currently 1.2515. If it goes up to 1.2525, then it has moved up for 10 pips: 2525 – 2515 = 10 pips
Similarly, if the price goes down from 1.2515 to 1.2505, it has moved down for 10 pips: 2515 – 2505 = 10 pips
Now, if you know how much the pip value is, then you can say how much profit you have made or how much you have lost when the price moves for 10 pips. Each currency pair has a different pip value. For example, EUR/USD pip value is usually around $10 if you trade one standard lot which is 100,000 Euro against USD. Therefore, if you buy one lot EUR/USD and the price goes up for 10 pips, you have made a $100 profit: 10 x $10 = $100
To make your life easier, you can use a pip value calculator, and a profit calculator. If you merely want to calculate your profit, then you don’t need to use a pip value calculator because our Forex profit calculator can calculate your profit without having to know the pip value. Our Forex calculators not only help you to know how much profit you can make in each position, but also you learn how to choose your position size properly, not to risk more than 2% of your account in each of the positions you take.
Although it is good to know how to calculate the profit and loss in Forex trading, and fortunately there are some calculators to use for this purpose, the trading platform you use to take your positions takes care of everything, while you don’t have to do any calculations. It adds the profits and deducts the losses to/from your account balance. The only thing you must calculate before taking a position is your position’s lot size. Learn about the importance of calculating your position size and use our position size calculator here.
How Much Profit Forex Makes?
As you saw above, it is easy to learn how much profit each position makes. However, something which is more important to know is how much profit you will make in long-term as a Forex trader. This is the sweetest part of the story to know how much profit you can make, per month and year. It shows you the long-term perspective to know how a $500 or a 10,000 account grows after one, two or three years.
Most Forex traders think that if they open a $500 account and double it every week or month, they will become a multimillionaire. If this was true, then 99% of Forex traders wouldn’t be losing. You can hardly find a multimillionaire retail Forex trader.
Those who are after doubling or tripling their accounts are exactly the ones who wipe out their accounts once in a while. Their problem is that they don’t know that in order to become a multimillionaire through Forex trading, they don’t have to double or triple their accounts every month. They just need to become a consistently profitable trader who can grow his/her account slowly but surely. Their problem is they have never spent a few minutes to do some calculations and have a perspective from their future as a Forex trader. They don’t see the horizon, and so they try to double or triple their small accounts because they think it is the only way to make a reasonable amount of profit through Forex trading. But they are wrong.
In this article, I will open your eyes on the reality to show you that all you need to become a rich or multimillionaire Forex trader is patience and consistency. So, make sure you read the rest of this article to the end.
Who Is a Consistently Profitable Forex Trader?
I see lots of false and misleading information on the Internet about the profit that Forex traders can make per month. For example, in an article on one of the most famous trading and investment related websites (thebalance.com), they are saying that Forex traders’ profit is from 5% to 30% per month. This is the most ridiculous thing you can ever hear or read. Can’t a Forex trader make 3% profit per month and still be known as a good Forex trader?
If a Forex trader makes even as low as 1% per month, but they can consistently repeat this, while their losses are managed and are not too big, heir gains are bigger than their losses, and their statement shows his discipline and consistency, he is a good and professional Forex trader who is consistently profitable. Consistency is the most important thing. If a trader makes 30% profit this month, but then they wipe out the profit the next month, they are a terrible Forex trader who will wipe out the whole account sooner than later.
So, it is not the percentage of the profit that says who is a good Forex trader. It is the consistency that counts. A trader who makes 1%, and also a trader who makes 30% profit per month, are both great Forex traders, if the track records of their past few years of trading show that they have been repeating their success, over and over, every month, at least for the past few years. This is what being a consistently profitable Forex trader means.
Traders who say they can double their accounts every month, but they disappear when you ask for their track record, are either liars, or it is just a couple of months that they have doubled their accounts, and they still call themselves Forex traders. I guarantee that they will wipe out their accounts as well.
How to Become a Consistently Profitable Forex Trader?
It needs several articles to explain this. Briefly, first you must choose a Forex trading strategy. Then you must learn it properly and demo-trade it until you become able to make profit with your demo account, consistently at least for 6-12 consecutive months. Then you can open a small live account and repeat this with real money, and if you can repeat your success with real money, at least for 12 months, then you are a consistently profitable Forex trader. I have explained this in more detail here and here.
Now, let’s answer the main question of this article: How Much Profit Forex Makes?
This question means how much profit you can make through Forex trading in long-term. To answer this question, I assume that you have already become a consistently profitable Forex trader, who is able to make profit, consistently, every month. Whether you make 1% profit per month or 40%, as long as you can do this consistently, you are a great Forex trader who is consistently profitable.
However, here is where most Forex traders make a big mistake that causes them not to make a fortune through Forex trading. Even when they become a consistently profitable trader, they think that they cannot get anywhere with a small account (for example a $1,000 account), and with making a small profit like 10% or even 20% per month. Therefore, they either try to make more profit and double their accounts every month, that will cause them to wipe out their accounts (because they must do this through taking too much risk , or by overtrading), or they start with a money that they cannot afford to lose. I guarantee that all of these mistakes end to failure, even for traders who are consistently profitable.
Such a bad mentality comes from having no long-term calculation, which is something that I want to do here for you. This calculation will change your life. You will see that you can even become a multimillionaire with a small account, and making a small monthly profit, only if you have the consistency, discipline and patience that I talked about above. You don’t need to take too much risk or overtrade. You just need to know where you will be, after one, two and three years of Forex trading and making profit consistently, no matter how much monthly profit you make, or how small your account is.
A Simple Excel Spreadsheet to Know How Much Profit You Can Make with Forex Trading
I have created a simple Excel Spreadsheet that you should always have open on your computer. It enables you to know what your account balance has to be, every month and while you are trading and growing your account. You must take a look at it at least once every day to remind yourself about the destination of your Forex trading journey. Feel free to modify the spreadsheet as per your needs and goals, but don’t close and forget it because it causes you to forget where you wanted to go, which can cause you to give up or think that you cannot reach the wealth and profit you wanted through Forex trading, and so you will start risking too much or overtrade. As I mentioned above, all you need to become a rich or even a multimillionaire Forex trader is consistency. If you have become a consistently profitable Forex trader who makes even as low as 5% profit per month, then all you need to do is the consistency to keep the same stamina, over and over, every month.
Here, I assume that you have become a consistently profitable Forex trader who is able to make n% of profit every month (you can consider your average monthly profit), the way I explained above. However, if you haven’t reached this level yet, still you should use our spreadsheet to learn how a Forex account will grow by making n% of profit every month. If you are still demo-trading to master your trading system and become a consistently profitable demo-trader, you must use our spreadsheet to keep yourself in the right track, and to build the discipline you need to become a professional Forex trader. This file prevents you from over-trading and expecting too much from the Forex market and yourself. Please read the explanations below the screenshot.
How This Excel Spreadsheet Works and What It Teaches Us
You can change two cells in our Spreadsheet (see the screenshot above) to compare the different results it calculates and returns:
- Average Monthly profit %
- Account balance
There are four fixed columns of account balance, from $500 to $500,000. Those columns cannot be changed. However, the last column is for you to enter the account balance that you want, to compare the results.
As an example, I set the average monthly profit to 20%. This is a relatively realistic monthly profit that professional and consistently profitable Forex traders, especially day-traders can make. However, feel free to change it to different numbers to compare the results. To make 20% profit every month on average, you don’t have to risk too much. You can make this monthly profit if you risk 2% of your capital, while your Risk to Reward Ratio is as low as 1:2. This has been proven by my years of Forex trading experience. However, traders have different styles and strategies.
Now let’s see what our spreadsheet has to say:
If you start with a $500 account and make 20% profit per month, while you don’t withdraw any money and you just grow your account, your account balance will reach $354,401 after three years or 36 months. And, if you decide to withdraw your monthly profit after three years, while you still make a 20% profit per month, you can have a monthly income of $70,880.
It is amazing, isn’t it?
Not only it is amazing, but it is unbelievable too because most traders think that if they cannot afford a $100,000 or $500,000 account, and so they have to start with a $500 account, they won’t be able to get anywhere unless they double their accounts every month. Based on such a wrong mentality, they try to double their accounts through risking too much or overtrading, and this will cause them to lose their money. However, according to the simple calculations that our spreadsheet does, you can become rich with a $500 account if you trade consistently and patiently. As I mentioned earlier, consistency is the success key here.
Please note that, to achieve what our Spreadsheet forecasts for you, you must increase your lots size accordingly, when your account grows and vice versa. If you follow the same 2% risk rule that we always emphasize on, and risk 2% of your account balance in each position you take, then you will grow your account steadily. You must calculate your position’s lot size, any time that you want to take a position to take a 2% risk according to your account’s current position size. If your account grows after a position, your next position’s lot size will be bigger and vice versa.
What If You Start with a $5,000 Account?
Although the results are amazing with a $500 account, if you start with a $5,000 account, the results will be 10 times greater. Therefore, after three years of trading and making an average of 20% profit per month, your account balance will reach $3,544,009. If you decide to withdraw your monthly profit after that, you will have a $708,802 monthly income.
As you see, it is possible to become a multimillionaire through Forex trader, even when you start with a small account. You just need to be a consistently profitable Forex trader, which has to be achieved through learning, demo-trading and mastering your trading system and developing the discipline that Forex trading needs. If you cannot afford to open a $5,000 account, but still you want to become a multimillionaire, you can start with the same $500 account, but keep trading for 10 to 14 more months after the three years period is over, and you will have the same $3,544,009 account balance eventually.
What you must note is that it is not the spreadsheet that tells you how much profit you must make every month. It is you who enter your average monthly profit percentage. Your trading style and strategy determine your monthly profit. Above, I entered 20% as the monthly profit, but it was just an example. It doesn’t mean that you must enter 20% on the spreadsheet you will download on your computer too, and then follow the numbers there.
Let the Spreadsheet Show You the Way
Our spreadsheet makes your life much easier for you. It doesn’t let you forget where you are at the middle of the journey. It enables you to have a goal, decision and long-term plan for your Forex trading program and the profit you want to make with Forex trading every month, and the account balance you dream to have as a professional Forex trader. These are the things that most Forex traders think about, but they never set them as the goals that have to be written somewhere. They just open a live account when they think it is the time to, and they keep trading. This is like sailing without a map and compass, while you don’t even know your destination.
Therefore, download and save our spreadsheet on your computer. Enter the account size that you want to start and the average monthly profit you make. Have the spreadsheet always open in the background and check it from time to time. When the month is over, check your account balance and highlight the related cell on the spreadsheet:
If your account balance doesn’t reach the level that the spreadsheet says for a month, don’t push yourself to recover the difference by overtrading or taking higher risks. This is a big mistake that can cause you to lose. You cannot be exact every month, you don’t have to reach your desired balance exactly after 36 months. Even if you can achieve it in 48, or even 60 months, it is still great, and is something that 99.99% of people cannot and won’t do. But you can do it if you want. I explained how this is possible to achieve.
Our spreadsheet should lift the stress from your shoulder. It is not there to give you more stress. If you feel stressed while trading because you are anxious to achieve the determined monthly account balance, then there is something wrong. Either you are taking too much risk, you are trading with the money they cannot afford to lose, or you have entered a nonrealistic monthly profit percentage. This problem can be easily be resolved by changing the numbers:
- Take only a 2% risk in each and every position you take, and then determine your average monthly profit accordingly.
- Adjust the average monthly profit percentage to the level that you can easily do it, without any stress.
- Don’t trade with the money that you cannot afford to lose. So, withdraw the extra money from your Forex account to lower the account balance to the level that it has to be.
This spreadsheet shows you the future you are going to have after 1, 2, 3 years of Forex trading and beyond. It tells you how wealthy you will be if you follow the same track consistently. Therefore, when the future is clear to you, and you know where your destination is and when you will get there, you won’t have any stress and you will be happy and excited to follow your system with enthusiasm, even if your current financial situation isn’t that good. You won’t give up in the middle of the way. You saw how you can start with a $500 and reach it to tens and hundreds of thousands of dollars with the profit you consistently make through Forex trading. What other business do you know that can reach a $500 capital to such a huge wealth? There is no other business that can do this. Above all, other businesses are not less riskier than Forex trading. Numbers say over 90% of the small businesses are doomed to bankruptcy, and so all the time and money that have been spent to take the business off the ground will go down the drain. Therefore, Forex trading is not riskier than other businesses, (1) if you become a consistently profitable Forex trader first, and then you start trading with real money, and (2) if you trade with the money you can afford to lose.
The conclusion is that you can make lots of profit with Forex trading, and you can even become a millionaire or multimillionaire with it. However, it has to be done under the conditions I summarized above. I cannot go into the detail of becoming such a Forex trader in one article. Consistently making profit through Forex trading has a long process and cannot be achieved overnight. In spite of this, I think it is worth spending time because as I explained above, no other business can make the profit that Forex does. But, you should know that you will never reach this level if you don’t follow the right track from the beginning. Read the above article over and over, and have our spreadsheet on your computer, even if you are still demo-trading and you haven’t started trading with real money. This spreadsheet shows you the way, reminds your current situation, and reveals the future and your final destination, if you use it properly.