How much do forex brokers earn

Every successful forex day trader manages their risk, it is one of, if not the most, crucial elements of ongoing profitability.

My list of forex bonuses

How Much Money Can I Make Forex Day Trading, how much do forex brokers earn.

It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

How much money can I make forex day trading?

Julie bang @ the balance 2021

Many people like trading foreign currencies on the foreign exchange (forex) market because it requires the least amount of capital to start day trading. Forex trades 24 hours a day during the week and offers a lot of profit potential due to the leverage provided by forex brokers. forex trading can be extremely volatile and an inexperienced trader can lose substantial sums.

The following scenario shows the potential, using a risk-controlled forex day trading strategy.

Forex day trading risk management

Every successful forex day trader manages their risk; it is one of, if not the most, crucial elements of ongoing profitability.

To start, you must keep your risk on each trade very small, and 1% or less is typical. this means if you have a $3,000 account, you shouldn't lose more than $30 on a single trade. That may seem small, but losses do add up, and even a good day-trading strategy will see strings of losses. Risk is managed using a stop-loss order, which will be discussed in the scenario sections below.

Forex day trading strategy

While a strategy can potentially have many components and can be analyzed for profitability in various ways, a strategy is often ranked based on its win-rate and risk/reward ratio.

Win rate

Your win rate represents the number of trades you win out a given total number of trades. Say you win 55 out of 100 trades, your win rate is 55 percent. While it isn't required, having a win rate above 50 percent is ideal for most day traders, and 55 percent is acceptable and attainable.

Risk/reward

Risk/reward signifies how much capital is being risked to attain a certain profit. If a trader loses 10 pips on losing trades but makes 15 on winning trades, she is making more on the winners than she's losing on losers. This means that even if the trader only wins 50% of her trades, she will be profitable. Therefore, making more on winning trades is also a strategic component for which many forex day traders strive.

A higher win rate for trades means more flexibility with your risk/reward, and a high risk/reward means your win rate can be lower and you'd still be profitable.

Hypothetical scenario

Assume a trader has $5,000 in capital funds, and they have a decent win rate of 55% on their trades. They risk only 1% of their capital or $50 per trade. This is accomplished by using a stop-loss order. For this scenario, a stop-loss order is placed 5 pips away from the trade entry price, and a target is placed 8 pips away.

This means that the potential reward for each trade is 1.6 times greater than the risk (8 pips divided by 5 pips). Remember, you want winners to be bigger than losers.

While trading a forex pair for two hours during an active time of day it's usually possible to make about five round turn trades (round turn includes entry and exit) using the above parameters. If there are 20 trading days in a month, the trader is making 100 trades, on average, in a month.

Trading leverage

In the U.S., forex brokers provide leverage up to 50:1 on major currency pairs. for this example, assume the trader is using 30:1 leverage, as usually that is more than enough leverage for forex day traders. Since the trader has $5,000, and leverage is 30:1, the trader is able to take positions worth up to $150,000. Risk is still based on the original $5,000; this keeps the risk limited to a small portion of the deposited capital.

Forex brokers often don't charge a commission, but rather increase the spread between the bid and ask, thus making it more difficult to day trade profitably. ECN brokers offer a very small spread, making it easier to trade profitably, but they typically charge about $2.50 for every $100,000 traded ($5 round turn).

Trading currency pairs

If you're day trading a currency pair like the USD/CAD, you can risk $50 on each trade, and each pip of movement is worth $10 with a standard lot (100,000 units worth of currency). therefore you can take a position of one standard lot with a 5-pip stop-loss order, which will keep the risk of loss to $50 on the trade. That also means a winning trade is worth $80 (8 pips x $10).

This estimate can show how much a forex day trader could make in a month by executing 100 trades:

Gross profit is $4,400 - $2,250 = $2,150 if no commissions (win rate would likely be lower though)

Net profit is $2,150 - $500 = $1, 650 if using a commission broker (win rate would be like be higher though)

Assuming a net profit of $1,650, the return on the account for the month is 33 percent ($1,650 divided by $5,000). This may seem very high, and it is a very good return. See refinements below to see how this return may be affected.

Slippage larger than expected loss

It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

Slippage is an inevitable part of trading. It results in a larger loss than expected, even when using a stop-loss order. It's common in very fast-moving markets.

To account for slippage in the calculation of your potential profit, reduce the net profit by 10% (this is a high estimate for slippage, assuming you avoid holding through major economic data releases). This would reduce the net profit potential generated by your $5,000 trading capital to $1,485 per month.

You can adjust the scenario above based on your typical stop loss and target, capital, slippage, win rate, position size, and commission parameters.

The final word

This simple risk-controlled strategy indicates that with a 55% win rate, and making more on winners than you lose on losing trades, it's possible to attain returns north of 20% per month with forex day trading. Most traders shouldn't expect to make this much; while it sounds simple, in reality, it's more difficult.

Even so, with a decent win rate and risk/reward ratio, a dedicated forex day trader with a decent strategy can make between 5% and 15% a month thanks to leverage. Also remember, you don't need much capital to get started; $500 to $1,000 is usually enough.

The balance 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.

How much do UK forex brokers earn?

It is all about the money. Probably all of us, involved in one way or another in the forex industry, have wondered “how much do FX brokers earn?”. So we decided to check out and compare the profits of largest brokerage companies, starting with UK ones.

According to the data, filed by brokers to the UK companies house, IG group has earned the most lucrative profits for the year 2015, amounting to £169,5 million (before taxes), followed by CMC markets and forex.Com. In fact, IG group holdings PLC (LON:IGG) is also the largest retail broker by market cap.

Here is the table, including data on profit (loss) of some of the biggest UK brokers for FY 2015, before and after taxation:

Broker	profit (loss) before tax	profit (loss)
IG group	£169,5 million	£131.9 million
CMC markets	£51,9 million	£43,5 million
gain capital	£30,428,654	£24,037,273
plus500	£5,572,569	£4,391,051
fxpro	£1,153,608	£1,117,554
HYCM	£403,308	£337,941
XTB	£336,827	£268, 374
admiral markets	£96,469	£96,469
activtrades	£11,578	£9,605
etoro	(£716,964)
oanda	(£1,546,083)	(£1,546,083)
FXCM	(£19,460,976)	(£7,818,832)

As financial years for companies do not always coincide with calendar ones, IG group has already published its annual report for 2016, revealing even better financial results. According to the document, for the year ending on may, 2016, the company’s profit before tax has increased by 2,9%, coming in at £207,9 million. What is more, IG group has generated a revenue from worldwide operations of £111.4 million in june-august 2016 (Q1 FY 2017), which represents an increase of more than 5% compared to the previous quarter.

Second in line comes another LSE-listed broker, CMC markets PLC (LON:CMCX). Its earnings for the previous year, ending march 2015, amount to £51,9 million before taxation. The broker has already published its account for the year 2016 and according to the data provided in it, profits before taxation come in at £53,4 million. However, due to the low market volatility CMC markets expects that its operating income for the six months to september 30, 2016 will be lower, compared to the same period of 2015, despite the growing number of clients.

At the same time, the value of CMC markets’ shares plunged by 16.8% for a month and continue to wane.

The third largest broker by profit in UK is global brokerage gain capital (NYSE:GCAP), operating the famous retail brand forex.Com, whose site has been revamped in july. The profit of its UK unit for 2015 amounts to £30,4 million before taxation.

Forex brokers earn their profits mainly through the spread (the difference between ask and bid price) and commissions charged (if any). Of course, their earnings depend on the number of clients they have, the number of trades executed by them, the costs that running and managing a forex brokerage involves and many other factors.

We need to make some clarification here: most of the companies mentioned in this article also conduct forex broker businesses in other jurisdictions. In fact, the parent companies of many of them are headquartered in cyprus, poland or elsewhere, mostly due to the more favorable tax conditions. Therefore, the profits mentioned above do not reflect the complete earnings of those forex brokers, but only the part of it that is attributable to their UK units.

How do forex brokers make money?

Many beginning forex traders wonder how the forex brokers earn their money from the common traders if they are not casinos. Understanding the basic principles of the brokerage economics will help traders to distinguish real forex brokers from the bucket shop scams and the honest companies from the unethical ones. Here is the list of the most common ways for the FX broker to earn money:

Currency pair spreads. The largest source of income for the forex brokers is spread, which is the difference between the bid and ask rates. A broker has access to lower spreads and adds mark-up to the spreads before passing the quotes to traders. This way, a company can earn the money that traders lose on the added spread.

Leverage. Spreads on small positions would be too low to be a significant income source for brokers. So, many brokers offer high leverage. Of course, it is a great tool for multiplying your trading volume — it increases both your profits and losses. However, trading bigger lots that become available with 1:100 leverage, a broker earns 100 times more on spreads than it would earn without such a leverage.

Overnight swap spreads. Brokers pay the overnight swaps to the trader if the difference between the interest rates in a currency pair is positive in the trader's position and get paid from the trader's account if that difference is negative. But these payments are not symmetrical, and they are biased so that a forex broker would always get an advantage. When someone is selling 1 lot of EUR/USD and another trader is buying the same amount of the same currency pair, the second trader is earning money on overnight swaps, but the first one is losing the amount that is big enough both to compensate the second one's earnings and to "feed" the broker.

Payment processing commission.Online forex brokers rarely charge commission per trade (except islamic accounts) and often advertise that as a feature. However, some brokers charge payment processing fees — they are deducted only when you deposit or withdraw money and usually are quite small and fixed in currency units, not percentage points. Of course, such commissions are too small to form a significant part of the broker's profit, but they are enough to compensate at least a part of the broker's expenses.

Trading against the trader. The most despised and unethical way a forex broker can make money is to trade against its customers. And that is the most profitable way too. Avoid brokers that earn when you lose. If the spreads are too low, the leverage is insignificant, the overnight swaps are fair and there are no commissions (for payment processing and trading), then the broker is certainly trading against you to make money.

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Forex trading bears intrinsic risks of loss. You must understand that forex trading, while potentially profitable, can make you lose your money. Never trade with the money that you cannot afford to lose! Trading with leverage can wipe your account even faster.

Cfds are leveraged products and as such loses may be more than the initial invested capital. Trading in cfds carry a high level of risk thus may not be appropriate for all investors.

How forex brokers make money

In the foreign exchange market, traders and speculators buy and sell various currencies based on whether they think the currency will appreciate or lose value. The foreign exchange, or forex market is high risk and sees more than $5 trillion traded daily. Traders have to go through an intermediary such as a forex broker to execute trades. No matter the gains or losses sustained by individual traders, forex brokers make money on commissions and fees, some of them hidden. Understanding how forex brokers make money can help you in choosing the right broker.

Role of the foreign exchange broker

A foreign-exchange broker takes orders to buy or sell currencies and executes them. Forex brokers typically operate on the over-the-counter, or OTC, market. This is a market that is not subject to the same regulations as other financial exchanges, and the forex broker may not be subject to many of the rules that govern securities transactions. There is also no centralized clearing mechanism in this market, which means you will have to be careful that your counterparty does not default. Make sure that you investigate the counterparty and his capitalization before you proceed. Be vigilant in choosing a reliable forex broker.

Forex broker fees

In return for executing buy or sell orders, the forex broker will charge a commission per trade or a spread. That is how forex brokers make their money. A spread is a difference between the bid price and the ask price for the trade. The bid price is the price you will receive for selling a currency, while the ask price is the price you will have to pay for buying a currency. The difference between the bid and ask price is the broker’s spread. A broker could also charge both a commission and a spread on a trade. Some brokers may claim to offer commission-free trades. These brokers probably make a commission by widening the spread on trades.

The spread could also be either fixed or variable. In the case of a variable spread, the spread will vary depending on how the market moves. A major market event, such as a change in interest rates, could cause the spread to change. This could either be favorable or unfavorable to you. If the market gets volatile, you could end up paying much more than you expected. Another aspect to note is that a forex broker could have a different spread for buying a currency and for selling the same currency. Thus you have to pay close attention to pricing.

In general, the brokers who are well-capitalized and work with a number of large foreign exchange dealers to get competitive quotes typically offer competitive pricing.

Risks of foreign exchange trading

It is possible to trade on margin by depositing a small amount as a margin requirement. This introduces a lot of risk in the foreign exchange market for both the trader and the broker. For example, in january 2015, the swiss national bank stopped supporting the euro peg, causing the swiss franc to appreciate considerably versus the euro. traders caught on the wrong side of this trade lost their money and were not able to make good on the margin requirements, resulting in some brokers suffering catastrophic losses and even going into bankruptcy. Inexperienced traders could also get caught up in a fat finger error, such as the one that was blamed for the 6% dip of the british pound in 2016.

The bottom line

Those contemplating trading in the forex market will have to proceed cautiously—many foreign-exchange traders have lost money as a result of fraudulent get-rich schemes that promise great returns in this thinly regulated market. The forex market is not one in which prices are transparent, and each broker has his own quoting method. It is up to those who are transacting in this market to investigate their broker pricing to ensure that they are getting a good deal.

Forex trader salary: how much do day traders, hedge fund traders, and forex traders really earn?

On one hand, we see movies like the wolf of wall street and shows like billions, where successful traders earn millions and live lavish lifestyles. On the other, we see the statistics, that tell us that the majority of day traders lose their money. So what is a typical forex trader salary?

That is the question this article aims to answer. We've done the research for you - we've compared what hedge fund managers make and compared this to typical forex traders. We've looked at traders working for companies and banks, as well as independent investors who are trading directly on the markets with their own money. So if you're wondering what traders really make, you've come to the right place.

Retail trader salary vs. Market & prop trader salary

Before we share the different salary levels for traders, the first point to cover is that there are different options for building a career as a professional trader. They can be broadly broken into two categories - working for a company and working for yourself.

If you're working for a company (such as a hedge fund or investment bank) as a day trader, hedge fund manager, or quant trader, you are an employee who is paid a base forex trader salary, and often a commission based on performance. Some of the benefits of being a salaried trader include:

You can use the company's existing tools and strategies, which have hopefully already proven to be profitable

There are often trainings and mentoring programs built into the company structure, meaning you have more support than you might have on your own

You are not risking your own money to trade, which can remove some of the stress of trading

There is the opportunity for career progression, which means you can climb the ranks to manage higher-value clients' or more clients' funds

While you have a job, you have a reliable salary and, depending on the company and local laws and regulations, you might also get health or pension benefits

However, there are some downsides to being a salaried trader:

If you don't meet the company's profit targets, you will probably have to deal with more rules, restrictions and observation

There is less flexibility - while TV and movies might make the role of a trader seem glamorous, it is still a regular job, with hours that regularly go beyond 9-5

There may be office politics or difficult clients you need to deal with

If you do well, you will only get a percentage of your profits paid as a bonus, rather than getting to keep all of them

If you're an independent forex trader, stock trader or commodities trader, rather than getting paid a salary, you would trade and invest your money and pay yourself with the profits of your trades. The benefits of working for yourself include:

More flexibility - you can work from anywhere with an internet connection, and can trade any time the market is open (that's 24 hours a day, 5 days a week for forex)

No limit on your earnings - if you have a profitable strategy, there is no limit on the amount you can earn (assuming you have the capital available to trade, of course)

Like trading for a company, though, being an independent trader does have its downsides:

You are risking your own money, which could lead to higher levels of stress

There is less security, as you can't rely on the same base salary being automatically paid each month, especially if you have a bad month

There is less built-in structure and support than with a company - while there are plenty of educational resources available for traders, you will need to look for them yourself rather than having them handed to you

You will need to find or develop your own tools to improve your trading performance

Are you already thinking that trading independently would be a good match for you? The good news is that you can start today with a free demo account!

A demo account allows you to trade the markets risk free, so you can develop your trading strategy and learn how to use the different tools, all with a virtual account balance. Learn more and open a free demo account by clicking the banner below!

Now that you have an overview of the pros and cons of working as a trader let's look at the typical salaries for each of these traders.

Forex trader annual salary: what do the numbers say?

For traders who are employed by companies, their salaries can vary dramatically depending on the trader's specific job title, the company they work for and even the city they are working in.

If we start with a US forex trader salary, according to indeed, the average trader salary is $98,652 per year plus $25,000 in commissions. However, the highest salary figure they quoted was $196,917 with citi trader.

According to payscale, equities traders earned an average of $80,935 with a bonus of $14,916, commission of $21,000 and profit sharing options of $6,000. Their range for base salaries ranged from as low as $47,000 and as high as $160,000.

Source: payscale.Com, equities trader salary

Glassdoor quoted a similar range, with an average salary of $91,642, and an average of $32,599 in additional cash compensation.

Source: glassdoor.Com, average trader salary

Ziprecruiter, on the other hand, found that the average forex trader salary in the united states is $60,698 a year, with the range going from just $16,000 up to $148,000. They found that the majority of financial salaries ranged from $30,000 to $74,500

Source: ziprecruiter, professional trader salary

So what do things look like across the pond?

According to glassdoor, the average forex trader salary of a london trader is £65,621. For the basis of comparison, that's about USD86,000 at the current exchange rate, so a $10,000 drop from the average figure in the US.

Source: glassdoor, london trader salary

Meanwhile, CW jobs calculated the average forex trader salary as only £42,500. Prospects, on the other hand, placed starting salaries for trainee financial trainers at £26,000 to £32,000, plus commissions, while they gave a range of £45,000 to £150,000+ for experienced traders.

For associate traders, especially derivatives traders, they gave a forex trader salary range of £140,000 to £230,000, with bonuses paid on their profits made. EU regulations limit bonuses to less than 200% of the base salary.

So why is there such a wide range? And why don't the trader salary numbers reflect the astronomical sums we see in shows like billions - which pays their analysts a base of $350,000 and top traders salaries in the millions?

There are a range of factors that can influence a day trader's salary, which we cover below.

Factors that influence a trader's salary

The factors that can trader salaries include the trader's role and seniority within a company, their performance, the company they work for, and even their location.

Salaries for different trader roles

There are a range of different positions available in hedge fund trading, including:

Analyst

Strategist

Junior traders/portfolio managers

Senior traders/portfolio managers

Most people will work their way up from being an analyst (4-8 years), assisting the junior and senior traders with data, after which they progress to being a junior trader. According to 80000hours.Org, junior traders typically earn between $300,000 and $3 million a year, while senior portfolio managers can earn over $10 million per year, however, these figures are based on performance.

Because this is a high-turnover industry, while the highest forex trader salary is very high, the average gets dragged down because most traders won't make it to that level.

Trader salaries and performance

Working as a trader within a hedge fund or investment bank is a performance-focused role, and the salaries listed above are heavily reliant on bonuses.

According to 80000hours, if a trader is managing a portfolio of $50 million in assets, and they earn a return of 10%, their income will be $600,000. If they fail to perform, they will be left with their base salary, which is about $60,000 to $90,000, according to the page executive 2019 survey.

A senior portfolio manager, who manages a portfolio of $500 million and gets a 10% return, would earn a salary of about $6 million per year.

Whether you're trading independently or trading for a company, performance is everything when it comes to how much money you can earn. The good news is that there's a simple way you can improve your trading performance, and that's by learning from the pros.

Every week, we run free webinars on the world's most popular markets and trading strategies, to help you be more successful as a trader. Keen to learn more? Click the banner below to get started!

Trader salaries by company

Salaries also vary by company. According to glassdoor, the average trader salary at citi is $147,418, but the range goes up to $252,000.

HSBC's trader salaries are slightly higher, with an average of $195,061 and a high of $286,000, while both .

Note that glassdoor's salary figures focus on base pay, so these numbers could be higher once bonuses are taken into consideration.

Note that these are all publicly traded companies. Private equity traders are a bit more of a mystery, but are known to pay much higher base salaries and bonuses than public firms.

Trader salaries by location

The location of the company a trader works for can also influence their salaries.

How do forex brokers make money?

How do brokers make money on forex? This question is interesting for every novice trader. After all, no one will give you the opportunity to earn a lot of money without you giving away something. The intermediary must receive something.

In general, the mechanism for generating income is simple, and brokers can do this on side activities such as training and providing additional services. Brokers’ profit does not depend to such an extent on the number of traders and the volume of their transactions, as is commonly believed. Often, the broker doesn’t care at all whether the client earns. Although honest brokers tend to care about the income of traders because their earnings depend on it. Let’s delve into details and find out how brokers earn money.

Spreads

Most brokers do not charge a commission for client transactions. But this does not mean that traders will not have to give their hard-earned money. They just need to pay a larger spread, that is, the difference between the ask and bid price of a particular currency. On the interbank market, it is much less than what is shown in the trading platform window. The difference between the market spread and the brokerage spread goes to the broker.

Earnings on commission

If a company offers low spreads, then it will definitely withdraw a commission for the traded volume. It is important for a broker that you earn. After all, the logic is simple – the more income, the more often positions will be opened, and in large volumes. And since brokers profit from this, they benefit from your earnings.

Therefore, brokers often stimulate trading activity with various contests and bonus opportunities. According to forextradingbonus no deposit bonuses, as well as other offers, tend to increase the number of customers of a particular broker.

The brokers stimulate the desire of traders to develop since the prize fund is divided among those who were able to earn the most over a certain period. It also stimulates the execution of trade operations. The total income significantly exceeds the losses on the payment of prizes to traders, and everyone earns.

At the same time, the broker can form the prize fund at the expense of the charitable contributions of the traders themselves, and thus completely deprives itself of losses associated with winnings.

Earnings on additional services

Forex brokers often offer additional services for which they charge money. It can be a training course or a VPS. Educational services, by the way, are in great demand and can generate a decent income for the brokers. Traders want to understand all the subtleties, and if a company can develop professionals, it wins on all fronts. First, it receives the money directly for training. Secondly, successful traders make a lot of deals and pay decent spreads and commissions.

VPS is also a highly demanded service. Traders get the opportunity to launch a functional advisor that will conclude deals 24/5. The robot can trade even while the person is sleeping, and therefore, open positions from which the broker makes a profit. Therefore, it is not uncommon for brokers to offer free vpss, although some may require payment for this service. Brokers often offer flexible prices that depend on the type of account. Where the minimum deposit is less, you have to pay there, and if it is more, a remote server can be provided for free, because the volumes in which a professional trader trades is enough.

Also, clients can order a trust management service from brokers. The scheme is simple – an investor invests money in a company, and the specialists working in it, trade, and the income is given to the investor. Obviously, the company earns a certain percentage of the profits for itself. Here, too, money is earned from several sources. Firstly, investors’ funds are accumulated, and the broker has the opportunity to increase the trading volumes that he brings to the interbank market. Secondly, the broker makes a profit from the commission that he takes on transactions.

The broker can also act as an intermediary between the investor and the owner of the PAMM account. This is also a form of trust management, only the funds are not given to a broker, but to a private trader who created an account on the basis of a broker. The latter receives a commission. As a rule, the first form of trust management (that is, money is given directly to the broker) is typical for large banks. Simpler companies make money on PAMM accounts. Although the dealer can combine these two forms of trust.

Thus, we see that brokers have plenty of ways to make money. Moreover, they are not always directly related to the conclusion of transactions. They also earn good money on additional services.

Final words

Brokers can earn in many ways, from honest to illegal. Therefore, a beginner (and sometimes an experienced trader) needs to be vigilant. It is always a good idea to pay attention to how interested the company is in customer profits. The correct criterion is the presence of competitions for income.

The second point is regulation. You need to pay attention to the availability of licenses (the more, the better), and their quality components. First, look who the regulator is. The best option is brokers with an english or american license. There is strict control. Second, look at the license type. Often forex “kitchens” are registered as casinos, and then legally there are no claims against them.

You also need to pay attention to whether liquidity providers are listed. Not always normal brokers say who supplies them, but if such information is provided, this is a huge plus in the company’s CV. And the main rule is to diversify. Because there is no guarantee that even an honest broker at the moment will not ditch you in the future. The financial market is like a jungle, everyone is here for himself. And in such conditions, it is very useful to be able to manage risks.

How much money forex brokers make?

As a forex trader, you’ve probably wondered at some point how much forex trading brokers makes from their business. Or maybe you’re thinking about starting your own forex brokerage firm that you’re wondering if it’s a worthwhile venture. Whatever your reason, the curiosity is certainly understandable; I myself wonder about the same thing. (what are the: most common questions forex traders ask)

However, it is very difficult to know how much the average forex broker makes because they are not required to provide this information to the public, but we can still get an estimate. Forex brokers listed on exchanges, on the other hand, do provide reports on their earnings quarterly and annually, and these brokers can help us determine an accurate estimate. (are you curious: how to create your own forex brokerage firm)

Earnings by the top forex brokers

It is not possible to know how much brokers make on average, but we can look at some of the top forex brokers’ financial statements.

What better way to know how much brokers make than to look at one of the largest brokers. This is the perfect example to see just how much a forex broker can make. The image below shows how FXCM’s stock has been performing over the past 4 years. The big dip at the beginning of january 2015 came from SNB’s action to de-peg the swiss franc from the euro – that was not a good day for FXCM.

Despite this setback, the company still went on, and still kept performing okay in the circumstances. A report released by the company on their website, FXCM made $61.4 million in revenues just in the 3rd quarter of 2016. Out of this, earnings before interest, tax, depreciation and amortization (EBITDA) was $6.4 million. Other financial statements revealed that the EBITDA for the 3 quarters of 2016 up to the 30th of september were slightly above $20 million.

The statement above was released by FXCM inc. To show how the company would be affected by its US exit. Apparently, the US subsidiary of FXCM inc., FXCM US had suffered a net loss of $13.89 million due to fines and repayment of the loan owed to leucadia national corporation. As for the entire company, the net income was $125.97 million for the first 3 quarters of 2016. (who are the: best US regulated forex brokers)

The profits for the entire year are yet to be released, but perhaps there will be an improvement. FXCM sold its clients to GAIN capital holdings at $500 for each client who placed a trade within 76 days since the 8th of february 2017 and $250 for clients who placed a trade between the 77th and 153rd days from the same date. For a company with over 170,000 clients around the world and a significant portion of them being based in the US, the sale might actually bring in more income for the company. (know the: lessons on self-defence: forex scams)

In addition, they are laying off 150 employees, which will further reduce their costs of operation. All-in-all, it’s fair to say that FXCM makes a good profit, and perhaps their exit from the US market may be a boost for them. On the other hand, dismal performance in the stock market may not be good for the company.

GAIN capital holdings inc.

With FXCM out of the US market, GAIN capital through its forex market subsidiary forex.Com is probably going to lead the US forex market. Even before the buying of clients from FXCM, forex.Com was already a major forex broker all over the world, and now the profits can only go up.

The chart below shows the financial statements made available on the company’s press releases section of their website:

The revenues for the entire year 2016 were $411.8 million with net income of about $35 million. Of these figures, $336.3 million of revenue came from the retail segment to generate profits of $115.7 while the rest came from the institutional and futures segments. Forex.Com gained 47,000 new clients from FXCM following the deal in february to push the total number of US clients above 70,000.

Income for GAIN capital was also high in 2016 following the finalization of the acquisition of city index for $118 million. At the moment, GAIN capital has over 200,000 clients around the world, 235,000 as of the 1st of november 2014. (do you know: how to find reliable trading signals)

GAIN capital is clearly a giant forex broker and their profits can show us how much forex brokers make. However, you’re probably also wondering how much smaller forex brokers make, but that is very difficult to know. What we can do is figure out how much another average broker makes.

Pepperstone

Based in australia, this broker has quickly grown to become a favourite forex broker. In an interview with the sidney morning herald in 2014, one of the founders of pepperstone, owen kerr, said that the company had 23,000 clients – mainly in australia and asia as they still didn’t have permission to sign up US clients. This still translated to EBITDA of $36 million in 2013 and $48 million in 2014.For a company that was only founded in 2010, that’s pretty remarkable, but it isn’t even close to what they could get.

You see, pepperstone is also seeking for an IPO to be listed on the australian stock exchange (ASX). According to the australian financial review (BRW) magazine, were pepperstone to be valued at 20x its 2014 earnings, each of the 2 founders would be worth $300 million. That should give you an inkling of how much forex brokers can make.

Although not yet listed on any exchange, fxpro is among the fastest growing forex brokers in terms of clients. In addition, the company is seeking to launch an IPO that will get it listed on a london exchange. For the meantime, though, fxpro has announced that it has shelved its plans for an IPO following new regulations by the FCA that will limit the amount forex traders can risk.

Being unlisted, we can’t get the revenues from the company itself, but there had been reports back in 2010 that the broker made $1,000 from every client per month. Back then, fxpro only had 17,000 clients, but now the client base is much wider and you can expect the profits should be too.

From the above examples, it is clear that top forex brokers in the world do make a lot of money – enough to tempt you to start one yourself. If so, you will need to know how these brokers make the money in the first place.

How forex brokers make money

Now that we know how much the largest forex brokers make, just how exactly do they make their money. Here, the brokers have various avenues for making money, some which involve charging their clients a fee and others from their own investment. (learn the: common forex terms you should know)

The minimum capital requirements for running a forex brokerage in the UK, US and australia is about $60.3 million. This amount is supposed to protect the company from going bankrupt in the case of huge client losses. The broker is not supposed to use this amount for trading, but they have all the customer deposits. For the large brokers, the customer deposits tend to be enormous.

For example, FXCM reported that they had $725 million in customer equity by november 2016. They also reported having a regulatory capital requirement of $151.2 million, which is $90.9 million above the requirement. That brings the total amount of capital for investment closer to a billion dollars. To put that amount in context, let’s look at the value assets under management (AUM) by most hedge funds around the world:

The chart above is a representation of the findings by preqin which studied the world’s top hedge funds with AUM above $1 billion; aptly titled the ‘$1bn club’, as of april 2016. As you can see, most hedge funds around the world have AUM worth $1 to $4.9 billion. For a large enough forex broker, such as FXCM, they seem to be very close to achieving the same status as the world’s top hedge funds.

This means that hedging forex brokers can then use these funds to invest in various markets and other venues, just like the hedge funds do. This provides the highest returns for the forex brokers even compared to the spreads and commissions charged to their clients. When you think about it, spreads that go as low as 0 pips are not enough to produce the kinds of profits the brokers make, so it only makes sense that they must be getting their money from somewhere else.

Basically, the forex brokers act like banks, although they will never admit it. In the same way people make deposits to banks, which are then lent out to loanees, the brokers use client deposits to make their own investments. Also considering that the brokers usually hire the best experts in finance, it is not difficult to imagine that they are really good at investing.

You have also probably heard of people complaining about their brokers trading against them. This refers to when a broker makes a trade opposite to yours in the markets, thus causing the client’s trades to turn a loss. When a retail client places an order and the broker sees it going bad, they know that you’re wrong, and they can just make the opposite trade to yours. Having a larger capital, they have the capacity to place high-value trades, enough to sway market prices.

As you know, market prices are determined by demand and supply, so when an asset, or in this case a currency, is being bought, this means there is a high demand for it and price goes up. So, when you’ve, say, shorted the EUR/USD and an hour later your trade is in the red and tumbling, the broker can place a long position. Their trade will further cause the value of the euro to go up and your losses will get even higher because of the size of their trade.

This is how brokers make money, but a ‘good’ broker will not be too aggressive about taking the opposite side of your trades thereby limiting the amount of loss you incur. So, the main income by brokers is through their own investments and trades made using your deposits.

The spread is the difference between the asking and bidding price. When a broker is connected to their liquidity provider, they receive quotes at a small spread, then they will increase the spread when transmitting the quotes to your trading platform. The difference may be small, but with enough clients and plenty of trades, it adds up to a huge sum. For example, in 2014, GAIN capital reported annual trading volume of $3 trillion. With such a huge volume, even very tight spreads can still bring in a lot of profits.

Commissions

These are straightforward – a percentage is charged from the profits you make on your trades. Just like spreads, the percentage can be small, but over time it adds up to a huge amount of money.

Dealing desk

The systems described above are used by STP brokers who transfer client trades to liquidity providers. But there are also dealing desk brokers who create the market themselves. For them, they make money whenever the client loses and vice versa. The idea behind the system lies in the higher number of losers than winners there are in the markets. Statistics show that more than 90% of traders lose their investment, which is how dealing desk brokers make their money – directly from you. Obviously, there’s a conflict of interest in such a setup, but that’s a story for another day.

Factors affecting a broker’s profits

Knowing how much and how they do it, let’s look at some of the factors that can affect the amount of profit the broker can make:

Regulatory requirements

As mentioned earlier, the forex regulator will set the minimum capital required to run the forex brokerage, and this can impede the amount of capital the broker is free to trade with.

Trading platforms

Forex trading platforms cost money to ‘lease’. Metatrader 4, for example, requires a $200,000 annual fee. The broker will probably require other platforms like ctrader to attract customers who prefer those platforms. All these will determine the amount of money they make at the end of the year. (see the: metatrader 4 advanced features)

Advertisement

There’s no other way of signing up clients without advertising yourself, which also costs money. For small forex brokerages, the internet is cheaper and still effective, but larger brokers go for more explicit advertising like branding sport teams’ jerseys or sponsoring certain events. Whatever method they choose to advertise through, it certainly affects the profits realized.

Of course, a brokerage firm cannot be a one-man gig, it requires a multitude of specialists to handle everything from customer support, technical details, market analysis, management, etc. Basically, the army of people hired will all need to be paid, and that comes from the company’s earnings.

Watch this quick video that explains the main way forex brokers make money:

How much money can I make forex day trading?

Julie bang @ the balance 2021

The following scenario shows the potential, using a risk-controlled forex day trading strategy.

Forex day trading risk management

Every successful forex day trader manages their risk; it is one of, if not the most, crucial elements of ongoing profitability.

Forex day trading strategy

While a strategy can potentially have many components and can be analyzed for profitability in various ways, a strategy is often ranked based on its win-rate and risk/reward ratio.

Win rate

Risk/reward

A higher win rate for trades means more flexibility with your risk/reward, and a high risk/reward means your win rate can be lower and you'd still be profitable.

Hypothetical scenario

This means that the potential reward for each trade is 1.6 times greater than the risk (8 pips divided by 5 pips). Remember, you want winners to be bigger than losers.

Trading leverage

Trading currency pairs

This estimate can show how much a forex day trader could make in a month by executing 100 trades:

Gross profit is $4,400 - $2,250 = $2,150 if no commissions (win rate would likely be lower though)

Net profit is $2,150 - $500 = $1, 650 if using a commission broker (win rate would be like be higher though)

Slippage larger than expected loss

It won't always be possible to find five good day trades each day, especially when the market is moving very slowly for extended periods.

Slippage is an inevitable part of trading. It results in a larger loss than expected, even when using a stop-loss order. It's common in very fast-moving markets.

You can adjust the scenario above based on your typical stop loss and target, capital, slippage, win rate, position size, and commission parameters.

The final word

How much can you earn as a forex affiliate marketer?

Thereвђ™s a lot of money in the financial markets.

And weвђ™re sure youвђ™d like to get yourself a piece of this pie. В the triennial central bank survey (from april 2016) puts this figure at $5 trillion per day.

And thatвђ™s only foreign exchange (forex). It doesnвђ™t include the CFD market, binary options or spread betting.

One way to get involved is through affiliate marketing. It's low-cost and low-risk. But how much can you earn as a forex affiliate?

Whilst itвђ™s nigh impossible to give you exact, verified, figures we have gathered a few examples for you. All are based on real world comments from various affiliate forums. В weвђ™ve taken their stated forex affiliate earnings and worked backwards.

Note:В the comments are dated now but the ideas are still the same. В all examples are exactly that, examples. They do not represent any guarantees of return or promises of success. The income figures are not verified and have been posted to forums by users who we do not know. All information below is based on projections, estimates, and best guesses from the information we were able to find on various broker pages, and other websites.

Example 1: scott making $9,000/m

Monthly income: $9,000

Affiliate for:В forexaffiliate (affiliate program of easymarkets)

Commission structure: program offers $400 CPA (not sure what CPA means?)

Conversion rate: program states they convert 25% of leads

Working backwards, with scottвђ™s income figure of $9,000 for a monthвђ™s activities, we can see that he must have had 23 referrals.

If the program consistently converts 25% of itвђ™s leads then scott must have sent them approximately 92 quality leads during the month.

Leads can be generated from a multitude of sources. Scott may have a website with good content and decent traffic. В or a landing page with paired with a PPC campaign. Perhaps, he has a database of people interested in making money online and gets his leads from a mail out or blog post series.

Whatever the method, the goal is the same. Convince your audience to click on your affiliate links and follow through with signing up. A good partner program will then handle the on-boarding, converting a large percentage of them into qualified clients.

Example 2: nicolas earning $400-700/pm (recurring)

Monthly income: $400-700

Commission structure: revenue share (rate not stated)

Whatвђ™s interesting about nicolasвђ™ example is that he mentions he makes $5,000-$8,000 per year from advertising he did four years prior.

Let that sink in for a minute.

He has done no further paid advertising, writing or website promos. He signed up to an affiliate program, promoted his link through paid advertising (we donвђ™t know how much he spent unfortunately) and thatвђ™s it. Four years later he is still earning thousands in commission - thanks to his referrals remaining active.

If you create a good strategy, take action and refer a decent list of traders you could swap a wee bit of short term work for recurring long term gains.

Example 3: jeremy earning $3000/m

Monthly income: $3,000

Affiliate for: easymarkets forexaffiliates program

Commission structure: program offers $400 CPA

Conversion rate: program states they convert 25% of leads

This user has provided his source of leads: a forex blog achieving 150 unique visits per day (4500 visits per month).

To make $3,000, he needs 8 qualified referrals.

With a conversion rate of 25% that means he needs to be referring 32 leads per month. В he only needs 0.72% of his monthly traffic to click on his affiliate link to make $3,000 per month.

If that doesnвђ™t get your motivation pumping, I donвђ™t know what will!

Example 4: $4,000/m from maric's review website

Monthly income: $4,000

Affiliate for: etoro

Commission structure: program offers $400 CPA or 25% revenue share

While maric does not state what payment structure he is under his comments lead us to believe it must be revenue share.

Maric also states that he partners with other programs as he runs a review site. For our example we will assume a blanket 25% revenue share commission across his portfolio of affiliate programs.

Calculating the leads and conversions is trickier under a revenue share model as there are a lot more variables to consider.

What we have assumed above is that heвђ™s making about $4,000 per month based on a 25% revenue share model. This means his qualified referrals (anything from 1 to 100вђ™s) must have made enough trades to generate $16,000 per month in fees for his partners.

Example 5: $15,000/m from a portfolio of forex sites

Monthly income: $15,000

The thread this comment is from followed a different structure to the others so our information varied. This trader states that he makes between $10,000 and $20,000 per month from his affiliate marketing efforts.

His costs are near to $0 as he uses an SEO strategy - targeting organic traffic. He has 6 years of experience and runs 50 different forex websites. This is what we would consider an experienced affiliate marketer!

If we assume he is making $400 CPA with a program that has a conversion rate of 25% (to keep things in line with the other examples weвђ™ve looked at) then he must be creating 38 qualified referrals per month from 152 leads.

What are you waiting for?

Hopefully these examples provide you with a few ideas and whole lot of motivation. Now it's time to create your own high earning affiliate marketing strategy in the endless world of the financial markets.

How much to start forex with minimum money

Forex trading

How much to start forex you need capital to trade on a financial market. Money is used to buy items if your research indicates that the price could rise, potentially leading to capital gains and income for the investor. The forex market is no different – to start trading in currencies; you need to spend a certain amount of money with your broker, which is then used to purchase and sell currencies. The sum spent has a significant effect on the number of gains you can generate since larger trading accounts will open up bigger position sizes when compared to smaller trading accounts (given the same level of leverage).

We will discuss the crucial issue of the minimum sum of money required to exchange forex in the following lines and show you that there is no uniform response that applies to all traders.

How much to start forex trading

So, how much money would you need to trade with forex? The total amount required to trade forex depends on several factors, such as your trading style, funds available, average stop loss standard, minimum deposit provided for your broker, level of knowledge, and so on.

In any case, you can never invest more than you’re okay with losing. Investing in the capital market entails a high risk of losing your money, so you don’t want to spend your whole life savings on trading.

Your trading style also plays a significant part in deciding the starting capital of your forex. In general, scalping involves a considerably lower investment cost than swing or position trading. The explanation for this is the comparatively limited size of stop loss rates in scalping, which, combined with flexibility, helps you to maintain a sufficiently free margin even though trade goes against you. Day trading, swing trading, and options trading, on the other hand, need considerably higher stop loss rates, which may be challenging to sustain with a limited trading account. Avoiding a margin call and retaining a reasonable free margin is often simpler with greater account size.

The chosen how much to start forex broker can also qualify for a forex trading minimum account to set up an account. Although many brokers consider minimum deposits of as low as $10, please bear in mind that some brokers can ask for hundreds, or even thousands, of dollars. When you’re trading on a budget, make sure your preferred broker respects the starting capital limit.

Eventually, expertise is also a critical aspect that determines the scale of your how much to start forex money. If you’re a novice, you might start with as low as $100 to get a market feeling while you’re dealing with real money. On the other hand, because you are reliably successful and have years of trading history, you can afford to invest as much as you are comfortable spending.

Capital instances

· $100 account

Assume that you have a $100 account. You’re going to reduce the chance on any deal to $1 (1 percent of $100) .

When you trade-in EUR / USD, buy or sell a micro amount, your stop-loss order would be within 10 pips of your entry price. Because each pip is worth $0.10, if your stop loss was 11 pips down, the risk will be $1.10 (11 x $0.10), which is more risk than you expect how much to start forex.

You can see how starting an account of just $100 limits severely how well you can trade. Furthermore, if you risk a minimal dollar sum, by default, you will only make minor profits if you trade correctly. You would need additional money to make a higher profit and how much to start forex— and probably generate a fair amount of profit from your trading operations how much to start forex.

· $500 account

Now presume you’re going to open a $500 account. You can risk up to $5 per bid and buy several lots. For example, you can set a stop loss of 10 pips away from your entry price and purchase five micro-lots and still be under your risk threshold (because 10 pips x $0.10 x 5 micro-batches = $5 at risk).

Or, if you want to avoid taking 25 pips away from the entry-level, you can buy two micro lots to maintain the trading chance below 1% of your account. You’d buy just two different lots then 25 pips x $0.10 x 2 micro lots = $5.

Beginning at $500, it would have greater trading versatility and produce more income every day than starting at $100. Yet most day traders will only be able to make just $5 to $15 a day from this amount daily.

· $5,000 account

When you start with $5,000, you have many more options to know how much to start forex, and you can exchange mini lots as well as micro-lots. When you buy the EUR / USD at 1.3025 and avoid the loss at 1.3017 (eight risk pips), you can buy 6 mini lots and 2 micro-lots.

Your overall risk is $50 (1 percent of $5,000), and you can swap mini-lots because each pip is worth $1, and you’ve selected 8 pip stop-loss. Divide the risk ($50) by (8 pipes x $1) to get 6.25 for the number of mini lots you might purchase without increasing the risk. You will break 6.25 mini batches into 6 micro batches (6 x $1 x 8 pipes = $48) and 2 micro batches (2 x $0.10 x 8 pipes = $1.60), putting a sum of just $49.60 at stake.

For this amount of money how much to start forex and the opportunity to risk $50 on each deal, the future turnover goes up, and traders will theoretically make $50 to $150 a day or more based on their forex approach.

Capital recommended

Starting with at least $500 gives you flexibility on how you can trade that an account of just $100 does not have. Beginning with $5,000 or more is much easier because it will help you produce a fair amount of money and can reward you for the time you spend on trading.

Although forex brokers will let you start trading with as little as $1, you’ll need to deposit at least $12 with a nano-lot broker or $120 with a broker providing micro-lots to day-trade. The amount of money you need to start trading depends on your brokers how much to start forex.

If you’re finding it difficult to decide whether you should start forex or not, then our guide why to trade forex will certainly help you.

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