This is the question many novice traders ask and of course it depends on numerous variables, some of which include your starting amount of capital, your risk tolerance etc, but if you were to make 100% per annum you would be up there with the very best.
Drawdown periods vary from trader to trader but typically you will face a drawdown of 30% from your peak equity at some point and you will face a drawdown period of a few weeks.
There is a huge industry in automated Forex robots that tell you that you can double your money each month, make a regular income and experience no real drawdown but this is pure fantasy and not the reality of Forex trading.
So what is a realistic amount you can make per annum in Forex trading?
When I say 100% per annum is a realistic annual return to traders, many look disappointed but this is a huge gain! If you look at it in business terms (and Forex trading should be seen as a business) any business that returns 100% per annum in profits would be seen as very successful. Furthermore, think of the compound affect of your capital and you will see this will see your money grow very quickly over time.
Many traders want to make money too quickly and they see there broker will give them 200:1 leverage or more, so they want to use it - but over leverage destroys more novice trader accounts than any other factor.
The risk of course increases when you leverage up your capital but most traders forget the impact of transaction costs. The transaction cost may look small on un-leveraged amounts but on a leveraged sum in relation to your account equity it's huge and traders trading 100:1 leverage can very often see an impact of 10% or more on their accounts ( depending on pip spreads) so you have to make that amount just to break even.
Novice traders should really start trading with no leverage, until they are comfortable with what their doing and my own view is - that a leverage of 10 - 20: 1 is plenty for most traders.
Money management and preservation of equity, is the key to making money long term In Forex trading. Always assume the worst first on your positions and things can only get better! As the old gambling saying goes:
If you want to win you need to bet but you can't bet without chips"
It's a fact that professional poker players make excellent Forex traders. The reason for this is they always have their eye on equity preservation and are not bothered about taking losses. They know they have to pass hands by and fold hands, if the odds are against them. Compare this to the average Forex trader, who takes losses personally, runs them hoping they might turn around and lets his emotions get involved and lack discipline.
If you want to win at Forex trading base your Forex trading strategy on sound money management and protect your equity and you will get the opportunities to trade the odds for big profits and be on the road to triple digit gains.
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