Forex trading is a lucrative venture once you perfect your craft and learn the right trading strategies. You might hear of people who make thousands of dollars to millions annually, but how much these traders make is left to speculation as only a few are honest about their earnings.
The average forex trader income as of 2020, based on information from Ziprecruiter, is $81,910 a year, which translates to $6,826 per month. These estimates are based on the continuous scans of the active jobs published throughout America, and for individual forex traders, the earnings may vary.
However, the average salary will differ based on location and other factors. Read on to learn more about factors that may affect a forex trader’s income and why money plays a crucial role in the forex trading business.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
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The Average Forex Trader Salary
According to ZipRecruiter, the average forex trader salary in the United States is $81,910 annually. The majority of the salaries range between $32,500-$100,000, with some top earners averaging $125,000 each year across the United States.
Based on Indeed’s information, a forex trader salary in the US gets an average of $98,652 a year and $25,000 in commissions. Indeed also reports $196,917 as the most significant salary at Citi Trader. Also, information from Payscale states that equities traders made an average of $80,935 plus bonuses of $14,916.
What Influences a Forex Trader Salary?
Note that the salary range can vary depending on education, position, experience in the profession, certifications, and additional skills.
Here’s a breakdown of the factors and how they affect a trader’s salary:
Forex Trader Roles
There are various positions in hedge fund trading. They include:
- Senior traders/portfolio managers
- Junior traders/portfolio managers
- Strategist
Most people start as analysts, where they work for an average of six years helping the junior and senior traders with data. They are later promoted to junior traders. Junior traders earn a range of $300,000-$3,000,000 annually, while senior portfolio managers will make close to $10,000,000 a year.
Nevertheless, these figures will depend on someone’s performance. Being in a high-turnover industry means the most senior has the highest salary. The average goes down as most traders are not on that level.
Performance
Apart from the roles, a forex trader’s salary is determined by his performance. According to a PageExecutive survey carried out in 2019, a trader managing a $50 million portfolio in assets earns a base salary of about $60,000-$90,000 if they fail to perform.
That accounts for when a trader makes a return of 10%, with their average income being $600,000. A senior forex trader managing a $500 million portfolio with a 10% return will earn about $6 million annually.
Performance is a crucial determinant when trading for a company or independently. The best way to move up the ranks is to learn from the pros.
Company
Trader salaries will also depend on where they work. A good example is a trader at Goldman Sachs earns an average salary of $110,462 a year, while a trader at Citi earns an average of $147,418 a year, according to GlassDoor. These numbers do not account for bonuses, which could push these figures higher.
Public traded companies disclose their salary, but private equity traders are known for their higher bonuses and base salaries, unlike public firms.
Location
The average forex trader income will also depend on the location of the company. According to Recruiter, the highest paying states are those on the east coast.
For example, a forex trader in Connecticut earns an average salary of $161,110, a New York forex trader earns $125,550, and a Maine forex trader will earn $110,270. The lowest paying states are Idaho at $58,700 and Nevada at $45,560.
According to Indeed, the UK’s average salary for a forex trader is £33,964 a year. The pay estimated is based on wages reported for the same roles and information gathered from past employees.
Trader salaries in the UK also differ based on location. For example, a forex trader in Bruntwood earns £20,896, while a trader in London earns £44,956.
How Much Will You Earn Trading Independently?
It’s easy to determine a forex trader salary for those who work for investment banks or a hedge fund. However, figuring out how much a forex trader makes when trading independently is not simple as there are various factors to account for.
These factors include:
- The costs of trading
- A trader’s starting capital
- The return on investment
The Costs of Trading
An independent forex trader has to account for trading costs, unlike a trader working for a company. These costs affect a trader’s profits and, eventually, the salary. Some of these costs include:
- Swaps: These are the interest rates charged to positions held overnight. Short positions will have an interest payment, while in long positions, the interest rate is assessed against the open position.
- Commissions: These are a percentage of your trading and are charged for specific units like ETFs and stocks.
- Spreads: Spreads are the difference between an asset’s buying price and the asking price of an investment. This amount is charged each time you make a trade.
These costs will affect the trading profits. Fortunately, some brokers give special rates to help an independent forex trader manage the trading costs.
A Trader’s Starting Capital
You also need to account for the trader’s starting capital when calculating the average salary. For example, a trader who starts with $200,000 will get a different return than one who started with $2,000 as capital.
If a trader is planning to earn an average return of 5% a month on $200,000, that will be $10,000, while a 5% on $2,000 is $100.
The Return on Investment
A trader’s ROI is the amount of profit he makes on the money traded. The rate of return is based on factors like:
- The use of leverage: With traditional investing, you need to buy assets upfront. However, forex traders use leverage, which allows them to trade in prominent positions with small account balances. That gives active traders higher returns, considering the percentage of their overall account balance. One thing to note is that the higher the account balance, the higher the risk of loss.
- Trading frequency: A trader’s average return will be affected by the number of trades made. For example, a forex trader who makes one trade with a 40% return, but it’s the only trade made in a week, will affect the trader’s overall investment return. The ROI will be lower compared to someone who is trading consistently.
- Trading style: A forex trader’s rate of return will also depend on their trading style. Short-term traders focus on making more per trade, but they are more at risk per trade. Long-term traders may not earn more per transaction, but they may end up with a high return as their risk is lower.
Different levels of return have varying requirements based on the risk you’re willing to take and the time you need to put into trading. One critical thing to note is that building ROI requires you to practice trading the live markets.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
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Conclusion
The average forex trader income differs a lot and will depend on the location, the company one works for, experience, and performance. Although trading may bring profits, it needs strategy development, risk management, trading practice, and preparation—the best way to earn more is to enhance your trading skills.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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