Forex trading can be a lucrative investment opportunity for individuals looking to make a profit by trading currency pairs. However, it’s important to understand the potential risks and rewards before entering the market. One common question that many new traders ask is, “How many pips does the average retail forex trader make?”
Before answering this question, it’s important to define what a pip is. A pip, or percentage in point, is the smallest unit of measurement in the forex market. It represents the fourth decimal place in a currency pair’s exchange rate. For example, if the EUR/USD pair is trading at 1.1234, a move up to 1.1235 would be a one-pip increase.
The number of pips a trader makes can vary greatly depending on their trading strategy, risk management, and market conditions. It’s impossible to provide a definitive answer to how many pips the average retail forex trader makes, but we can look at some general trends and statistics.
According to a study by the French financial regulator, AMF, the average retail forex trader in France loses 4,875 euros per year. This equates to a loss of approximately 15 pips per trade, assuming an average trade size of 10,000 units. It’s important to note that this statistic only includes traders in France and may not be representative of traders in other countries or regions.
Another study by the US Commodity Futures Trading Commission (CFTC) found that the majority of forex traders lose money. The study analyzed data from forex brokers and found that 68% of retail forex traders lost money in the fourth quarter of 2019. The median loss was $1,900, which equates to approximately 19 pips per trade assuming an average trade size of 10,000 units.
These statistics suggest that the average retail forex trader loses money and may be losing anywhere from 15 to 19 pips per trade. However, it’s important to note that these figures are based on data from a limited sample size and may not be representative of all traders.
There are also traders who make money consistently in the forex market. These traders typically have a well-defined trading strategy, strict risk management rules, and a deep understanding of market conditions. It’s difficult to estimate how many pips these traders make on average, as their profits will vary depending on their individual trading strategies and market conditions.
Some professional forex traders have shared their performance statistics publicly. For example, the forex trading firm, SMB Capital, publishes the performance metrics of their traders on their website. According to their data, their traders made an average of 0.39% per day in 2019, which equates to approximately 39 pips per day assuming an average trade size of 10,000 units.
It’s important to keep in mind that these professional traders have years of experience and access to resources that may not be available to a typical retail trader. They also have the ability to trade with larger positions, which can lead to greater profits but also greater losses.
In conclusion, it’s difficult to provide a definitive answer to how many pips the average retail forex trader makes. The statistics suggest that the majority of retail traders lose money and may be losing anywhere from 15 to 19 pips per trade. However, there are also traders who make money consistently in the forex market, but their profits will vary depending on their individual trading strategies and market conditions. It’s important for traders to have a well-defined trading strategy, strict risk management rules, and a deep understanding of market conditions in order to have the best chance of success in the forex market.
