Forex Trader Salaries

A forex trader buys and sells currency on the foreign exchange. They assess and take advantage of the values of different currencies, whether rising or falling, to make a profit for a financial organization, for clients or themselves.

A forex trader may be:

• Employed by a financial organization, such as a hedge fund or an international bank
• Employed by a group of clients to trade on their behalf
• Self-employed as an independent trader
• Acting as an independent trader as an additional source of income

What Is the Foreign Exchange Market?

The foreign exchange (forex) market is the largest global market to the value of over $5 trillion.

The forex market is a network of brokers and financial institutions, covering both over the counter (OTC) transactions by individuals involved in forex trading and interbank transactions carried out by large banking organizations.

The most traded currency on the forex market is the US dollar.

Forex Trading Roles

The job of forex trader requires the fulfillment of several roles:

Forex Analyst

A forex analyst researches currency markets and political/economic factors that may affect the Forex to inform their employer and clients on the most advantageous investments to make.

This role is also sometimes known as a currency researcher or a currency strategist.

Forex Account Manager/Trader

Dealing with one or more clients, an account manager is responsible for making buying and selling decisions on their clients' behalf and handling large amounts of money.

They are expected to meet profit targets and, often, to already have a high level of forex market experience.

Forex Exchange Operations Associate

A forex exchange operations associate supports the forex trader by providing a customer-service role, carrying out the necessary administration tasks; for instance, verifying customer ID and processing customer withdrawals and deposits.

What Is the Average Salary of an Employed Forex Trader?

Before we can arrive at the average salary of an employed forex trader, it is necessary to look at what makes up that salary and what could affect the level of that salary.

What Makes up the Salary of an Employed Forex Trader?

If you work as an employed forex trader, your salary will be made up of:

• A base salary – This is what you will receive each month, regardless of your performance
• Bonuses and commission – This will be based on your performance, the performance of the team of traders within the organization and company turnover
• You may also be offered certain employee benefits, such as health insurance, holiday allowance, profit-sharing scheme or 401(k) pension plan

What Might Affect the Salary of an Employed Forex Trader?

Forex trader base salaries may vary for several reasons:

• Your level of forex market and trading experience
• Education, both general and financial
• The financial organization you work for
• The geographical location of where you work
• Length of service and the seniority of your forex trading position

Factors affecting bonuses and commission include:

• Your performance
• Performance of the entire trading team
• Company turnover
• Current economic and political climate
• What other similar organizations pay

The Average Salary of an Employed Forex Trader

The average employed forex trader salary can be difficult to tie down for several reasons:

• The variance of base salaries based on the factors mentioned above
• Equally, the variance of bonuses and commissions
• Differing practices between financial organizations
• The extent to which bonuses and commission can inflate a forex trader’s salary, sometimes moving it from a five-figure number to a six or seven-figure number
• The lack of information available about forex traders involved with private hedge funds

Even organizations that can usually be relied on to provide average salary figures for other careers, do not appear to agree on average forex trader salaries.

For instance, the recruitment website Indeed sets an average base salary for a forex trader in the US at $91,050, and annual commission at $25,000 in 2020.

In comparison, Payscale offers an average salary figure of $80,935 for the same period, with $21,000 commission, and a bonus figure of $14,916.

These average figures, however, are drawn across all levels of seniority of forex trader, a vast array of financial organizations and throughout different parts of the US, and are likely to be inflated by the six or seven figures that senior traders can earn.

What Is the Average Salary of an Independent (at Home) Forex Trader?

Independent (at home) forex traders use their own money to trade currencies, taking the entire risk on their shoulders but also retaining the entire profit.

An independent forex trader may make all their earnings from trading currencies or use forex trading as a way to make additional money over and above their employment in some other capacity.

As an independent forex trader, you have the choice whether to take the entire profit you make from the purchase and sale of currencies as your salary, take only a portion of your profit as salary and reinvest the remaining profit, or continually reinvest over a longer period to achieve a higher profit and, as a result, a higher salary.

Your final profit figure is arrived at by taking into account the following factors:

Return on Investment (ROI)

Your ROI is the amount of profit you make from trading currency. This figure will be affected by how much money you invest, whether you are a short-term or long-term investor, the number of trades you make, and your ability to efficiently analyze the forex market.

The Amount of Money You Start With

The amount of starting capital you have to invest in currencies can make a vast difference to your profit and salary as an independent forex trader.

An initial 5% return on an investment of $4,000 is $200.

If you can manage that return monthly and re-invest, your annual profit would amount to $3,183.42 ($7,183.42 – $4,000).

In comparison, an initial 5% return on an investment of $80,000 is $4,000.

Again, if you can maintain that return every month and re-invest, your annual profit would be $63,668.51 ($143,668.51).

The amount of starting capital you have to invest, if handled successfully, could make the difference between having some extra money on the side and supporting yourself solely from your income as an independent forex trader.

Costs Incurred Through Forex Trading

As with any business enterprise, there will be costs involved in operating as an independent forex trader, such as fees paid to your broker.

If you trade currency as a business and are self-employed, you may also have to factor in any of the following general business costs:

• Furniture and equipment; for instance, a computer
• Telephone line and broadband
• Business insurance
• Accountancy fees

Finally, as with any income you earn, your salary from forex trading will be subject to income tax. If you use forex trading to earn extra income, then you may find that this pushes you into a higher tax bracket.

For instance, if you already earn $25,000 and your additional earnings from forex trading amount to a further $15,000, you will move into a higher tax bracket, paying 22% income tax instead of 12%.

$25,000 with a 12% tax deduction: $25,000 – $3,000 = $22,000

$40,000 ($25,000 employed earnings and $15,000 forex trading income) with a 22% tax deduction: $40,000 – $8,800 = $31,200

Examples of Profit Earned by an Independent Forex Trader

To put the above into context, here is an example of what profit an independent forex trader could make using different starting amounts of capital and length of the investment.

This example assumes that profit will be earned at the same ROI for every month.

An independent forex trader has $500 to invest over a year. If they invest that amount, make a monthly 5% ROI and continue to re-invest that 5% (adding it to the original starting capital each month), they will have made a profit of $397.92 ($897.92 – $500) by the end of the year.

By comparison, investing $10,000 under the same conditions for a year would yield a profit of $7,958.56 ($17,958.56 – $10,000).

If that same independent forex trader continued to invest and receive the same monthly 5% ROI for a further two years, a $500 investment would see a profit of $2,395.90 ($2,895.90 – $500) at the end of the three years, and $10,000 would see a profit of $47,918.16 ($57,918.16 – $10,000).

The above figures are, however, dependent on consistently receiving a 5% ROI each month.

Average Salary of an Independent Forex Trader

As you can see, the average salary of an independent forex trader will depend on how much you invest, your trading methods and approach, whether you are a short-term or long-term investor, the forex market, any costs or losses you may incur and how much of your profit you decide to take as a salary.

The situation is completely individual to you and your forex dealings.

How Many Hours Will You Have to Work?

The forex market trades 24 hours Monday to Friday, and there may be some overlap on the beginning and end of that working week depending on which currencies you are involved with in comparison to the country you live in.

As an employed forex trader, your working day could be expected to stretch to 12 hours, or you could be asked to work on a shift basis so that one or more of the traders at your workplace have eyes on the forex market at all times. You may also be expected to work on a weekend.

As an independent forex trader, you have a level of flexibility. The choice is yours as to how much time you spend working on your forex investment.

If you are employed elsewhere and this is an additional source of income, you may be limited on how much time you can spend on your forex dealings; however, it is possible to be a successful part-time forex trader.

How Do Forex Trader Salaries Differ by Location?

The salary of an independent forex trader will generally not be affected by location, other than local living costs.

Employed forex trader salaries, however, can vary greatly depending on where in the US you work.

For instance, a forex trader working in New York may expect to reasonably earn over twice the salary of a similar trader working in Nevada.

Outside of the US, an average salary for a forex trader could be around:

• £34,668 (approximately $44,581) in England
• €71,599 (approximately $83,798) in Germany
• 130,000 FR (approximately $140,967) in Switzerland
• CA$99,975 (approximately $74,746) in Canada
• €64,473 (approximately $75,449) in France

Employed or Independent? The Pros and Cons

The main benefit of working as an employed forex trader is the security of receiving your base salary, and possibly employee benefits, regardless of your performance.

In addition to this, bonuses and commission can greatly increase your annual earnings from five to six- or seven-digit salaries.

However, along with that security comes long hours and working to your employer’s targets and expectations.

In comparison, the main benefit of operating as an independent forex trader, whether full-time or as an additional source of income, is flexibility (hours, amount to invest, what to invest in, and when to buy and sell) and the opportunity to keep all of the profits you make.

Hand in hand with these benefits, however, is the fact that you are putting your own money at risk.

You are also responsible for all the costs involved.

Final Thoughts

As an employed forex trader, your salary will depend on the stage you are at in your career progression, the organization that employs you, where in the US (or the world) you work, and your trading performance.

As an independent forex trader, your salary will rely on how much you have to invest, your investment strategy and any involved costs.

Whether you work as an employed forex trader or an independent, it is difficult to state what an average salary will be, but there is the potential to make a good salary if the trades are in your favor.

*WikiJob 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.