The question how much money you can make as a trader and whether it’s realistic to set the goal to make 1 million Dollars lands in my inbox almost every day. It is one of the most important questions a trader can ask and how you answer it will determine whether you will have a chance to make it as a full-time trader or are doomed to blow trading account after trading account.
I our course, we always encourage our traders to get a realistic view early on and we have seen great results once traders really internalize it. Profitable trading then becomes much easier (click here to learn our system and trade with us).
Can you make a million Dollars as a trader?
Of course, the answer here is YES. Theoretically, this is possible. But to fully answer this question, we have to look deeper and also ask:
- What is my time horizon to reach this goal?
- How much risk am I willing to take?
- How good am I as a trader?
We will go through each point nd by the end, you will know what to do. Hopefully.
What is my time horizon to make a million Dollars?
Obviously, it matters whether you try to make a million within 1 year, 5 years, 10 years or 20 years. And, it also matters where you are starting.
Of course, it’s unrealistic to turn $1,000 into a million within a few years. Such a trader will immediately over-leverage, get into the gambling mentality, take random trades and try to hit home runs instead of smartly managing risk. If you don’t have a big trading account, I have some tips for you below at the end.
If you want to turn $50,000 into $1,000,000 within 18 years, that seems more realistic and it would equal a consistent 20% annual return. After year 11, you would hypothetically earn $60,000 a year. After year 14, you would make an annual return of 130,000 based on the calculations. If you are 30 years old now, wouldn’t it be worth it to have an annual extra income of 130,000 when you’re 44? You bet! And it just goes up from there.
If you are 30 or 35 years old now, wouldn’t it be worth it having an annual extra income of 130,000 when you’re 44 or 49?! And it just goes up from there if you don’t withdraw.
At the same time, a 20% annual return does sound much more attainable than trying to achieve 500% every year or even every few months. 20% a year boils down to a little over 1.5% per month. How relaxed could you approach your trading if you’d only shoot for 1.5% a month?
I completely understand that this is not something you want to hear, but having unrealistic expectations is one the main reasons why so few make it in this business. A short-term mindset, paired with an unrealistic view that you will soon get rich will lead to:
- taking too much risk
- taking random trades, hoping that you will hit it big
- aiming for home run trades, which means you push your winners too much, instead of taking what is offered
- not adhering to risk management principles
How much risk are you willing to take?
Obviously, return and risk go hand in hand. And if you want to achieve a higher return, you need to take more risks. In trading, you would then increase your position size per trade.
If you could achieve a 40% per year return with increased risk, it would take ‘only’ 9 years to get from $50,000 to $1,000,000. Of course, the likelihood that you will blow up in the meantime also increases significantly.
When you are using a higher position size, the drawdowns and losing streaks will hurt much more and many traders will struggle emotionally to get out of a big drawdown.
The higher you scale the risk, the higher your potential reward.
How good are you as a trader?
The last and final question is, is the “making a million Dollar goal” something that you have to deal with right now in your current position as a trader?
If you are still losing consistently and you cannot even achieve the break-even status, then looking to make $1,000,000 is not going to get you far and it will distract you from the real problems at hand.
First, you need to work on yourself. You need to establish rules, you have to find a trading method that works for you and that you are ready to follow (click here to learn our system and trade with us), without looking somewhere else. And you need to make sure that your unrealistic expectations aren’t the cause of your current struggles.
Don’t try to run before you can walk. Most traders bite off more than they can chew and they could already be much closer to profitable trading if they’d just be more realistic and stop chasing wrong goals and absurd figures.
What if you don’t have a big trading account?
I understand that most traders reading this, don’t have $50,000 to spare for their trading account and that’s totally fine. Here is a path that you can follow to get there too:
- Focus on yourself. Find a trading method that makes sense and try to master it (click here to learn our system and trade with us)
- Once comfortable with your trading, fund a live account
- Don’t focus on the money. Instead, focus on keeping risk low and avoid big drawdowns
- Build a track record that investors and outside capital would find appealing
- Then go and look for services like TopStep Trader, Darwinex or FundSeedr who allocate money to individual traders who can trade profitably
- Then you work your way up and be patient
Your future self will thank you
Trading does not necessarily have to immediately become your main source of income. Trading can also be just a great way of supplementing your income, or allowing you to quit your job and then start a lower paid career where you follow your real interests and passions.
And how great would it be to build a big trading account that can generate a lot of income 15 or 20 years down the road? If you’re 30 now, your 50 years old future-self will thank you for being realistic and creating a trading career.
Disclaimer: The calculations and returns are all hypothetical. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual’s trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Full Terms