Foreign exchange markets provide many profitable opportunities, and forex traders can earn an income independently or as an employee of a trading firm. Below we discuss how forex trader salaries vary due to location, ability, and years of experience.
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Have you seen TV shows like Billions and movies like Wolf of Wall Street, Margin Call, and The Big Short with images of successful and wealthy traders, in swank business suits and driving flashy cars and thought, “yeh! I could do that”?. While you can certainly make money by trading different CFDs like forex, stocks, cryptocurrencies and indices, the reality is about 70% of retail traders lost money.
In this article, we look at how much a forex trader really earns. As part of the guide, we will cover the following topics
Forex markets are a decentralised global market where traders can buy and sell different currencies. Foreign exchange is the largest financial market in terms of both liquidity and trading volume with a daily turnover of $6.6 trillion dollars and a total value of $2.409 quadrillion.
Market participants include individuals, firms, organisations and governments that trade forex to conduct international business as well as profit from exchange rate fluctuations.
When forex trading, you are speculating on whether a currency’s value will increase or decrease relative to another currency. There are many factors that affect foreign exchange markets, including political, economic and social events. Forex traders analyse these markets and events, then develop trading strategies with the goal of profiting off these market movements.
To become a fx trader, there are two ways to enter the industry:
Below we discuss the different salaries, and benefits offered to both employed and independent traders.
There are three key forex trading roles that cover different aspects of online trading. Whether a hedge fund or investment bank is hiring you, your years of experience trading and understanding of forex markets will determine your suitability for the position along with your annual salary.
A forex analyst’s role is to research foreign exchange markets. This includes any political and economic events that may affect global markets. Forex Analysts then report back their findings and investment recommendations to senior traders and clients.
Forex Analysts job titles may also be described as currency or forex researchers or currency strategists. It is one of the more entry-level positions for forex traders.
Forex traders and account managers trade on behalf of one or more clients. Account managers tend to be experienced traders as they are managing large amounts of funds for their clients.
The role often requires years of experience trading forex and CFDs, as clients expect traders to reach profit targets.
The customer service based role support foreign exchange traders with administrative duties. The role often involves tasks such as processing withdrawals and deposits or verifying clients ID.
The average salary of an employed forex trader depends on a range of factors. Although each trading firm structures salaries differently, fx traders may be paid:
Your overall salary as a forex trader depends on the following key elements:
Due to the large variance in base salaries, commissions and bonuses, it can be difficult to determine a forex traders average salary. Additionally, there’s a lack of accurate information regarding forex traders employed by private hedge funds.
If based in a financial hub in the United Kingdom, PayScale suggests an average salary of £53,500 per year for a full-time fx trader. Yet, for the reasons mentioned above, there is a significant difference between what junior traders and experienced traders should expect:
There is also a large variance in forex trader salaries depending on your years of experience. Entry-level employees can expect 29% less than the average salary, while experienced traders receive 70% more.
Reported average salaries also differ between websites. Glassdoor suggests an average of £63,065 per year, while Indeed states an average of £36,100.
Independent forex traders are not employed by a trading firm and instead use their own funds to trade currency pairs.
Choosing to work as an independent trader for some is a lifestyle choice. Only a small amount of capital is needed to get started, there is no reporting to a senior meaning you are accountable only to yourself and you only need a laptop or PC (or mobile) and an internet connection.
As derivatives are complex instruments, you are taking on a significant amount of risk when trading with your own money. The high risk is amplified even further if you place trades with high leverage.
The salary you earn will depend on various factors such as whether you are trading part or full-time, the income tax you are paying and the costs involved.
The amount of profit you make, referred to as your return on investment (ROI) will be affected by how long you plan to trade forex, your initial deposit and your ability to develop successful trading strategies.
There are certain costs involved when operating as an independent fx trader. As you are self-employed, you’ll be required to source your own equipment, internet connection, insurance and accountancy services.
Depending on the broker and trading software used to access forex markets, there will be different fees and costs involved. For example:
As each independent forex traders circumstances and dealing are completely individual, it’s not possible to determine an accurate average salary. The average profit you make from trading forex depends on the fees you are paying, the amount of time you can dedicate, and the efficiency of your trading strategies.
To illustrate the importance of an investments term and initial deposit, assume a fx trader earns the same ROI of 5% every month.
According to Salary Expert, traders earn differing average base salaries depending on where they are based.
Forex markets operate Monday to Friday, 24 hours a day due to the overlap in different forex centres time zones. For instance, forex markets in Sydney and Tokyo can be open when London and New York are closed.
If you are a forex trader employed by a trading firm, you may be expected to work 12 hour days or weekends due to the different international time zones.
If you are an independent fx trader or trade part-time as an extra source of income, you can be flexible and trade the forex markets time zones that suit you.
With leverage, forex traders can make significant profits when buying and selling currencies. But all fx traders should beware of the high risk of losing money when trading.
To learn more about the risks involved in forex trading, along with tools available to reduce the high risk, read our UK Forex Trading Guide here.
According to PayScale, the average base salary for a forex trader in the UK is £53,500. Yet, there are many factors that such as experience and location that may increase or decrease a traders salary.
Forex traders are buying and selling a currency with the intention of profiting from price movements. As an employed forex trader, a hedge fund or investment bank may hire you to conduct analysis and trades on behalf of clients, while independent traders work from home investing their own funds.
If you are an independent fx trader looking for a broker, you can find a list of the Top UK Brokers here.
There are pros and cons to being an independent versus employed trader. You are offered a lot of flexibility as an independent trader, while employed traders are required to reach their employer’s targets while working long hours.
However, employed traders receive employee benefits and can drastically increase their income by earning bonuses and commission on top of their base salary.
Independent traders receive no such employee benefits and are not provided with any security in terms of income and stability. Additionally, as an independent trader, you are carrying all the risk and solely responsible for any costs involved.
Justin Grossbard has been investing for the past 20 years and writing for the past 10. He co-founded Compare Forex Brokers in 2014 after working with the foreign exchange trading industry for several years. He also founded a number of FinTech and digital startups including Innovate Online and SMS Comparison. Justin holds a Masters Degree and an Honours in Commerce from Monash University. He and his wife Paula live in Melbourne, Australia with his son and Siberian cat. In his spare time, he watches Australian Rules Football and invests on global markets.