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I have lately been reading up on what Forex Trading is and how it works. In many sources, it is described that a consistent investor can generate 15% return annually.

My question is, what is this return based on? Is it based on your margin or is it based on your total position (which includes leverage).

Lets say you have a margin of $1000 and your broker provides you with a leverage of 100:1, so you have a position of $100,000.

Now is your return 15% of $1000 = $150 or is it 15% of $100,000 = $15,000?

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    it is based on your actual initial capital.
    – CQM
    Jun 27, 2014 at 22:59

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Please, please don't believe all the financial sales pitches you will hear in your life. Consistent?? give me a break. The returns promised include the effects of leverage. That same leverage can also generate 100% losses.

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To make a return of 15% on $100k the currency you are trading would have to move by 15%. This does not happen to often. In FX trading you are mostly trying to capture and profit from small moves in a currency pair.

Based on this, in my opinion, the 15% return would be based on your own capital, ie. the $1000. This would be how I would work out my return when dealing with margin.

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  • Since virtually all retail forex traders do so with very high levels of leverage, you wouldn't need a cumulative 15% of moves in order to net a 15% return (or loss!).
    – alyehoud
    Dec 31, 2015 at 5:04

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