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Forex Trader Salary: How much do day traders, hedge fund traders, and Forex traders really earn?

October 14, 2020 19:30 Europe/Tallinn
Reading time: 25 minutes

Forex Trader Salary: How much do day traders, hedge fund traders, and Forex traders really earn

On one hand, we see movies like the Wolf of Wall Street and shows like Billions, where successful traders earn millions and live lavish lifestyles. On the other, we see the statistics, that tell us that the majority of day traders lose their money. So what is a typical Forex trader salary?

That is the question this article aims to answer. We've done the research for you - we've compared what hedge fund managers make and compared this to typical Forex traders. We've looked at traders working for companies and banks, as well as independent investors who are trading directly on the markets with their own money. So if you're wondering what traders really make, you've come to the right place.

Retail trader salary vs. Market & Prop trader salary

Before we share the different salary levels for traders, the first point to cover is that there are different options for building a career as a professional trader. They can be broadly broken into two categories - working for a company and working for yourself.

If you're working for a company (such as a hedge fund or investment bank) as a day trader, hedge fund manager, or quant trader, you are an employee who is paid a base Forex trader salary, and often a commission based on performance. Some of the benefits of being a salaried trader include:

  • You can use the company's existing tools and strategies, which have hopefully already proven to be profitable
  • There are often trainings and mentoring programs built into the company structure, meaning you have more support than you might have on your own
  • You are not risking your own money to trade, which can remove some of the stress of trading
  • There is the opportunity for career progression, which means you can climb the ranks to manage higher-value clients' or more clients' funds
  • While you have a job, you have a reliable salary and, depending on the company and local laws and regulations, you might also get health or pension benefits

However, there are some downsides to being a salaried trader:

  • If you don't meet the company's profit targets, you will probably have to deal with more rules, restrictions and observation
  • There is less flexibility - while TV and movies might make the role of a trader seem glamorous, it is still a regular job, with hours that regularly go beyond 9-5
  • There may be office politics or difficult clients you need to deal with
  • If you do well, you will only get a percentage of your profits paid as a bonus, rather than getting to keep all of them

If you're an independent Forex trader, stock trader or commodities trader, rather than getting paid a salary, you would trade and invest your money and pay yourself with the profits of your trades. The benefits of working for yourself include:

  • More flexibility - you can work from anywhere with an internet connection, and can trade any time the market is open (that's 24 hours a day, 5 days a week for Forex)
  • No limit on your earnings - if you have a profitable strategy, there is no limit on the amount you can earn (assuming you have the capital available to trade, of course)

Like trading for a company, though, being an independent trader does have its downsides:

  • You are risking your own money, which could lead to higher levels of stress
  • There is less security, as you can't rely on the same base salary being automatically paid each month, especially if you have a bad month
  • There is less built-in structure and support than with a company - while there are plenty of educational resources available for traders, you will need to look for them yourself rather than having them handed to you
  • You will need to find or develop your own tools to improve your trading performance

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Now that you have an overview of the pros and cons of working as a trader let's look at the typical salaries for each of these traders.

Forex trader annual salary: What do the numbers say?

For traders who are employed by companies, their salaries can vary dramatically depending on the trader's specific job title, the company they work for and even the city they are working in.

If we start with a US Forex trader salary, according to Indeed, the average trader salary is $98,652 per year plus $25,000 in commissions. However, the highest salary figure they quoted was $196,917 with Citi Trader.

According to Payscale, equities traders earned an average of $80,935 with a bonus of $14,916, commission of $21,000 and profit sharing options of $6,000. Their range for base salaries ranged from as low as $47,000 and as high as $160,000.

 Payscale.com, Equities Trader SalarySource: Payscale.com, Equities Trader Salary

Glassdoor quoted a similar range, with an average salary of $91,642, and an average of $32,599 in additional cash compensation.

Source: Glassdoor.com, Average Trader Salary

Source: Glassdoor.com, Average Trader Salary

ZipRecruiter, on the other hand, found that the average Forex trader salary in the United States is $60,698 a year, with the range going from just $16,000 up to $148,000. They found that the majority of financial salaries ranged from $30,000 to $74,500

Source: ZipRecruiter, Professional Trader Salary

Source: ZipRecruiter, Professional Trader Salary

So what do things look like across the pond?

According to Glassdoor, the average Forex trader salary of a London trader is £65,621. For the basis of comparison, that's about USD86,000 at the current exchange rate, so a $10,000 drop from the average figure in the US.

Source: Glassdoor, London Trader Salary

Source: Glassdoor, London Trader Salary

Meanwhile, CW Jobs calculated the average Forex trader salary as only £42,500. Prospects, on the other hand, placed starting salaries for trainee financial trainers at £26,000 to £32,000, plus commissions, while they gave a range of £45,000 to £150,000+ for experienced traders.

For associate traders, especially derivatives traders, they gave a Forex trader salary range of £140,000 to £230,000, with bonuses paid on their profits made. EU regulations limit bonuses to less than 200% of the base salary.

So why is there such a wide range? And why don't the trader salary numbers reflect the astronomical sums we see in shows like Billions - which pays their analysts a base of $350,000 and top traders salaries in the millions?

There are a range of factors that can influence a day trader's salary, which we cover below.

Factors that influence a trader's salary

The factors that can trader salaries include the trader's role and seniority within a company, their performance, the company they work for, and even their location.

Salaries for different trader roles

There are a range of different positions available in hedge fund trading, including:

  • Analyst
  • Strategist
  • Junior traders/portfolio managers
  • Senior traders/portfolio managers

Most people will work their way up from being an analyst (4-8 years), assisting the junior and senior traders with data, after which they progress to being a junior trader. According to 80000hours.org, junior traders typically earn between $300,000 and $3 million a year, while senior portfolio managers can earn over $10 million per year, however, these figures are based on performance.

Because this is a high-turnover industry, while the highest Forex trader salary is very high, the average gets dragged down because most traders won't make it to that level.

Trader salaries and performance

Working as a trader within a hedge fund or investment bank is a performance-focused role, and the salaries listed above are heavily reliant on bonuses.

According to 80000hours, if a trader is managing a portfolio of $50 million in assets, and they earn a return of 10%, their income will be $600,000. If they fail to perform, they will be left with their base salary, which is about $60,000 to $90,000, according to the Page Executive 2019 survey.

A senior portfolio manager, who manages a portfolio of $500 million and gets a 10% return, would earn a salary of about $6 million per year.

Whether you're trading independently or trading for a company, performance is everything when it comes to how much money you can earn. The good news is that there's a simple way you can improve your trading performance, and that's by learning from the pros.

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Trader salaries by company

Salaries also vary by company. According to Glassdoor, the average trader salary at Citi is $147,418, but the range goes up to $252,000.

average trader salary at Citi is $147,418, but the range goes up to $252,000.

HSBC's trader salaries are slightly higher, with an average of $195,061 and a high of $286,000, while both .

HSBC's trader salaries are slightly higher, with an average of $195,061 and a high of $286,000

Barclays and Goldman Sachs have lower averages at higher highs, topping $320,000

Barclays and Goldman Sachs have lower averages at higher highs, topping $320,000

Note that Glassdoor's salary figures focus on base pay, so these numbers could be higher once bonuses are taken into consideration.

Note that these are all publicly traded companies. Private equity traders are a bit more of a mystery, but are known to pay much higher base salaries and bonuses than public firms.

Trader salaries by location

The location of the company a trader works for can also influence their salaries.

Trader salary in USA

If we look at the Forex trader salary in the US, the highest-paying states for traders are largely on the upper east coast, according to Recruiter.com:

State

Trader salary

Connecticut

$161,110

New York

$125,550

Maine

$110,270

District of Columbia

$102,210

Kansas

$99,520

Minnesota

$97,950

California

$96,150

Source: Recruitment.com, Trader Salaries by State

The states with the lowest trader salaries included Nevada, at $45,560, Nebraska, at $58,340, and Idaho, at $58,700.

Trader salary in London

While a Forex trader salary in London is higher than other cities in the UK, let's look at a comprehensive list of cities in the UK. Trader salaries here varied depending on location as well. According to Indeed:

State

Trader salary

Birmingham

£33,259

Bruntwood

£20,896

Cannock

£21,850

Harrogate

£40,100

Huddersfield

£26,699

Leeds

£29,427

London

£44,956

Manchester

£35,044

Nuneaton

£26,650

Rotherham

£22,804

Sheffield

£41,917

Stokenchurch

£29,519

Wolverhampton

£26,032

Source: Indeed, Average Trader Salaries

Are trader salaries going down?

Now that we've covered the averages, you might be wondering, are trader salaries going down? We can't know for sure, due to being unable to find data on private hedge funds (like the type you see in Billions).

However, anecdotally, salary increases seem to be stalling, with fewer traders needed as electronic trading continues to rise.

So what does this mean for you? If you're interested in trading, fortunately there is another method, which is trading for yourself.

Day trading for yourself: Can you get rich trading Forex?

What we've covered so far is the Forex trader salary for those who trade on behalf of a company (such as a hedge fund or investment bank) and that company's clients. Now, we're going to cover the potential salary for a trader who is trading independently, using their own money.

The salary calculation is different, in this case. While an employed trader earns a base salary plus bonuses and commissions, as an independent trader, your salary will be the profits of your trades.

So, that means there are a number of factors to consider. These include:

  • Your return on investment
  • Your starting capital
  • The costs of trading

Calculating your trader salary, step 1: ROI

Your return on investment is the amount of profit you make on the money you trade. If you then draw on that profit, that would count as your salary.

Now this rate of return can vary dramatically depending on:

  • Your trading style: Are you a long-term, buy-and-hold investor? Or are you a swing trader, day trader or scalper? Shorter term traders usually try to make more per trade, but they often risk more per trade as well.
  • Your trading frequency: The number of trades you make will also affect your average return. If you make one trade that has a 50% return, but that is the only trade you make in a week, your overall ROI (your profit compared to your initial account balance) is going to be much lower than if you were trading consistently.
  • Your use of leverage: Traditional investing often involves buying assets outright, where the investor needs to pay the full price of an asset upfront. Many active traders, however, use leverage, which allows them to trade larger positions with smaller account balances. This then means their returns (as a percentage of their overall account balance) can be higher. Having said that, it also increases their risk of loss.

A traditional investor, who isn't using leverage, might be able to make a return of 5-10% per year on their investment. A day trader or swing trader, on the other hand, might have a goal of making a return of 10% a month.

These are significantly different levels of return, and come with different requirements regarding the time you'd need to put into trading and investing, as well as the risk you'd be willing to take on. So, these are both very important things to consider when deciding what salary you'd like to earn as a trader.

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Calculating your trader salary, step 2: Starting capital

Once you have a target profit you'd like to make, the next step towards calculating your Forex trader salary is to think about your starting capital.

Let's say you wanted to make an average return of 5% a month. That return would be very different if you started with $5,000 than it would be if you started with $500,000.

A 5% return on $5,000 is $250. If you multiply that by 12 (to get your total profit for the year), you would have $3,000. When compared with traditional investing, that is a return of 60% on your initial investment, so it is an excellent rate of return. However, it's probably not enough for you to quit your day job.

However, if you had $100,000, a 5% return would be $5,000. Over a year, $5,000 a month would add up to $60,000, which is a much more reasonable starting salary for a trader.

Calculating your trader salary, step 3: Costs of trading

The next thing to consider is your trading costs, as these will cut into your profits and, consequently, your Forex trader salary.

For active traders (this includes day traders, swing traders, Forex traders, commodity traders and more), the costs your broker will charge usually include:

  • Spreads: This is the difference between the ask (sell) and bid (buy) price of an asset, which is charged every time you make a trade.
  • Commissions: This may be a percentage or value-based cut of your trading, and is often charged for certain instruments, like stocks and ETFs.
  • Swaps: Swaps are an interest rate charged to positions that are held overnight. For long positions, an interest rate will be charged against your open positions, while short positions may receive an interest payment.

All of these costs will come out of your trading profits, so it is important to keep them in mind.

The good news, though, is that if you trade with a significant account balance, many brokers will offer special rates in order to get your business, which can help manage your trading costs.

Something else to consider is how your trading income might affect your salary. It is very common for Western countries to have a tax bracket system, including the United Kingdom, the US, Canada, Australia, New Zealand, India, the Netherlands, Switzerland and more. If your trading income pushes your total income into a higher bracket, you may need to pay more tax on that income.

Let's consider the US, as an example. If you earn an income of $60,000 in a day job, and you make an additional $15,000 as a trader, your income will fall within the 22% marginal tax rate. This means that for every dollar you earn over $38,701, you will pay 22 cents in tax. The dollars you earn under that figure will earn the lower applicable tax rates.

If you were earning an income of $60,000 in a day job, and you earnt an additional $30,000 in trading, your total income would be $90,000. For every dollar you earn over $82,500, you will be paying 24 cents in tax, rather than 22 cents.

Marginal Tax Rate

Single

Married Filing Jointly

10%

Up to $9,525

Up to $19,050

12%

$9,526 to $38,700

$19,051 to $77,400

22%

$38,701 to $82,500

$77,401 to $165,000

24%

$82,501 to $157,500

$165,001 to $315,000

32%

$157,501 to $200,000

$315,001 to $400,000

35%

$200,001 to $500,000

$400,001 to $600,000

37%

over $500,000

over $600,000


Source: Bankrate.com UK Income Tax Brackets

Trader salaries over different time periods

So, what might a trader's salary look like? Let's consider:

  • Average monthly return
  • Starting capital
  • Length of time spent trading

This will give you an idea of the different incomes a trader can earn over time.

12-Month Trader salary

With a Forex trader salary, beginners usually earn quite well, but proportionate to experience.

Starting capital

2% monthly return

5% monthly return

10% monthly return

$200

$253.65

$359.17

$627.69

$1,000

$1,268.24

$1,795.86

$3,138.43

$5,000

$6,341.21

$8,979.28

$15,692.14

$10,000

$12,682.42

$17,958.56

$31,384.28

$50,000

$63,412.09

$89,792.82

$156,921.42

$100,000

$126,824.18

$179,585.63

$313,842.84

$250,000

$317,060.45

$448,964.08

$784,607.09

As you can see, your average monthly profit and your starting capital can make a significant difference to the amount you pay yourself as a salary.

If you started with $200 and had a 2% monthly return, you would make a profit of $53.65 for the year - not quite enough to quit your day job! If you had the same starting capital and had an average return of 10% a month, you would more than triple your money with $427.69 in profit, however that still isn't what most of us would consider a livable salary.

Once your starting capital goes up, though, so too does the salary you'll earn - even if you don't improve your profit levels. If you started with $100,000, for instance, a 2% monthly return would add up to $26,824.18 for the year, which isn't bad - especially if this is on the side of your full or part-time income.

If you tweaked your trading strategies and increased your monthly return to 10% a month, your total profit at the end of the year would be $212,842.84.

2-year trader salary

If you don't need to withdraw your profits straight away, though, that's when things get more interesting.

The reason for this is because then your account balance will benefit from compounding. If you started with an account balance of $100,000, for instance, and had an account balance of $126,824.18 by the end of the year, you would then have much higher starting capital for the next year. This means that the profit you make will be 2%, 5% or 10% of $126k, rather than $100k. If you then leave your profits in the account for the following year, once again you'll have a higher balance to work with.

In the table below, you can see the same levels of starting capital and monthly returns, but what it would look like if you kept everything in your account for two years.

Starting capital

2% monthly return

5% monthly return

10% monthly return

$200

$321.69

$445.02

$1,969.95

$1,000

$1,608.44

$3,225.10

$9,849.73

$5,000

$8,042.19

$16,125.50

$49,248.66

$10,000

$16,084.37

$32,251.00

$98,497.33

$50,000

$80,421.86

$161,255.00

$492,486.63

$100,000

$160,843.72

$322,509.99

$984,973.27

$250,000

$4,021,093.12

$8,062,749.86

$24,624,331.69

As you can see, in just one extra year, your salary would increase exponentially.

A trader who started with $50,000 and earnt a monthly return of 5%, for example, would have a total account balance of $89,792.82 at the end of Year 1. This works out to a salary of $39,792.82 per year, once we subtract the starting capital.

If that trader left the money in his account rather than withdrawing it, and continued following a strategy that got him a return of 5% a month for the next 12 months as well, at the end of Year 2 his account balance would be $161,255.00.

If we subtract the starting capital, that gets is to $111,255.00, or a trading salary of $55,627.50 a year.

And things continue going up if you do this for five years...

5-year trader salary

Starting capital

2% monthly return

5% monthly return

10% monthly return

$200

$656.21

$3,535.84

$60,896.33

$1,000

$3,281.03

$18,679.19

$304,481.64

$5,000

$16,405.15

$93,395.93

$1,522,408.20

$10,000

$32,810.31

$186,791.86

$3,044,816.40

$50,000

$164,051.54

$933,959.29

$15,224,081.98

$100,000

$328,103.08

$1,867,918.59

$30,448,163.95

$250,000

$8,202,576.97

$46,697,964.74

$761,204,098.85

After five years, a trader who started with an account balance of $50,000 and earnt a cumulative return of 5% a month would have $933,959.29 in his account. Once we subtract the starting capital, this gives us an annual trader salary of $176,791.86.

Like with traditional saving and investing, the benefits of consistent, profitable trading compound over time, which means traders who are in it for the long haul are more likely to have higher salaries than those who stop after a couple of months.

Who is the richest forex trader?

Forex traders attempt to use the largest market in the world to turn enormous profits. However, a great deal of them, particularly those who are new to it, have unsuccessful trades because they do not have a lot of experience and the drive to continue after they make mistakes, learn from them and get better.

Like any skill, trading also requires effort and dedication. There are many traders who have traded over the years with dedication and perseverance. However, an interesting question is, “Who is the richest one of them all?"

Here are the richest forex traders in the world. these are people who persevered after they failed, learned from their mistakes and are now role models:

Paul Tudor Jones

By far, one of the most skilled forex traders around is Paul Tudor Jones. He took advantage of the market crash that occurred in October of 1987. He is considered to be one of the wealthiest living traders. In 2018, his net worth was estimated at $4.5 billion.

As you may have expected, Jones did not start at the top. He was born in 1954 and studied Economics at the University of Virginia. He graduated in 1976 and began his career in the financial world working the trading floor as a clerk.

Jones is an example that illustrates the importance of perseverance in developing as a trader.

George Soros

No review of the richest and most successful Forex traders would be complete without mentioning George Soros. He is one of the industry's most notorious figures. Soros earned a reputation as being one of the most skilled investors ever. One event which solidified his reputation was when he reportedly generated a $1 billion profit from a pound sterling short position.

It was such an immense feat, that broke the “Bank of England", as many other traders put it. This all happened in before Black Wednesday, September 16, 1992. If you want to know the full and incredibly interesting story, check it out here.

Warren Buffett

A name almost everyone knows. Waren Buffett is the third richest man in the world. He is an incredible investor. In 2019, he was estimated to have a net worth of $84.2 billion. Buffett's fortune surmounted, in part, due to his investment decisions and his perspective on the long term which has reaped him enormous gains.

I mentioned Warren Buffett in this list because he is one of the most well known and wealthy people in the world involved in investments, but he is more involved in long term investments and is not thought of very often in the world of Forex trading.

Bill Lipschutz

Interestingly enough, Bill Lipschutz earned his profits in the Forex sector of Salomon Brothers back in the 1980s. He is a key example of someone who started out with no experience in currency markets and through perseverance and, no less important, dedication to developing a safe and intelligent strategy, became very successful.

He earned the nickname the Sultan of Currencies. Libschutz sees the Forex market as psychological. While Lipshultz pays attention to fundamentals, like most traders do, he does not overlook market perception. He believes it substantially influences price action.

A note on risk and trader salaries

While trading can be an option to earn more money on the side, or replace a full time income, it's also important to be aware of the risks involved.

All of the numbers above assume that a trader is being consistently profitable, however, in reality, this is very difficult to achieve. Sometimes you might make the wrong trade, or the market might not react in the way you expect, or you might close a trade too early or too late. All of these can cut into your profits, which means that it's very unlikely for you to make the same return every month.

Instead, something like this is more realistic:

  • January: +2%
  • February: +5%
  • March: +7%
  • April: -4%
  • May: -2%
  • June: +10%

This would give you an average monthly return of 8% over six months, but there would be months in there when you lose.

This is why having good risk management and money management is essential for long-term success in trading - while you can work on new trading strategies and invest in Expert Advisors and mentors to help make your traders more profitable, if you don't know how to manage risk, those good trades will be outbalanced by bad trades, leaving you in the red.

Closing thoughts: Trader salaries

While it's difficult to get exact numbers of what different traders are earning, there is a lot of information we can use to draw some conclusions.

For traders employed by companies - like hedge funds and investment banks - the average annual salary is around $90,000 per year, plus bonuses, though this can increase dramatically as a trader gets more experience and their results improve.

For traders who are trading the market independently with their own money, their salary will come down to their average monthly profits, as well as their starting capital. The larger their starting capital and the larger their monthly profits, the more they will be earning. However, even if they don't start with a large deposit or capital, if they trade persistently and make consistent profits over time, those profits will accumulate exponentially over time.

In any case, it's important to be aware of the risks involved with trading, as those earning the highest salaries are often taking the largest risks, which means they could potentially lose those earnings just as quickly as they made them.

Has this article piqued your interest in trading? If so, one of the first steps you'll need to take to get started is to download a trading platform. The good news is that you can download MetaTrader 5 - the world's #1 multi-asset platform, absolutely free by clicking the banner below!

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About Admiral Markets

Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.