Why Do Many Traders Lose Money in Forex Trading
A commonly known fact is that most traders fail in forex. It is estimated that the 96% of forex traders lose money in forex trading and end up quitting.
Many Forex traders do better than that, but the new traders still have a tough timing gaining ground in the market.
To help you to be in that tricky 4% of winning traders, we have compiled a list of the most common reasons why do traders lose money in forex trading.
Click on Below Video: Beginner Guide to Investing Forex Trading Currency Trading
Reason Why Do Many Traders Lose Money in Forex Trading
Starting Advice in Forex
The market is not something you beat, but something that you understand and join when a trend is defined. At the same time, a market is something that can bounce you if you are trying to get too much from it with few capitals. Beating the market mindset often causes traders to trade against the trends and overlords the account which is a sure recipe for disaster.
Low Start-Up Capital
Most currency traders start out looking for a different way to get out of debt or to make easy money. It is common for the forex marketing to encourage you to trade large lot sizes and trade highly leveraged to generate the large returns on a small amount of initial capital. You must have some money to make money. It is possible for you to generate outstanding returns on limited capital in the short term.
However, with a small amount of capital and outsized risk, you will find yourself being nervous with each swing of the market and falling in and out and the worst times possible.
Solution: People that are beginners in forex trading should never trade with only a small amount of capital. It is a difficult problem to get around for someone that wants to start trading on a shoelace. $1000 is a reasonable amount to start off with if you trade very small
Failure to Manage Risk
Risk management is key to survival. You can be a very experienced trader and still be wiped out by poor risk management. Your first job is not to make a profit, but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost.
Solution: Use stops and moves them once you have a decent profit. Use lot sizes that are reasonable compared to account capital. Most of all, if a trade no longer makes sense, get out of it.
Many traders feel that they need to squeeze every last pip out of a move. There is money to be made in forex markets every day. Trying to grab every last pip before a currency pair can set you up to lose the profitable trade that you are trading.
Solution: It looks obvious, but don’t be greedy. It’s ok to shoot for a reasonable profit, but there are plenty of pips to go around. The Currencies move every day there is no need to get the last pip. The next opportunity is just around the corner.
Sometimes you might find yourself suffering from trading regret. It happens when a trade that you open isn’t suddenly profitable, and you start saying to yourself that you picked the wrong direction.
Then you close your trade and reverse it, only to see the market go back in the beginning direction that you chose.
Solution: Pick a direction and stick with it. All that switching back and ahead will make you lose little bits of your account.
Click on Below Video to learn How to Trade the London Breakout Forex Trading Strategy
Trying to Pick Tops or Bottoms
Many new traders try to pick turning points in the currency pairs. They will place a trade on a pair, and as it keeps going in the wrong way, they continue to add their position being sure that it is about to turn around this time. If you trade this way till the end up with much more exposure, then you planned and a negative trade.
Solution: Trade with the trend. It is not worth the bragging rights to pick one bottom out of 10 attempts. If you think that the trend is going to change and you want to take a trade in new desirable direction, wait for a confirmed trend change.
If you want to pick up the bottom, then pick up the bottom in an uptrend, not in a downtrend. If you want to top, then pick a top in a corrective move higher, not an uptrend in a downtrend. If you want to top, pick a top in a corrective move higher, not an uptrend.
Refusing to Be Wrong
Some of the trade doesn’t work out. It is human nature to want to be right, but sometimes we are not. As a trader, sometimes you have just to be wrong and move on, instead of clinging to be wrong and move on, instead of sticking to the idea of being right and ending up with a failed account.
Solution: It is a difficult thing to do, but sometimes you have to accept that you made a mistake. Either you entered the trade for the improper reasons, or it didn’t work out the way you planned it. Either way, the best thing to do is admit the mistake, dump the trade, and move on to the next opportunity.
Buying the System
There are many forex trading systems for sale on the internet. Some traders are out there looking for the ever elusive 100 % accurate forex trading system. They keep buying the systems and trying them until finally giving up deciding that there is no other way to win.
Solution: Accept that there is no such thing as a free. Winning at forex trading takes work just like anything else. Build your own system and stop buying the worthless systems on the internet.