The Reasons of Why Forex Traders Lose Money
A known fact is that most traders lose in forex. Actually, it is approximately 95 percent of traders in the forex lose money and quitting the market. . Many forex websites found that the forex traders do better than that, but new traders still have a tough time gaining ground in this market. To help you make it into that elusive 4 percent of winning traders, the following list shows you some of the most common reasons why forex traders lose money.
Befriending the Market
The market is not an enemy you beat, but something you understand and join. At the same time, the market is something that can sway you away if you are straining to take too much of it with too little capital.
We should know the "beating the market" mindset often causes traders to trade too aggressively or go against trends, which is sure a direct way for disaster.
Low Start-Up Capital
Most traders in the forex market looking for a way to get out of debt or to make money.
Many forex marketers encourage the traders to trade large lot sizes and trade using high leverage to generate large returns on a small amount of initial capital.
You should have some money to gain some money, and it is possible for you to generate outstanding returns on small capital in the short term.
However, with only a small amount of capital and outsized risk because of too-high leverage, you will find yourself being emotional with each swing of the market's ups and downs and jumping in and out and the worst times possible.
You can fix this issue by never trading with a too-limited amount of capital.
This is a difficult problem to get around for someone that wants to start trading on a shoestring.
$1,000 is a reasonable capital to start with if you want to trade very small (micro lots or smaller).
On the other hand, you are just setting yourself up for the loss.
Failure to Manage Risk
The secret key to survival as a forex trader in life is risk management. You can be a very skilled trades and still be wiped out by a bad risk management plan. The very important point in the forex market that is not to make a profit, but rather to protect what you have. because if your capital gets depleted, your ability to make a profit is lost.
To face this threat and implement good risk management, you should use stop-loss orders and move them once you have a reasonable profit. Use lots of sizes that are reasonable compared to your capital account. It's very important, if a trade no longer makes sense, you should get out of it.
Giving in to Greed
Some traders feel that they need to wring every last pip out of a movement in the marketplace. There is money to be earned in the forex markets every day. Attempting to take hold of every last pip before a currency pair turns can have you to hold positions too long and set you up to lose the profitable deal that you are swapping.
The result seems obvious here, but don't be grabby. It's fine to charge for a reasonable profit, but there are plenty of pips to get round. Currencies continue to move every day, then there is no penury to make that last pip; the next chance is right around the corner.
Sometimes you might see yourself suffering from trading remorse. This occurs when a trade that you open isn't immediately profitable and you start saying to yourself that you culled the incorrect instruction. Then you close your trade and reverse it, just to watch the market go back in the initial direction that you took.
In this situation, you need to pick a direction and stick with it. All that switching back and forth will just make you continually lose little bits of your account at a time until your investing capital is consumed
Trying to Pick Tops or Bottoms
Many new traders in the forex market try to pick turning points in currency pairs. They will pose a trade on a pair, and as it keeps giving way in the improper way, they continue to append to their position being sure that it is about to turn round this fourth dimension. If you trade this way, in the final stage, you end up with a lot more exposure than you planned, along with a terribly negative trade.
It's not worth the bragging rights to know that you picked one bottom correctly out of 10 trials. If you think the tendency is starting to change, and you desire to learn a trade in the new possible direction, wait for a confirmation of the trend change.
If you want to pluck up a post at the tail end, pick up the tush in an uptrend, not in a downswing. If you desire to spread out a position at the top, pick a tip when the market's making a corrective move higher, not an uptrend that's part of a larger a downtrend.
Refusing to Be Wrong
Some trades just don't go out. It is human nature to desire to be good, but sometimes you just aren't. As a trader, you simply have to recognize that you're wrong sometimes and move along, instead of clinging to the idea of being right and ending up with a null-balance trading account.
It is a hard thing to answer, but sometimes you simply have to accept that you caused a fault. Either you came in the trade for the wrong reasons, or it just didn't work out the direction you planned it. Either way, the best thing to do is just accept the error, dump the trade, and move along to the next opportunity.
Buying a System
Thither are many so-called forex trading systems for sale along with the net. More or fewer traders are out there looking for the ever-elusive 100-percent accurate forex trading scheme. They keep buying systems and testing them until eventually breaking up, deciding that there is no path to deliver the goods.
As a young trader, you must admit that there is no such thing as a free lunch. Winning in forex trading takes work just like anything else. You can find success by constructing your own method, strategy, and system instead of buying worthless systems on the internet from less-than-reputable vendors.