Perhaps the main reason that the majority traders lose money is that most people have little self-control, can’t resist the temptation of excessive trading and excessive leverage, and no one is responsible for it.
Another major reason why most traders lose money is because they are trying to reverse this trend for some reason, although they know that they will statistically be higher or escalate by sticking to the trend until the trend is clearly over.
In this article, I will share with you my opinion on this issue – why completely rational and successful people are losing money in the foreign exchange market.
Low start-up capital
Most currency traders start looking for ways to get out of debt or make money. Forex marketing often encourages you to trade large volumes and highly leveraged transactions, creating large returns for a small amount of initial capital. You must have some money to make some money.
In the short term, you have the potential to create outstanding returns with limited capital. However, with only a small amount of capital and huge risks, you will find yourself excited at every swing and jump in and out of the market and at the worst moments.
Solution: People who are new to Forex trading should not trade with only a small amount of funds. $ 1,000 is a reasonable start. Otherwise, you are just setting up your own potential disaster.
Failure to manage risk
Risk management is the key to survival. You can become a very skilled trader and still be eliminated due to poor risk management. Your number one job is not to make money, but to protect your income. When your capital dries up, your ability to profit is lost.
Solution: Once you have a reasonable profit, use right strategy to manage your risk of losing that income. Most importantly, if a transaction makes no sense, get rid of it.
Some traders think they need to squeeze every point in the action. Make money on the foreign exchange market every day. Trying to grab every point before the currency pair turns is a bad strategy. By this, you may lose the profitable trade.
Solution: It seems obvious, but don’t be greedy. It is possible to get a reasonable profit, but there are many other opportunities as well. Money moves every day; there is no need to be greedy. The next opportunity is here.
Sometimes you may find yourself regretful of a transaction. This happens when the trade you opened is not immediately profitable and you start telling yourself that you have chosen the wrong direction.
Then you close your trade and reverse it, just to see the market return to the initial direction you chose.
Solution: Choose a direction and stick to it. All the back and forth switching will only make you lose a little account at a time.
Try picking top or bottom
Many new traders try to pick a turning point for currency pairs. They put the deal in a pair, and as it continues to go in the wrong direction, they will continue to increase their position, ensuring that it will turn this time. If you trade in this way, you will end up with more risk and extremely negative trading than you planned.
Solution: Trade with trends. If you think the trend will change and you want to trade in new possible directions, please wait for the confirmed trend change.
Some deals just don’t work. Want to be the right all the time is human nature, but sometimes we are not. As a trader, sometimes you just make mistakes and move on, instead of sticking to the right ideas and end up with a touted account.
Solution: This is a difficult thing to do, but sometimes you have to admit that you made a mistake. Whether you entered the transaction for the wrong reason or it just didn’t work the way you planned. Either way, the best thing to do is admit your mistakes, give up the deal, and move on to the next opportunity.
There are many “Forex Trading Systems ” available for sale on the Internet. Some traders are there looking for a “100% accurate Forex trading system ” that is always elusive. They kept buying systems and trying them out until they finally gave up on the decision and couldn’t win.
Solution: Winning in Forex trading is like anything else. Build your system and stop buying worthless systems on the internet. Accept the fact that there are no free lunches.