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  • Why do Forex Traders Lose Money ?

    Posted on: November 1st, 2012 by Brian Tieling No Comments
    Forex Trading TV Blog

     

    One of the main issues you hear about retail forex trading is that most of people are losing money and now gaining any. The reasons for this is something you have to look at if you are interested in starting trading online?

     

    We know today that around 80% of the people are losing money and estimates are even higher than that. So how can you be on the other side of this scale?
    This is a small list of the reasons that are most common as to why people are losing money in online forex trading.

    I am aware that there are many more reasons but this is a small list of the main reasons why people are losing in online retail forex trading. if you have additional reasons add them as comments.

     

    1. Failure to manage risk
    risk Management is of vital importance to make it as a trader. You can be a very skilled trader and still lose all you money by bad risk management. You need money to make money so keep focused on keeping what you have.Use stops, and move them once you have a reasonable profit. Use lot sizes that are reasonable compared to your account capital. And most important don’t stay in a trade that keeps losing, know when to get out and fast.
    2. Being stubborn
    not all trades are winners, know this and have peace with it.
    Sometimes just admit that you made a mistake. Like in poker never just believe your cards are good. If you see you are on the losing side. Don’t hesitate understand you made a wrong trade and move on. Even the best of traders and systems have it right maximum 70% of the time, meaning everyone makes mistakes.
    3. Low start-up capital
    It is normal for the brokers in the industry to encourage you to trade large lot sizes and trade highly leveraged to generate large volume on a small amount of starting capital. But it is a known fact that with money you make money and you need a minimum to do this. Meaning with cents you make cents and not dollars. Beginners in forex trading should never trade with a small amount of capital. $1000 is a reasonable amount to start off with.

     

    4. Buying a trading System
    there are no guarantees in this market and anyone that says otherwise is selling you something. Many people buy and try systems see the money disappear and become frustrated and stop trading. Trading has a learning curve and you have to do what is right for you. There is no perfect system.

     

    5. Predicting tops or bottoms
    many new traders try to pick turning points in currency pairs. They will open a trade and as it keeps going in the opposite direction as to what they predicted. Then they continue to add funds to their position being convinced that it is about to turn around. If this is the way you trade you end up with much more exposure than you bargained for.
    Trade with the trend.. If you think the trend is going to change and you want to take a trade in the new possible direction, wait for a confirmation in the change of the trend. Trade carefully.
    6. Indecisive Trading
    in some situations you might find yourself suffering from trading remorse. This happens when a trade that you open isn’t immediately profitable, when you open a trade decide before how much you are willing to loose on this trade and stick with it. Give the market time. Don’t increase the stop-loss but understand that immediate profit is not a given.
    7. Greed
    every day the markets are open it offers a opportunity to earn money. Some traders want to milk the profit to the max and see that the turn of the trend set in earlier than they expected. So don’t be too greedy. If every day you get some profit is better than some days a lot and some days a lot of loss.

     

    8. No education.
    Starting without actually knowing what you are doing is not smart. Read blogs, books and do some smaller online courses to understand what it means. Then, once you are trading keep the news on so you are able to act on the trends in the market. No one was born a good trader.
    Today also it is easier to learn from others. Services like forex globes allow you to follow successful traders and copy their trades. Keep the discussion going and learn, learn, learn and you will see it is great fun and you can make some money along the way
    Good luck
    brian

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