Most forex traders end up troubled, it is said that 96 percent of them lose their money. Some traders do better than that, while it takes time for new traders to familiarize all trading things. Here are a few reasons of why forex traders lost money.
- Start with small capital
Most forex traders are searching for an alternative way to get out of debt, or to generate easy money. It is normal for a broker to encourage an investor to trade large lot sizes, including high leverage in order to see bigger results with just a small amount of investment. However, starting with smaller amount might lead to worst times possible.
Thus, inexperienced investors in forex trading should not engage with small amount of capital. Start with $1000 for smaller trades, if not, you’re just putting yourself in trouble.
- Mismanage of risk
With poor risk management even if you got skills and knowledge, all your money could be wiped out. Your job in forex trading is to secure what you have, and not to make profit. Simply because if your capital is worn-out, your ability to make profit will vanished.
Hence, learn to use your stops, and move them as soon as you reached a reasonable profit. In lot sizes, use a realistic one that your capital account. Most of all, get out if the trade is no longer making any sense.
Read about the need for proper risk control in forex trading.
- Being greedy
Forex traders are being greedy as they feel like squeezing every last pip. They’re doing it before a currency pair turns and thought of throwing away the profitable trade. Remember, there is money to be made every day.
Therefore, do not practice being greedy. There’s nothing wrong to execute reasonable profit as long as you got more pips to go. The movement of currency changes every day, so there’s no need to chase for that last pip.
- Indecisive Trading
Finding yourself in an uncertain decision makes you think of picking a wrong direction. For instance, you’ve opened a trade and it did not profit immediately, you start to close your trade and later realized that the market go back in the initial direction you just
You must choose a direction and stick with it. Switching back and forth will just surely wiped your account at a time.
- Picking turning points
Inexperienced traders are normally undecided in picking turning points. A trade is placed on a pair, and while it keeps going in the opposite direction, they add to their position predicting that it will go in the right direction this time. If you continue this way, there’s a higher chance your trade will turn negative.
To avoid this, you must trade with the trend. If you think the trend will change and you witnessed an opportunity for new direction, wait for a definite trend change.
Learn more about the underlying principle of trend trading.
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