A common fact about forex traders is about failing. 96% estimated that forex traders lose money and end up quitting. On the other hand, DailyFX, a forex website, found that many forex traders do better than that. But, new traders still have a tough timing gaining ground in this market.
To help you from the loss, the following list shows you some of the most common reasons why forex traders lose money.
Befriending the Market
The market is something you understand and join when a trend is defined. At the same time, the market is something that can shake you out if you are trying to get too much from it with too little capital. Having the “beating the market” mindset often causes traders to trade too aggressively or go against trends. This will lead you to a disaster.
Low Start-Up Capital
Most currency traders start out looking for a way to get out of debt or to make easy money. This is a common thing for forex marketers to trade large lot sizes. In addition, trade using high leverage to generate large returns on a small amount of initial capital.
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.
Failure to Manage Risk
Risk management is key to survival as a forex trader in life. You can be a very skilled trader and still be wiped out by poor risk management. Your number one 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.
Giving in to Greed
Some traders feel that they need to squeeze every last pip out of a move in the market. There is money to be made in the forex markets every day. Trying to grab every last pip before a currency pair turns can cause you to hold positions too long and set you up to lose the profitable trade that you are trading.
To emphasize this point, just don’t be greedy. It’s fine to shoot for a reasonable profit. But, the are plenty of pips go around. Everyday, currencies continue to move, so there is no need to get the last pip. The next opportunity is right around the corner.