Forex trading is one of the most difficult careers in the world. It is important that new traders are aware of the reasons traders lose money in this industry and how they can avoid such mistakes. Although every Forex trader should be prepared to lose money, it is part of the experience and the industry. Some say you cannot be a true trader until you have lost money. The trick is to become a profitable trader, where your winnings outweigh your loses. The amount of unsuccessful traders in the world is around 70% to 90%. Most of these traders usually end up quitting, hopefully traders will be able to elude the following, in order to be a profitable trader.
It is important to understand that traders do not beat the market, but the befriend the market. Traders need to understand the trend in the market and know how to make money from it. The market can also shake you out of all your money, it is important to go into the market with enough capital to trade. Beating the market mindset often leads traders to trade aggressively and this creates losing traders. Forex markets often entice traders to use large sums of money and large lot sizes in order to trade. This attracts a lot of clients who have debt and/or wants to make a lot of money quickly. This attitude will surely get you knocked out very quickly. It is important to have an appropriate amount of start up capital. Many say that the appropriate amount is R15000 and using micro account to start trading, anything else is setting yourself up for disaster. Risk management is that biggest aspect to failure of Forex traders. Many traders do not know how to manage their risk appropriately. Your number one job as a trader is not to make money, but protect what you have, as your capital gets deleted so does your chances of making money. To prevent this threat, traders should set stop losses and move them as profit is reached. Traders should also use lot sizes that are appropriate to your balance. Most important of all, if a trade doesn't make sense anymore, get out. Giving into greed is also one of the biggest reasons why traders fail in this industry. Some traders feel that they need to squeeze every pip out of every move in the market. Currencies move everyday, there is always another trade around the corner, always many to be made. Traders should take out reasonable profits. Indecisive trading could be one of the biggest killers of trading accounts. Traders enter a trade and if it is not in profits immediately, close the trade, only for the market to go in the intended direction. Traders should pick a trade and stick with it. Many traders want to pick tops and bottoms to trade. What usually happens is traders pick one of these and when the trade goes into a loss, they keep adding to their trade. This leaves them over exposed in a losing trade. Next they get margined and their account is closed. Its best to trade with the trend, instead of waiting for the market to turn around. If you want to pick a bottom, pick a bottom in an uptrend. If you want to pick a top, pick a top in a downtrend. Not accepting that you are wrong can be a huge factor in the failure of a trader. It is human nature to be wrong sometimes. Traders need to accept the loss and move on. Many traders are now buying trading systems to help them trade or trade for them. These traders are looking for the ever elusive “100% accurate trading system”. The sad truth is that it doesn't exist and traders should get to work instead of looking for an easy way out. Traders need to work on their trading strategy and method of trading.
Traders should look out for the aforementioned attributes and make sure not to incorporate any of these into their trading strategy. Traders should development healthy trading psychology above all and make sure their trading foundation is in place and solid. Most importantly traders should never give up, once they start they need to keep pushing and overcoming all the obstacles in their paths to achieve success.
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