Why do I keep losing money in forex trading : Commonly most new forex traders are losing money in forex trading. In fact, it is estimated that 96 percent of forex traders lose money and end up quitting. Financial trading, including the currency markets, requires long and detailed planning on multiple levels. Trading cannot commence without a trader’s understanding of the market basics, and an ongoing analysis of the ever changing market environment. For those interested in investing and trading, read through the suggestions below and you will learn how to avoid losing money in Forex trading.
- Not Adapting to the Market Conditions
- Poor Risk Management
- Not Having or Not Following a Trading Plan
- Unrealistic Expectations
Why do I keep losing money in forex trading : Overtrading
Over-trading is perhaps the most prevalent trading mistake that Forex traders make. This article will fully explore over-trading and provide some solid tips to help you overcome this extremely destructive emotional trading problem. The main problem is that many traders are simply unaware that they are over-trading when they are in the moment. It is very easy to become fixated on a less-than-perfect trade setup and forget about your trading plan and not be consciously aware of whether or not you are over-trading.
Why do I keep losing money in forex trading : The best way to stop overtrading
The best way to stop overtrading is before you start. Because it can be difficult to realize you are over-trading when you are “in the moment” of trading, it is best to simply go on the offensive against over-trading by planning your trading strategy and trading plan in advance.
Why do I keep losing money in forex trading : Not Adapting to the Market Conditions
To stay profitable, you need to consider making the necessary adjustments to catch shorter-term price moves and adapt to random market conditions. Markets are not static. If they were, trading them would have been impossible. Because the markets are ever-changing, a trader has to develop an ability to track down these changes and adapt to any situation that may occur. There’s an inevitable impact on supply and demand for respective currencies. Lastly, the inability to distinguish trending markets from ranging markets, often results in traders applying the wrong trading tools at the wrong time.
Why do I keep losing money in forex trading : Poor Risk Management
Risk management is one of the most important topics you will ever read about trading. Many forex traders are just anxious to get right into trading with no regard for their total account size. When you trade without risk management rules, you are in fact gambling. Keep in mind that a ‘stop-loss to low’ could liquidate what could have otherwise been a profitable position. At the same time, a ‘take-profit to high’ might not be reached due to a lack of volatility. Paying attention to risk/reward ratios is also an important part of good risk management.
Why do I keep losing money in forex trading : Not Having or Not Following a Trading Plan
The difference between making money and losing money can be as simple as trading with a plan or trading without one.
The most successful traders trade to a plan, and may even have several plans that work together. Always write things down. Why? Because it will help you stay focused on your trading objectives, and the less judgment we have to use the better.
A trading plan is an organized approach to executing a trading system that you’ve developed based on your market analysis and outlook while factoring in risk management and personal psychology.
Remember, the main purpose of the trading plan is to keep you on task, and to operate in an effective and efficient manner to make good trading decisions. It is, however, only as good as you make it, and it is completely useless if it is not applied in practice.
One of the biggest factors preventing new traders from achieving success is unrealistic expectations. It’s important for first-time traders to remember that Forex is not a means to get rich quickly. As with any business or professional career, there will be good periods, and there will be bad periods, along with risk and loss. By minimizing the market exposure per trade, a trader can have peace of mind that one losing trade should not compromise their overall performance over the long-term. Make sure to understand that patience and consistency are your best allies. Achieving positive compound results with smaller trades over many months and years is the best option.