Everyone knows that forex traders suffer losses from time to time. Anyone who has ever taken part in the forex market has lost money at some point in his or her life. Statistics show that over 80% lose money and quit. Here are some reasons why you might be losing money as a trader.
Failing to Manage Risk
Most newbies have a weak or no risk management strategy. You can be a great trader with all the knowledge on fundamental and technical analysis but without managing risk, you can be wiped out. In the forex market, your main priority should not be to make money; it should be to protect what is in your account. This is because you will have zero chances of making a profit if your capital is wiped out. Managing risk entails placing stop-loss orders and adjusting them once you make enough of a profit. Your lot sizes should be commensurate to your capital. Besides that, when a trading position stops making sense to you, get out.
Purchasing a System
There are numerous forex-trading systems online. Some traders will try to find a system that offers them a 100% profit. However, such a system does not exist; the result is that they keep buying different systems to try to game the market and they end up losing a lot of their capital. You have to accept there is no such thing as a free lunch in the forex market. If you want to succeed, you will have to put in all the hard work of creating and refining your trading system.
Risking too Much in Each Trade
A newbie might try to risk 10% or more on a single. This presents a huge problem since you will be too worried about losing the trade than actually making money off it. The result is that you will not be focused enough to see when the potential to make huge lossesarises.
Profitable traders know how to risk just the right amount in a single trade. They will not participate in a trade if it forces them to risk too much money. It helps to trade rationally even when they suffer multiple losses in a row.
Failure to Take Time to Understand the Market
Professional traders spend a good chunk of their day trading. A full-time trader takes as much time understanding the market as they would in a day job. It is thus impractical to succeed in the forex market when you only take about an hour to study the forex market and enter a trade. Succeeding in the forex market is a time-consuming endeavor. You will need to take a lot of time to study the market and understand the changing trends in the market.
Failure to Have the Right Mindset
While understanding technical and fundamental analysis is important, having the right trading psychologyis equally as important. You will need to work on your trading mindset to ensure that you do not let the emotions of greed and fear take over you. Without mastering your emotions, you will find that trading anxiety and you make loss after loss.
These are just a few examples of the mistakes traders make. If you want you to discover what mistake you are making, you will need to take time and analyze your trades, especially after you make huge losses and learn from them.