According to research by BABYPIPS.COM.
The consensus in the Forex market is that 70% to 80% of all beginner Forex traders lose money and end up quitting.
These 5 reasons that most Forex traders lose money were compiled by our researchers to keep you from becoming a statistic.
Hopefully in this article you can learn to avoid the major pitfalls that most traders make and learn from their mistakes.
Poor risk management, and even worse, no risk management is a major reason why Forex traders lose their money quickly.
Risk management is key to survival in Forex trading including day trading.
You can be a good trader and still be wiped out by poor risk management.
You need to not only make sure you are following a sound Forex trading plan to make a profit, but more importantly you want to minimize losses so that you can keep the capital you have.
Trading platforms are equipped with automatic provisions to help you take-profit and stop-loss for a reason.
Make use of them!
Over-trading is one of the most common things in Forex trading preventing you from succeeding.
Forex traders who spontaneously jump in and out of the market and who are indecisive in their trading will not only lose trades, but they will rack up a lot more fees via spreads and (or) commissions.
A Forex trader does not have to make a lot of trades to be successful, you just need to make the correct trades.
This is why a Forex trading strategy is crucial and being able to recognize the right conditions in order to make a trade.
And this applies to day trading as well.
Trading is NOT a game of luck. Full stop.
Never put more than 2% of your available capital on any individual Forex trade.
Doing so puts you at significant risk of loss.
Rather, spread your investments over a wide number of trades so that you limit your overall losses.
If you have a good Forex trading strategy, there is no reason to risk too much on a single trade.
The only time you should increase your risk per Forex trade is when your account value increases.
Do not trade on “feelings”.
Keep emotion out of your Forex trading life.
Anyone that wants to trade in Forex needs to develop or follow a trading strategy or set of strategies including proper risk and money management.
If you do not have a solid Forex trading strategy, then don’t trade.
Rather go look for something else where you can rely on luck.
It is absolutely crucial that you have an effective trading strategy that you are confident in and know how to recognize and apply.
Do not just pick a Forex trading strategy. Actually, spend the time to learn it and master it or learn from someone who has mastered it.
This topic covers quite a few different subtopics, but they all deal with the same thing.
You let the market and your trading get in your head and mess with your trading plan.
Do not second guess yourself and jump from trade to trade erratically. Pick a direction according to your trading strategy and stick with it.
If not, you can find your trading capital dwindle quickly.
These are not the only reasons that Forex traders fail and lose money, but they are certainly the main ones and the ones that are the most common.
Becoming a real student of the Forex market, doing your research, developing a solid trading plan, managing your capital as well as developing great trading attributes like patience will all ensure that you will have a long and successful trading career.
Learn from other people’s mistakes in this list of the 5 reasons Forex traders lose money and your chances for consistent success in trading will improve dramatically!
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