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Why do forex traders lose money?
Written by: PaxForex analytics dept - Friday, 27 June 2014 0 comments
It is much known that a lot of forex traders especially beginners are losing money and are failing. In fact, it is estimated that around 95% of forex traders are losing money and end up quitting. The reasons for this high percentage of forex traders who fail are also much known to most of the traders: starting with low capital, trading without a strategy andtrading plan, trying to make a lot of quick money, trading without risk management etc.
Forex traders who are trading with small accounts and try to make a lot of easy money without any risk management will definitely lose their money. After a few unpredictable market movements they will become emotional and try to jump in and out in the worst time possible. Usually beginners are going to trade large lot sizes in order to make quick money but in the end they will end up losing their account.
Trading forex without a trading strategy and a trading plan is one of the biggest mistakes new traders are making. Every successful trader knows that having a forex trading plan is one of the most important pieces of the puzzle to becoming a consistently
successful forex trader. Many of the forex traders who are new in the forex market are trading without a forex trading plan which is leading them to losing their money and blowing their account.
Risk management is key to survival in forex trading. You can be a very skilled trader and still be wiped out by poor risk management. One thing that you can do to manage your forex risk is to never trade money that you can't afford to lose; if you are trading money you can't afford to lose, and you lose significantly or even face the threat of losing significantly, your decision making will be compromised and mistakes will happen.
Trading with money that you can’t afford to lose is the worst case scenario. Trading with a reasonable lot size and controlling your risk with a stop loss will prevent you from losing an excessive amount of your money. These steps won't prevent you from losing money, but they will give you a chance to save your account. Trading while keeping your risk low will keep you trading and save your money at the same time.