What are the biggest reasons of losing Money in forex - page 6

 

Do not correctly interpret the words of Bernanke

 

Often when the headlines are full of negativity or unidirectional consensus towards a certain asset, we need to do analysis in a contrarian optical---otherwise the loss is certain.

 

Believing too much in a choice and keep it going despite the market going against you (perhaps by increasing the exposure) sometimes leads to the removal of the stop loss. Serious error of money management

 

The biggest reasons why most traders lose money in Forex are:

  1. Ignorance
  2. Lack of discipline
  3. No or bad Risk/Money management
  4. Over confidence

Hope this helps.

Cheers,

Pip

 

Appropriate. But sometimes greater size is excellent for earning cash. The weak points you have defined above can be capitalized by having self-discipline and tolerance. . . .

 

Well, as for me the main reason is that people don't want to learn. Only at the beginning, but even later on their own mistakes. They keep doing the same things concider them right, while practice says the they are not. And then they are pissed when they have the same result.

 
Pip:
The biggest reasons why most traders lose money in Forex are:
  1. Ignorance
  2. Lack of discipline
  3. No or bad Risk/Money management
  4. Over confidence

Hope this helps.

Cheers,

Pip

Several other factors can be,

* Get rich quick mind

* Not following a trading plan

 
alanfx:
Several other factors can be,

* Get rich quick mind

* Not following a trading plan

This get rick quick mind is actually the disastrous act by any trader, often good trader lose their heads because of greed when they see a good setup and when it fails they lose hugely.

 

1. Low start up capital

Most currency traders start out looking for a way to get out of debt, or to make easy money. It is common for forex marketing to encourage you to trade large lot sizes and trade highly leveraged to generate large returns on a small amount of initial capital. You must have some money to make some money. It's possible for you to generate outstanding returns on limited capital in the short term. However, with only a small amount of capital and outsized risk, you will find yourself being emotional with each swing of the market and jumping in and out and the worst times possible.

Solution:

People that are beginners in forex trading should never trade with only a small amount of capital. This is a difficult problem to get around for someone that wants to start trading on a shoe string. $1000 is a reasonable amount to start off with, if you trade very small. Microlots or smaller. Otherwise you are just setting yourself up for potential disaster.

2. Failure to manage risk

Risk management is key to survival. You can be a very skilled trader and still be wiped out by poor risk management. Your number one job is not to make a profit, but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost.

Solution:

Use stops, and move them once you have a reasonable profit. Use lot sizes that are reasonable compared to your account capital. Most of all, if a trade no longer makes sense, get out of it.

3. Greed

Some traders feel that they need to squeeze every last pip out of a move. There is money to be made in the forex markets every day. Trying to grab every last pip before a currency pair turns can set you up to lose the profitable trade that you are sitting on.

Solution:

It seems obvious but, don't be greedy. It's ok to shoot for a reasonable profit, but are plenty of pips to go around. Currencies move every day, there is no need to get that last pip. The next opportunity is just around the corner.

4. Indecisive Trading

Sometimes you might find yourself suffering from trading remorse. This happens when a trade that you open isn't immediately profitable, and you start saying to yourself that you picked the wrong direction, and then you close your trade and reverse it, only to see the market go back in the initial direction that you chose.

Solution:

Pick a direction and stick with it. All that switching back and forth will just make you lose little bits of your account at a time.

5. Trying to pick tops or bottoms

Many new traders try to pick turning points in currency pairs. They will place a trade on a pair, and as it keeps going in the wrong direction, they continue to add to their position being sure that it is about to turn around this time. If you trade this way, in the end you end up with much more exposure than you planned, and a terribly negative trade.

Solution:

Trade with the trend. It's not worth the bragging rights to pick one bottom out of 10 attempts. If you think the trend is going to change and you want to take a trade in the new possible direction, wait for a confirmed trend change.

6. Refusing to be wrong

Some trades just don't work out. It's human nature to want to be right, but sometimes we just aren't. As a trader, sometimes you have to just be wrong and move on, instead of clinging to the idea of being right and ending up with a blown account.

Solution:

It's a difficult thing to do, but sometimes you just have to admit that you made a mistake. Either you entered the trade for the wrong reasons, or it just didn't work out the way you planned it. Either way, the best thing to do is just admit the mistake, dump the trade, and move on to the next opportunity.

7. Buying a System

There are many "forex trading systems" for sale on the internet. Some traders are out there looking for the ever elusive "100 percent accurate forex trading system". They keep buying systems and trying them until finally giving up deciding that there is no way to win.

Solution:

Accept that there is no such thing as a free lunch. Winning at forex trading takes work just like anything else. Build your own system and stop buying worthless systems on the internet.

 

Working on cross currencies linked to economies with a different time zone than the trader can bring negative side effects. See the trend for the Aussie tonight to believe.