Why most traders loose their capital at long run
Well said Bro
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I had been trading forex for a long time now and I had been a victim of this topic at some point. In this article, I will highlight few reasons most traders blow their accounts often and what had helped me improve in trading.
1. Most traders are irritated by loss and as such will do everything possible to avoid loss. It always ends in catastrophe whenever a trader refuse to accept loss in order to keep a clean sheet (100% winning), in this case, Just one or two loss will always send the account/trader into oblivion. The truth remains that there is no business without loss. Loss is part of trading and every good trader encounters loss at a particular point in time but the ability to control or accept loss when it is small will make you a rear gem in forex trading.
2. Setting unrealistic profit targets; This has a way of making a trader to be emotional in trading. it happens more when you are managing other people accounts. I found out that this always make traders to overstay in trading especially when they are in loss. Once a trader overshoots his trading style, emotion comes into play, at that point, anything is possible including accumulating enormous loss or even wipe out the whole account. Trader should understand his trading systems and its potentials. It is good that you have profit projection but don't let it control you.
3. Not having an exit strategy; A very good trading system comprises of not only the entry strategy but also an exit strategy. It is always a good thing spotting a good entry opportunity that has a great profit potential at a moment but sometimes market will just play on you or your indicators/expert advisors, it can happen that both fundamental and or technical analysis will not work. What then will you do to save your accounts from such scenario? This is where your exit strategy comes in. In such situation, good exit strategy will result in controlled loss (minimal loss). Always plan your exit before you open any trade.
4, Choosing wrong trading account type; This may not wipe your account but it has a systematic way of frustrating your trading efforts which in turn puts you into negative trading emotion. Trading with ECN accounts or STP broker is far better that trading with Standard accounts which always has floating spreads. In floated spread, the spread are widened that it can swallow your profits even with good trading strategy. it is better to pay commission on open trades and have a very narrow spread, this way, just little portion of your profit can offset the commission.
Obi Ifeanyi