WHY DO MOST TRADERS LOSE MONEY IN THE FOREX MARKET
Let’s start off with statistics that verify this information, did you know that at least 95% of traders lose their money in the forex market on a yearly basis, although this is the statistics this number is thought to be bigger as every year there are new forex traders entering the market.
Some of the major reasons why forex trader’s lose money in the forex market include;
1. Overtrading
Overtrading is a common trap that most traders fall into, usually it comes from the urge of trying to recover losses made in the forex market, as I like to call it revenge trading (you usually pursuit money lost in trades). This often does not end well for most trader as they make more losses in the pursuit of lost trades. Overtrading can also come as a result of the mistaken belief that more trades equal more profit. This is not usually the case as it exposes you to poor trades thus leading to losses. Traders should instead concentrate on quality trades rather than quantity to avoid losing money.
2. Trading without a plan
most people who enter the forex market enter with the belief of making huge bucks and then stepping away. This is a belief that should be striped from the minds of men as this is not usually the case, this belief often leads to gambling in the market or just relying on luck and in this case, it causes most people to lose money. you should invest your time in learning the various strategies used and choose the one which is most suitable to you in accordance to your financial goals and risk tolerance. Then come up with a trading plan basing your argument on your trading strategy. Make sure you research about the market and do your analysis so as to make good decisions in your trading journey. Having a trading plan increases your chances of benefiting from forex.
3. Lack of discipline and emotional control
Let’s get facts straight trading is like a rollercoaster of emotions, you can feel excitement fear and even pain at the same time. This is perfectly normal as you are dealing with money, the biggest problem although is letting your emotions control your judgment
Here is where you need hard core discipline to enable you to stick to your analysis not what the market is saying, note the market is usually volatile this means it keeps on changing from time to time. if your emotions cloud your judgment and you make one wrong decision you may incur losses that you aren’t ready for.
4. Failing to adapt to market conditions
Note the forex market is a beast of change, today the market is up tomorrow it may be down. Sticking to one trading style regardless of the market conditions can lead to major losses. You need to constantly evolve your trading strategy to avoid the risk of losses. keep advancing your knowledge about the market as what works today may not work tomorrow. invest in reading books as the market is unpredictable
5. Poor risk and capital management
Risk and money management should be the corner stone of your trading strategy. Yet most traders don’t understand the concept of risk and money management, this usually puts them in a position of losing money, this concept usually serves as a sort of protection to avoid huge losses.
All forex trading platforms come with tools such as stop loss and take profit, these tools aren’t just for show they are meant to protect you against catastrophic disasters in the market. Learn and understand the concept of risk management and use it effectively to avoid major losses.
6. In conclusion
Forex trading is not a get rich quick scheme, it involves patience, strategic planning and a solid plan so as to succeed in trading. At first the forex market is cruel but as you progress it gets easier over time. you may lose hope, you may feel like giving up but stay rooted to your trading plan. Make strategic decisions and invest more time in knowledge as this will enable you to advance and grow in the forex market.
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