Did you know that only 10 percent of forex traders usually end up successful? The bigger percentage are usually quitters with some traders racking great losses in the undertaking.
But why is financial trading so complicated?
Well, forex involves currency markets that require detailed and long planning on different levels. The volatility of markets makes the trading process to be either very profitable or extremely risky.
That’s why if you are interested in forex trading you should read on to gain useful insights on why many forex traders end up losing money.
One of the greatest secrets to gain good returns in forex trading is knowing the right time to exit the market in question. While most of the traders are motivated by the need to rack up enormous profits, setting a reasonable goal is of the paramount essence. Most of the forex traders always want to go big, which results in overtrading and it is very risky. The reasons that results to this scenario includes the need to achieve unrealistic profits, insufficient capitalization, or market addiction. A good trader does not let emotions and greed to control their trading decisions and they know discipline is key.
- Low Start-Up Capital
It is a common notion with many start-up traders that forex is a cash cow—well, it’s not. Many of the beginners getting into currency trading usually get started with low capital with the anticipation of making big profits. With a large financial base, you get to trade large lot sizes with high leverage, which brings in good returns. Trading with small capital and going for large leverage is a sure way of draining your account. Notably, $1000 USD is the recommended amount to start-up forex trading. Always remember you have to use money to make money.
- Trading without a Plan
In Forex trading, failing to plan is planning to fail. Whether focusing on One trade forex or any other asset class, laying down a viable trading plan and sticking to it is key to success. A strategic trade plan helps investors mitigate the common trading pitfalls and help them accomplish perfection. Always remember that 90 percent of quitters are usually plan-less traders.
- Failure to Manage Risks
Financial 101; risk management is a crucial key to currency trading survival. Even skilled and professional traders get drained when they fail to stick to this technique. Becoming a successful trader means making big wins and suffering smaller losses. With poor risk management, you stand a chance of suffering consecutive losses, which may end up depleting your trading capital. It is vital to learn how to place stop-losses. also, understand how to move stop-losses when you have made a reasonable profit. Always remember your number one job in forex is to make profits rather than protecting what is in your trading account.
- Indecisive Trading
Did you know most of the currency traders suffer from trading remorse? This is where a trader opens a trade and start questioning their decision on whether they picked the right direction when they are making losses. In most cases, most of them close the trade while they are at a loss and reverse the direction. This is for sure one of the easiest ways to deplete your account. It is important to always make a decision and stand by it.
Forex trading is a complicated undertaking that needs a lot of planning. It is one of the ways that you can easily lose money. Also, it is one of the ways that you can make big profits within short time margins when done right. Always remember the higher risk the higher the returns.
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