Forex trading requires skills, a plan and a strategy. There is a reason why some traders make thousands or even millions every month trading forex, and others lose all their money. Below, we outline our top reasons why some traders end up on the losing side, even after thinking they have done everything right.
Here we go!
1. Lack of Knowledge
Most people will get into forex trading without first bothering to gather enough knowledge about the trade. If you just rush into it without taking time to understand the dynamics of forex trading, you are certainly going to lose your money.
Forex trading is not gambling. It is about buying and selling currency. You buy when you have reasons to believe that the value of the currency you are buying is going to rise in the near future. If you approach forex trading with a gambling mentality you are, without a doubt, going to lose all your investment.
3. No Trading Strategy
It is important to have a trading structure or guidelines that you follow while trading. Your actions on the forex market are supposed to be informed by certain aspects of the market. That is what a trading strategy is. If you do not have any strategy, it is more than likely that you’ll find it difficult to make any profit.
4. Unrealistic Expectations
There is nothing wrong with hoping to make a profit on the forex markets. Those expectations need to be realistic though. If your expectations are running wild, you’ll end up disappointed, and you’ll end up making all the wrong decisions.
5. Lack of Discipline
There are certain virtues that are really important for you as a forex trader. You need patience, self-control, and rational reasoning. You should have the discipline to maintain these virtues and ensure you do not make any irrational decisions. As mentioned earlier, forex trading needs a sober mind and rational reasoning.
6. Not Consulting
No matter how much experience you get, no one person can ever claim to be a master of forex trade. It is never a one-man show. If you are not sure about certain aspects of the trade, you should consult with other traders. If you are just getting started, it is always best that you have a trading mentor.
7. Lack of Emotional Control
If you cannot control your emotions, you are going to have a very hard time in the fore market. Many traders have overexcitement or fear as their biggest undoing. Overexcitement when they win a position and fear when they lose a position.
Overtrading is taking too many positions. Traders tend to imagine that taking a position after another all the time can guarantee you profits. That’s not the case, and you’ll most likely end up losing you money. You should take a position when you see a trading strategy.
9. Failing to Adapt
Forex markets are never static. They change every now and then. As such, you need to be able to adapt and change tact when that’s what needed. Knowing what to do at any given instant is what having a trading strategy is all about.
10. Wrong Broker
Woe unto you if you fall into the hands of the wrong broker. There are many great brokers out there, but there are others who are out to steal your money or take advantage of traders. Take time to ensure you are working with a broker that has your best interests at heart.