Forex market is the most volatile and vulnerable market in the world. It requires lot of patience and discipline to make money on the Forex market. Many newbie traders enter the Forex market with huge expectations. The main aim of the FX newbie is to make quick money from Forex. However most of the newbie traders end up making many trading blunders. At the end they account for a big Forex Loss and quit trading.
5 Reasons Why Newbie Traders Account Forex Loss
The truth is that most traders lose money in Forex. The statistic shows that about 95% of the traders lose money on the Forex market. This means that only 5% are actually making a living from Forex. 1 out of 20 traders is making money from Forex. The other 19 traders account for overall trading losses when investing in Forex. This brings the question: “Since so many traders experience FX loss, is it actually possible to make money from Forex?” The answer to this question is YES!
But to understand how traders make money from Forex, you should first understand Forex loss and learn how to avoid big trading losses. Therefore, we will now go through the 5 reasons why traders lose money in Forex trading.
Deviating from the Trading Discipline
A person wishing to engage in Forex rate trading should always follow the strategy of maximizing the profits and minimizing the losses. Not everything that comes in your way should be traded. Forex trading requires lots of analysis and strategy formulation. Strategies have to be followed strictly and you should never cheat on your Forex trading discipline. One has to be preserved and disciplined when trading Forex. There may be several tempting deals coming across the Forex trading process. But one should follow the strategies in a disciplined manner. In a long term you will be rewarded for your patience. If you don’t follow strictly your strategy, then you will definitely experience the Forex loss more often than you should.
Poor Analysis of Factors Affecting the Trade
Newbie traders do not plan their trading moves properly. There are several factors that can have an impact on the Forex trade. It is important for a newbie trader to have a thorough knowledge of these before planning and implementing strategies. Below you will find a list of some important factors, which can impact your Forex trades.
- Varied Market Forces
- Policies of Different Nations
- Technical Indicators
- Economic Indicators
- Market Sentiment
- Relation between Currency Pairs
- Forex Trading Time Zones and Overlaps
Each of these is an important point for the implementation of a proper Forex analysis. Forex beginners should understand these factors determine the Forex forces. Not knowing these guarantees you that you will account for a loss in Forex.
Dependence on Forex Automation
Forex automation isolates the human factor when opening and closing Forex trades. This could make the amateur trader dependent on the automated Forex trading. This could turn out to be very bad in case a Forex beginner turns off the Forex automation. Would you be able to implement your strategy as strict as the automated Forex software does? If not, then you will definitely account for a higher FX loss.
Setting Unrealistic Forex Targets
People have high expectations from Forex trades. The dream of FX beginners is to become rich overnight. They set unrealistic targets which require a very high stake investment in a trade. This involves a great amount of risk which is often neglected. Only the returns are calculated ignoring the risks involved. Setting unrealistic Forex targets leads to:
- Greater Position Size
- Neglecting Margin Requirements
- Taking More Leverage than You Can Afford
- Trading Many Currency Pairs
- Taking Risks with Low Liquidity Currencies
- Experiencing High Currency Loss in the Long Term
If you expect to make fast money from Forex I guarantee you that you will end up broke. First, consider the amount you deposit in your bankroll. Then work on pursuing a realistic monthly return. Most experienced traders say that they make around 10% monthly return. As a beginner you can aim for anything above 5%. After all, we shouldn’t forget that the yearly interest rates in the US are 0.50% and in Europe are 0.00% (Nov, 2016). This means that a 5% monthly return is an extremely big achievement.
Taking Unrealistic Leverage
A Forex trade offers low margin and yields higher leverage in order to commence the trade. The range may exist something between 50:1 and 400:1. As a result people go in for bigger trades with small investments. Although high leverage yields greater profits, it also results in bigger losses. Newbie traders just want to make more profit. As a result they opt for high leverage trades and end up being Forex losers. Experienced traders always aim for moderate leverage and continuous profits without any unnecessary blow to the investment.
Trading profit and loss account are normal phases of the Forex trading process.
Forex trading is not about making fast money. It is about generating steady income.
Newbie traders often neglect the risk in trading and fall into the trap of being a Forex loser. The top 5 reasons why traders lose money and account Forex Loss in trading are:
- Poor Trading Discipline
- Poor Forex Analysis
- Dependence on Forex Automation
- Setting Unrealistic Forex Targets
- Taking Unrealistic Forex Leverage
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