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It's commonly known that most forex traders fail. In fact, it's estimated that 96 percent of forex traders lose money and end up quitting. To help you to be in that elusive 4 percent of winning traders, I have compiled a list of the most common reasons why forex traders lose money. 1. Low start up capital Most forex traders start out looking for a way to get out of debt, or to make easy money. It is common for forex marketing to encourage you to trade large lot sizes and trade highly leveraged to generate large returns on a small amount of initial capital. You must have some money to make some money. It's possible for you to generate outstanding returns on limited capital in the short term. However, with only a small amount of capital and outsized risk, you will find yourself being emotional with each swing of the market and jumping in and out and the worst times possible. Solution: People that are beginners in forex trading should never trade with only a small amount of capital. This is a difficult problem to get around for someone that wants to start trading on a shoe string. $2000 - 10000 is a reasonable amount to start off with, if you trade very small. Microlots or smaller. Otherwise you are just setting yourself up for potential disaster. 2. Failure to manage risk Risk management is key to survival. You can be a very skilled trader and still be wiped out by poor risk management. Your number one job is not to make a profit, but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost. You can use professional trader or managed account services (URL REMOVED BY MODERATOR - PROMOTIONAL) Solution: Use stops, and move them once you have a reasonable profit. Use lot sizes that are reasonable compared to your account capital. Most of all, if a trade no longer makes sense, get out of it. 3. Greed Some traders feel that they need to squeeze every last pip out of a move. There is money to be made in the forex markets every day. Trying to grab every last pip before a currency pair turns can set you up to lose the profitable trade that you are sitting on. Solution: It seems obvious but, don't be greedy. It's ok to shoot for a reasonable profit, but are plenty of pips to go around. Currencies move every day, there is no need to get that last pip. The next opportunity is just around the corner. 4. Indecisive Trading Sometimes you might find yourself suffering from trading remorse. This happens when a trade that you open isn't immediately profitable, and you start saying to yourself that you picked the wrong direction, and then you close your trade and reverse it, only to see the market go back in the initial direction that you chose. Solution: Pick a direction and stick with it. All that switching back and forth will just make you lose little bits of your account at a time you can also use (URL REMOVED BY MODERATOR - PROMOTIONAL)
