The facts are clear: most Forex traders lose money. Only about 10% of traders manage to create a long term and continuous income from their efforts. The rest simply end up poorer than they were when they got started.
How can you avoid this fate and make sure your Forex trading experience is a good one?
Here are 6 reasons why traders lose money:
1. Using complex systems – Some traders believe that if a trading system is simpler than it must be insufficient. They choose complex systems which are so hard to operate that they never completely grasp them. Choose a program which is simple to operate. It's the key to making the right decisions.
2. Can not control emotions – Trading is an emotionally turbulent experience. Watching the market turn against you is always stressful. The problem is that many traders can not control their emotions and allow them to influence their decisions. They end up making silly mistakes.
3. Long learning curve – Many traders choose systems which take forever to learn. Again, this has to do with the complex issue. Wasting time is also wasting money. In addition, the longer you need to spend learning something, the more things you forget about it. This leads to bad decisions and wasted money.
4. Poor money management – Trading the Forex market is not about one single trade. It's about a whole strategy of trading and investment which requires you to strategize. You need to fit your trades to your current financial status and level of knowledge. Otherwise, one trade can wipe out your account without warning.
5. Relying too much on software – There is no harm in using automatic trading systems. Some are pretty good. However, not knowing how to trade yourself means that you are forever dependent on some program. The way to achieve a long term Forex trading success is through true knowledge and hands on experience. Software programs can make you a lot of money, but make sure to get a Forex education too.
6. Not trading with Stop Loss and Take Profit prices – This is a huge mistake which many traders do. You need to always have a target price in which you get out of the market and take the profit that you've earned. You also need to set a Stop Loss price in case the trade went against you. This is part of money management and is a critical step to stop losing money on Forex.
Avoid these mistakes and you'll have more success