Why do traders lose money?
Trading can be a great way to earn huge benefits but it also brings a number of hurdles and risks with it. These become a very big issue for the new traders and they lose their money and end up quitting. Losing money on traders is not just a problem with the beginners but also with professional traders who might have been trading for decades.
According to a survey conducted in the Forex market, about 70-80% of beginners have been found to have money loss in trade and they end up giving up. In this article, we are here with the main reasons that make Forex trading so difficult for the traders.
We know that trading requires a lot of determination and focus on learning new skills and developing your experience. Your small mistake can put the whole game in vain. However, we suggest you should not give up because real-life mistakes are your best mentors.
We have listed some of the major factors that make you feel regretful after losing your money in Forex trading.
Learn from the top 10 forex brokers in the world so that you can keep your portfolio safe.
1. Insufficient start-up capital
When new people start trading, they start from the back foot. The main motive of these people to start trading is to earn higher revenue in a quick period.
They are then distracted by the Forex marketers who encourage them to trade using high leverages and promise them to earn high returns for a very small amount of initial capital.
Doing this can be quite risky and they usually end up losing all their capital.
In the Forex market, slow and steady wins the race. So use a balanced amount to put in your first trade to minimize your losing chances and earn good returns.
2. Improper risk management
It becomes very important that you calculate your risk while you trade in Forex and other trading platforms. Not having proper risk management is a big reason why traders lose money in their Forex trading.
In simple words, proper risk management is the key to survival in the Forex market that includes day trading. Having good risk management can help you avoid your money-losing risk and get you higher benefits.
You should follow the different sound Forex trading plans available and also work on minimizing the risk of losing your initial capital.
Make use of the automatic take-profit and stop-loss mechanisms provided by the trading platforms. Learn to manage these useful tools present on the platforms to make your name in the trading market.
Always read the forex reviews before investing and losing money on trades without the proper information.
3. Over-trading
Over-trading is one of the major factors that can make you have money losses in your trading career. Making too many trades is not going to get you greater benefits and you will be just wasting your money.
Some Forex traders constantly keep jumping in and out of the market; these traders not only lose their trades but also end up paying unnecessary commissions and fees.
A professional market trader does not make unnecessary trades. They trade in the market after a good study and make trades that are beneficial for them.
4. Unrealistic Expectations
You should always keep in mind that Forex is not quick money earning platform. To be successful in trading, you need to have some patience and determination towards learning new skills and developing presentation skills.
It has been found that most of the new traders hope to earn a lot of money in just a few big trades. This is however not true and you are not going to earn big profits in your starting trades unless you are too lucky.
Having unrealistic expectations from your first few trades can also be a big reason why you lose your capital.
The best way to make consistent earnings is by trading smartly in small trades regularly.
5. Trading addiction
We all know that addiction is never a good thing if it crosses the line no matter what this emotion raises. Like all the other things and habits, you can get addicted to trading. This usually happens when you win unexpected profits by putting very small amounts in the trade.
Forex trading brings a lot of excitement and crazes with it and it changes as your rank changes in the list. It highs when you win big profits and lows when you lose your money.
This excitement can turn into addiction in a very quick period and you will start chasing the price at any cost and end up losing your money in this emotional battle.
To avoid addiction, professional traders always have a second plan if they lose their money in the trade.
The best UK forex traders to trade and earn with proper professional brokers with safety.
6. Risking too much
Never compare trading with gambling. Trading and gambling are two different things with clear differences. Trading is not just about putting your money on the line and counting on your luck, it needs a lot of study and dedication towards inhibiting new skills.
It would be a vein if you invest more than 2% of your available capital on any individual Forex trade. This will only increase your money-losing risk.
Instead, you can distribute your investment in different small trades to limit your overall losing risk.
We recommend increasing the risk per Forex trade after your account value increases.
7. Refusing to be wrong
Trading is a game of un-expectations and you sometimes might face loss even after having all the strategies perfect. In such cases, you need to understand that these things happen and you should not blame yourself. Everyone wants to be right and when they are not, they end up carrying a psyche with them.
You should understand that you can be wrong sometimes and move on.
Accepting your faults, cutting, minimizing losses, and moving on can be a wiser choice than insisting you are right and putting all that you have on the line.
Conclusion
Trading is a different kind of game that requires both precise preparation and good luck. In case you are missing any of these two, you might end up losing your money.
In this article, we have tried to point out some of the major factors that are responsible for money loss for the traders. However, this article does not include all the factors but only some major factors.
To avoid losing money, you should learn new trading skills and develop your present ideas and skills. trading requires a lot of determination and precise focus so be ready to be consistent even after some losses.
Check out the best forex broker review and start your journey to earn.
