WHY MAJORITY LOSE MONEY IN FOREX TRADING
Majority of forex traders lose money in forex. That’s a big truism. Over 96% lose money in forex. The reason for this is because most traders don’t know how to trade forex. Some don’t use the right signal. Others are not patient enough for their profit to be made or for their loses to revert to profit. Sentiments also make people to lose money in forex. All these are valid, splendid and cogent reasons but they are not the main reasons why people lose money in forex.
The main reason why people lose money in forex is due to greed. A trader with 50, 000 capital wants to double it in a day or 2 or in a week. It does not work that way. If that is your goal, then that’s called greed. That kind of mindset will not enable any trader to make money in forex. In fact, any one in such a state may make money for a very short time and lose over a long period of time. Forex is not a hit and run event but a continuous affair. The important thing is not how much you make in a day and then off the market. What’s vital is what you can consistently make daily over a very long period of time. Little drops of water make a mighty ocean. Your profit target should be 1-3% of your capital daily. Yes, target 1-3% of your capital daily. Daily make that and keep it and continue doing that. If that is the case, you will succeed in forex.
Another vital reason why many lose money in forex is due to the lack of money management. Money management is one of the last things taught in forex training. Money management is the ability to not risk more than is necessary to the point that you burn your account or your account is wiped out. Money management suggests that you do not risk more than 10% of your capital in any trade set up. In that set up you can target double profit. Some people say 2% but I say nay from experience. Market can and usually will reverse.
Another vital reason why most traders lose money is because they use very high lot sizes for their trades. Small lot sizes imply that over a rapid change in direction in the opposite direction to your trade you will lose a little still. Higher lot sizes can make you higher profits and can also lead to very high loses. Using small sizes protects your capital. One of the rules of forex is that you don’t go broke. If you don’t grow broke you can still trade and make money. The moment you go broke you have to look for new capital and start trading afresh. If your trading capital is not up to 2million don’t use lot size 1 or 2. Try and maintain lot size 0.01 if your capital is less than 100, 000 or even if more.
Take heed to these advises and you will not lose money in forex again.
To your profit…