Reasons Why Forex Traders Lose Money
A forex market is where traders from across the globe can trade different international currencies. This particular market is highly liquid; therefore, the traders can easily enjoy lucrative currency pairs. However, all that glitters is not gold. Most traders also lose extensive capital in the market due to thousands of reasons. According to some of the reports, approximately 70 to 80 per cent of the forex traders lose their capital and decide to quit the market early.
The new traders usually face a tough time dealing in the forex market. Hence, many traders quit early as they don’t possess enough market knowledge and indulge in trading without thinking. Here are some common reasons that make forex trading a massive failure for forex traders.
“Don’t blindly follow someone, follow the market and try to hear what it is telling you.” – Jaymin Shah
Reasons why forex traders fail in the forex market
Generally, forex traders can lose money when they trade endlessly and without complete market analysis. Besides, many traders aim at winning; however, the significant aim should be to stay safe without losing much money. Here are some reasons why forex traders lose money. Take a look:
- Defeating the market attitude
One thing the traders must understand is that you should not put your focus on beating the market but understand it and follow the ongoing trend. Also, the market will shake you out if you expect too much with limited capital. This attitude often makes traders trade aggressively or go against trends, which can prove to be disastrous.
- Low capital, high leverage
The forex market is a house of different global traders. Generally, it lures traders from across the globe, and the main reason behind it is leverage. Typically, many forex traders invest low capital but expect high leverage. However, it creates financial and emotional instability among the traders. Hence, the traders invest more at high leverage, and due to the volatile nature, they lose massive money shares.
Video Source : UKspreadbetting
- Inadequate risk management
Risk management is essential as it is the key to staying strong in the forex market. The forex market is lucrative yet highly risky. Even a skilled trader loses money if he fails to apply an adequate risk management policy. Thus, it is suggested that the traders must protect their existing capital rather than aiming at doubling it in a short time.
- Psychological factor
The forex market allows traders to make money every hour of the day. However, some traders are greedy for more and more money and try their best to get money from the last pip. However, such a greedy approach makes them lose their capital rather than enhance it. Therefore, not being greedy is an ultimate and proven solution for earning extensive profits in the forex market.
- Uninformed trading decisions
Staying updated with the latest happenings in the forex world is extremely significant. On the other hand, when traders go ahead with uninformed trading strategies, they usually face several losses. Furthermore, once a wrong trading pair is chosen, the traders try to correct it by going back and forth with other trades. In the process, they end up losing more money.
Many forex traders deny accepting that they are opting or going in the wrong direction. The denial is exceptionally bad for overall forex trading because the trader refuses to accept the wrong moves and continues to trade with non-lucrative forex pairs.
The Bottom Line
Therefore, those mentioned above are the primary reasons that cause forex traders to lose their money in the forex market. The Pepperstone review suggest that the traders must not make the above mentioned mistakes. If they have indulged in these issues, taking the required steps and saving the capital is necessary. Hence, it is ideal to state that sometimes it is okay to shoot some profits as it enables the traders to protect their overall capital.
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