You might be feeling as though you’ve tried absolutely everything to make some money trading the forex market, and somehow it just seems like none of your strategies work. This is a fairly common problem: There are many reasons someone might lose at forex, and understanding them can help you improve your trading and hopefully avoid losses in the future.
1. Stay disciplined
One of the most frequent reasons people lose money on their trades is not staying disciplined throughout their daily routine. This is probably one that we all know intuitively, but it also makes a noticeable difference if followed correctly.
Traders often find themselves excited about their new strategy or technique and want to push things as fast as possible; this leads them to overtrade and take on more risk than they can handle.
If you feel like you’re making significant enough progress to warrant adding on additional trades, don’t push things too quickly; instead, look for some way that you can measure your current performance and see if it’s time to start adding on trades.
2. Understanding entry and exit points
A second common reason traders lose money is that they lack a thorough understanding of their entry and exit points. This may sound obvious, but there are lots of people out there who go into the market without any idea of where they want to get in or out; this means that even if they do make a good trade, they’ll often be forced out at a wrong time or be unable to get back in when they go right.
The best-case scenario with this is that you’ll break even; the worst is, of course, that you lose money due to getting out at a low point or not having enough funds in your trading account to make it worthwhile.
3. Forex Market volatility
Many traders also lose money because they don’t consider forex market conditions before making their decisions; believing that all movements are created equal is absurd. It’s essential to recognize what kind of market you’re in when deciding when and where to place your trades; for example, if there is high volatility present in the forex market, you stand a much better chance of profiting than if things are relatively calm and still.
If you don’t understand market conditions and how they affect your options, you’ll find it nearly impossible to make any money in the forex market; this is why learning what kind of market we’re in before we make a trade is so important.
4. Use risk management tools
Finally, one of the most frequent reasons traders lose money is that they don’t utilize their risk management tools properly. Far too often, people jump into trades without even thinking about using stop-losses or taking profits; this makes it incredibly easy to get yourself into severe amounts of debt on trades that would have otherwise been manageable if you had just used some simple risk management techniques.
Risk management tools might be a little intimidating at first, but they’re relatively simple to use and can save you a lot of trouble in the long run.
It’s also worth mentioning that if you lose money on trades, it doesn’t necessarily mean that your strategy is wrong or that you’re not cut out for trading; some losses are simply part of the learning process.
If your strategies didn’t work right away, don’t panic – they sometimes take months to get off the ground. Keep working at them until they do work consistently, and try not to get discouraged when early results aren’t what you expected.
Remember that even experienced professionals still have their losing days, so keep trying until things start coming together for you. Beginner traders should use a reputable online broker like Saxo Bank and trade on a demo account before investing real money; read more here.