5 Ways New Forex Traders Lose Money

1. 5 Ways New Forex Traders Lose Money 5 Ways New Forex Traders Lose Money For beginners, the excitement of Forex trading can be overwhelming. Many enter the Foreign Exchange market with get-rich aspirations and underdeveloped trading plans. That’s why statistically beginners are much less likely to profit. In fact, without a solid plan and knowledge of the Forex markets, many beginners wipe out their accounts quickly. Forex trading is high-risk, and losses can quickly add up. But this alone shouldn’t discourage new Forex traders. Instead, it should serve as a reminder of the importance proper training, risk-management tools, and in-depth market knowledge play in investment success. So what are some of the common causes of failure in Forex trading? 1.Over-Leveraging Your Trades Leverage plays an important role in Forex strategy. Many traders use leverage to effectively maximize their profits. But when used improperly, the opposite can happen: Maximized losses. To avoid over-leveraging traders, beginners should first learn how it is used and why it is used. Also, by increasing the use of leverage over time, a beginning Forex trader will gain confidence in their ability to properly leverage trades. 2.Keeping Too Many Positions Open Many beginners think that to be profitable they must win as many trades as possible. In effect, they open many trades each day with the hope that they can win them all. This is a critical mistake. Forex traders must pay close attention to their open positions, so that they can react when the market fluctuates. When too many positions are open, the trader can quickly become overwhelmed and unable to closely watch each position. 3.Not Taking Losses Experienced Forex traders know that taking losses is part of being profitable. That’s right. In many cases, walking away from a losing trade at the right time

2. minimizes the damage. Beginners, though, tend to stay in losing trades too long; they hope the trend will reverse. Avoiding this requires discipline and an effective stop-loss strategy. Disciplined traders are not afraid to lose trades, and they use stop orders to protect against runaway losses. 4.Forgetting to Practice Sound Risk Management Successful traders tend to limit their risk on each position. They risk just 1 to 3 percent of their trading capital on any given trade. Beginners can get distracted by the promise of big wins. By risking more, they think, they stand to gain more. Unfortunately, the markets are very unpredictable. The difference between risking 1 percent and 10 percent is 90 trades. 5.Ignoring Spread Changes The Forex spreads – the difference between the buy and sell price of a currency – fluctuate. For example, liquidity decreases in off-hours trading and the spreads increase. Additionally, in periods of heightened volatility, the spreads increase as well. Profits – especially in day trading – are tied closely to the spreads. Beginners must be aware of these fluctuations and fully understand them, as to not diminish their razor-thin scalping profits. Beginning day traders are at a disadvantage and historically, they’re more likely to fail than prosper. Yet, beginner success is closely tied to knowledge of the markets and trading systems as well as avoiding common mistakes. If the beginning trader builds up his skill set and avoids mistakes, he is much more likely to profit in his day trading. Presented By Learn To Trade