You may have heard that 90% of forex traders lose their money during the first few weeks of forex trading.
Does that mean that the FX market is not a very good alternative investment? Are 90% of traders not up to it?
The problem is that many forex investors come into trading carrying extremely big expectations that they can be forex millionaires overnight. In doing so, these traders have the wrong approach and a misguided attitude in trying to make profits from trading currencies.
There are 3 major mistakes newbie forex traders make which contribute to them losing their money early on.
They are as follows:
There are times when a forex trader is his/her own worst enemy. He has a trading strategy. He has a trading plan – so how can things still go so wrong?
When inexperienced traders cannot wait for a proper set up they get very impatient. But the market cannot be dictated upon. It is a forex trader’s job to read the market, not anticipate it movements.
When a forex trader gets ahead of the market and tries to predict what the market is going to do next without clear indications from technical analysis, that it the beginning of a downfall.
Most FX traders new to trading get excited. Strategies that have been successful using demo accounts, they are eager to implement in the real market. They don’t want to miss any oportunities to make money. Trade after trade, they enter every chance they see. Before they know it, they’re holding far too many positions.
Their strategies demo trading are sound, but they are trigger happy and can’t help entering positions in every currency pair they see. Thus, they overtrade.
When open positions have added up, and the floating losses, which otherwise would have been acceptable, are now applying pressure to a newbie’s account, strategy can go out of the window.
Leverage is good – it’s what makes trading the FX lucrative. Conversely leverage can hurt you badly too if you don’t take care.
Mathematically it it possible to become rich overnight and it is leverage which makes it possible to multiply your account several times over in a very short time. But statistically, the double-edged sword that is leverage can also wipe out your account’s equity in no time at all.
Lack of a risk management strategy and pure greed will eventually lead to over-leveraged positions in your forex account. When this happens, the dreaded term ‘margin call’ is never far behind.
The be successful in forex trading you must have the correct attititude. Have a plan. Manage your money and be disciplined.