Contrary to popular belief forex trading is not easy money. In fact, it requires skills, adequate practice and a suitable strategy to make your trades fruitful. Losses are an inevitable part of forex trading but learning to effectively control your losses is what lets you survive to trade another day. So, what are the factors that lead to your losses? Here are 5 of the most common factors:
- Disproportionate Risks: Many newbie traders tend to undertake risks that are disproportionate to their capital size. They over-leverage their account hoping to make huge gains. In doing so they fail to realise that a few losing trades might totally decimate their trading account. You should be confident about your trading method & be discerning enough to understand if your losses are reasonable and your edge will eventually materialise or not.
- Fear and Greed: Fear and greed can be big deterrents to your forex trading graph. Greed in moderation can be an impetus to perform better. But in excess it may only do you more harm than good. Owing to sheer greed you may risk more money than you can afford to and open positions without proper analysis. Likewise, fear can paralyse you into inaction and prevent you from entering favourable setups, compel you to make premature exits all of which can prove damaging to your career.
- No Patience, Unrealistic Expectations: Lack of adequate patience, discipline may lead to a lot of impulsive trades and bad trading decisions. Likewise, many forex traders seem to harbour expectations of making millions in a matter of weeks. But, that's easier said than done. Unless you analyse you risks carefully, wait for a favourable setup and your trading edge to work out you may risk overtrading your FX trading account causing irreparable damage to it.
- Technical Snags & Poor Management: Technical faults like slow connections and network malfunction might impede your trades. Also, poor management of your trades can accelerate your losses. Most traders ignore trading with a proper strategy because they think that they can do without it. As a result, they enter trades and wreak havoc to their FX trading account. Once money is at risk they tend to be more emotional and lose objectivity. Learning to adapt to different market conditions with a carefully-devised plan using risk management tactics like stop-losses etc is extremely important as without such measures your losses will only mount instead of profits.
- Getting Confused by Too Many views: There are way too many opinions about forex trading flooding the Internet. You are often bombarded with endless news articles, blogs, social media posts related to Forex. But you should be intelligent enough not to be overly influenced by any of that but form your own perceptions so that it is you ultimately who takes the onus for your mistakes and nobody else. Once you realise your problem areas you can rectify them and move on.
- Concluding Remarks: Forex trading success is not about being rich overnight. Rather, it means consistently being profitable in your trades by embracing your financial situation and learning to survive in varying market conditions.