Good day forex traders and koalas!
Everyone wants to make money in forex. So why find out the 3 ways to lose money in forex you ask? Simple because if you can identify yourself with any 1 way, it is best you do something right way for the love of your money 🙂
1) Clueless trading
You have no technical or fundamental views. If the currency pair goes up, good. If the currency pairs goes down, cool.
Reports have shown that clueless trading wipes out margin account fast and leads to other poor forex trading habits such as over trading. Spend more time understanding the charts and the economies. Form a belief on why you think a particular currency pair will move in a particular way. Even if you are wrong on the first time, learn from it and do better the next 🙂
2) Impatient trading
Now that you have a clue on how a currency pair may possibly move in a particular direction, you need to have the patience to wait for the perfect execution of the trade. Going into a position too early may result in unexpected consequences. You may be buying into the currency pair too high or too low. Closing a trade too early due to panic or eagerness to lock in profit will also hamper with your forex trading performance. Starting new trades too often ie over trading is no good too as you will be exposing yourself constantly to the forex market risks.
If you wonder why most automated forex trading systems EA ( Expert Advisers ) beat the majority of retail forex traders, this is one key reason. EAs are programs and take action based on a set of rules. No emotions, no impatience.
3) No Proper Money Management
This is probably the number 1 reason why forex margin accounts blow up. Long time readers of the website will know that i had 3 margin calls before. OUCH!
A high risk of 20% per trade.
$1000 > 1 losing trade > $800 > 1 losing trade > $640 > 1 losing trade > $512
Just 3 losing trades would have wipe out almost half your margin account.
A proper money management approach of 2% per trade.
$1000 > 1 losing trade > $980 > 1 losing trade > $960.40 > 1 losing trade > $941.20
3 losing trades would have wipe out only 5.9% of your margin account, leaving plenty to spare for your forex journey.
It is common to lose 3 trades in a row in forex.
Hope the above helps and i’ll see you on the winning side 🙂
Want to know how you can possibly make money in forex? Read 3 ways to make money in forex trading
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