Do you think the bankers and hedge managers who trade Forex are fools ? Per day Trillions of dollars are traded in this big financial market in the world.I will give you an explanation for example:
Take the Titanic tragedy.As they said if there are many life boats available then they may have chance to save more passengers.The failure is the thing that not carrying many life boats with them.They went greedy on their confidence that titanic will never face any problem.It can face anything.So the same situation is going on in Forex Trading.The Forex traders are not carrying life boats that means they are not maintaining stop loss levels in Forex Trading.Even though you are confident on your trade you must set Take Profit and Stop Loss levels for your opened trade.
I explained the main 6 important reasons why the traders loss money in Forex Trading.And my title itself describes “Reasons behind loss in Forex Trading.
Less Capital:
Most of the Forex traders who enters into Forex are afraid of trading and that tend to invest less money invested in Forex Trading.The traders from the countries like Asian,Africa regions are highly losing money by investing and trading with less capital amount in the Forex Trading.If your capital amount is high then you have more liquidity amount.This liquidity amount survive your whole trades which are already opened.
How this liquidity capital survive your trades?
In my words liquidity doesn’t survives but it gives support to the trades.If you trading situation is like you bought Eur/USD and if 2 pips down then you trade goes died and your balance becomes zero.And after the 2 pips went down the market got boosted and the Eur/USD is up 20 pips.I personally faced this situation many times.So at this situation if you have much money and it gives support to the existing trade which is gonna died without this supporting amount.So,be careful while trading with less capital and never cross the trade value more than 10% of your total capital.This helps you a lot to escape from the loss.In this situation you are maintaining 90% liquidity for that trade.
Managing Risk Level:
Managing the Risk level is very important in Forex Trading.In many countries like India Forex trading to the individual traders is banned due to this high risk levels of trading.Not only in India Forex is banned to trade by individual traders due to this risk levels of Forex Trading.Here risk in nothing but Leverage.Like 1:50,1:100,1:200,1:400,1:500,1:2000 these are the Leverages in Forex Trading.Try to trade on less risk levels.If you trade in high risk levels though you get higher profits if you are in profit.And at the same time you will get high loss if you are in loss.Risk involves both higher profits and higher losses.It depends on whether you are in loss or in profit.So always trade with less loss.Getting profit of 0.5% on your investment per day results very high profits per month.
Opening Wrong Trades:
Never ever trade if you don’t know from where to start today’s trading.If you don’t know how to start trading today and confused with your mind then just sit relax and watch the market position.If you got a perfect place where to start then you may proceed.If you don’t know and got confused then never open a single trade.That may be the wrong trade you opened.So never trade without analysis.Many beginner traders open blindly and go upset after losing their money.And that’s is also the reason why they call Forex Trading as a Casino.
Greediness of The Trader:
Greediness in the sense expecting to get much profits in less time.Of course this works for the experienced traders only.But experienced traders will never go greedy.They know what happens if they go greedy.Greediness confuses your mind and tempts you to get much profits in Forex trading in less span of time.But this is impossible to any trader.The trader try to trade with high risk levels and it becomes wrong trade and his balance becomes null at a particular point.In the Forex Trading the one and only Devil which is inside you is “Greedy” only.So remove the greediness from you trading mind.For suppose if you got 30 pips of profit today yes be satisfy with that profit and relax then still passionate to Forex then trade in Practice account to shine your trading skills.
Market Volatility:
I already mentioned in my previous posts that market volatility is very dangerous situation though you are a well experienced trader.The reasons for volatility in Forex market is due to release of Economic events and the respective growth and change of values in that particular events like Employee rate,Economic Budget releases.If you notice that the market is volatile then it’s safe to take down all your trades and please be seated to relax and to observe the moments in market. Because this volatility may cause sudden jump in more number of pips like 50 pips at a single step sometimes even 100-200 pips in a single step.
Maintaining The Stop Loss:
70% of traders neglect to set Stop-Loss for the trades they opened.They just open trade and look for whether it’s in profit or in loss.They never take care of Stop loss levels.Setting of Stop loss level stops your loss in trading.And this is very very useful when the market is much volatile as i said above if the sudden jump like 100 pips occur then if you set stop loss for 20 pips then you just escaped from more loss and you saved 80 pips.So,always set stop loss even though you are confident on your opened trade.A Wise trader sets Stop-Loss as a secure guard to his trade.
