According to the study conducted by a South African investment farm, 70-80 percent of novice Forex traders end up quitting at the beginning of their trade by losing money. The researchers compiled these five reasons regarding why most Forex investor lose their investment.
A fact is that most foreign exchange investors fail at the beginning of their trade. As stated, among novice traders, 70-80 percent lose their capital, and, in some cases, it may go as high as 90 percent. An investor needs lots of dedication to learn Forex trading, primarily how it works and what rules and regulations are associated with it. However, even after learning Forex and gaining tremendous knowledge about it, a trader may fail and lose money. Don’t worry; your mistakes and failures will give you the best lesson in your life.
Insufficient Capital for Investment
Many investors start to invest in Forex with the hope of making money, and after completing their first investment, most of them begin to run on the back foot. They face such situations because they think this market is the source of enormous revenue and, and soon they will become millionaires with insufficient capital. But when reality knocks at the door, they become shocked, and they choose to close the trade.
Beginners get attractive high leverage offers from foreign exchange marketers, and they promise to make significant returns to the investors for a small initial capital. The CFD traders face the risk for this high leverage, and quickly they lose all their initial capital. “Slow and Steady Wins the Race,’ and this proverb is valid for the foreign exchange market too.
Poor Risk Management
Most FX traders lose their money quickly because of their worse risk management, and, in some cases, they have no risk management strategy. If a trader wants to stay in the foreign exchange market for the long term, he needs a solid risk management plan.
Poor risk management may wipe out all your profit even if you are a good trader. An investor should incorporate a sound trading plan in his profession so that he can achieve success quickly. Moreover, dramatically the success chance of a trader improves if he had a robust risk management strategy.
Most Traders Don’t Accept the Losses and Mistakes Responsibility
You cannot get success by playing the blame game, especially in Forex Day trading. Trader’s most important lessons are accepting their trading mistakes and accepting the responsibility for their losses. Many investors thought that buying errors and taking the losses responsibility is a waste of time, but that is not true.
Fear of accepting responsibility is a big reason why most foreign exchange investors fail to make a profit, and their trading outcomes become zero.
In FX trading, one of the most common things that prevent a trader from making money is over-trading. Indecisive traders who quickly jump in and out of the market and invest in many trades face huge losses because of their tentative attitude. A trader cannot be successful by doing overtrade; instead, it makes their account balance zero.
Overtrading can’t be a tool to succeed in the foreign exchange market; instead, a correct and consistent trade can consistently help you make a profit. Creating a consistent profit means you are going in the right direction, and you will be successful one day.
Too Much Risk
Trading and wagering are not the same. An investor should never invest more than 2 percent of his available capital in Forex trade. If you invest more, you are putting your account at substantial risk of loss.
Rather an investor should spread his investment over various trades so that he can limit his overall losses. Holding an excellent foreign exchange strategy helps to guide you not to risk too much on a single transaction.
Foreign exchange traders don’t fail and lose money because of only one reason; instead, different reasons act as the main culprit behind their failure. Be a Forex market student, do proper research, develop an excellent trading plan, manage sufficient capital, and finally, all success is yours, for sure.