Here’s a snappy, happy opening to an article for you: most forex traders fail. It’s an unavoidable, undeniable fact about the business. The reason it keeps happening is because so many traders keep making mistakes.
Now, forex trading is always going to be a bit of a gamble. But this isn’t the primary reason so many forex traders end up haemorrhaging money. So this isn’t an article telling you not to go into forex trading because there’s a high chance you’re going to fail. No; most of these failures are due to avoidable mistakes. So this is an article that will help you figure out why these failures can occur and how they can be fixed or avoided.
Here are the most common reasons you may be losing money in forex trading.
You got greedy
Holding on to that currency so long because you want every one of those last few pips? Mistake. That’s greed setting you up for the loss of a profit. But hey, maybe you didn’t do it out of greed. Maybe it was giving you some kind of adrenaline rush that you get a real kick out of. Either way, it’s a mistake. Do you have a reasonable profit to make from selling that currency? Then you should consider selling it.
Remember how quickly things change in forex trading. Tomorrow is a new day with plenty of new opportunities. Sell while it’s looking good and consider being a little more risky once you’ve found more success. Consider prospect theory. It’s the theory that people feel more anger from loss than they do pleasure from gain. This could be why so many people are willing to hold onto a prospect (in this case, a currency) for so long. The pleasure of profit takes more of a backseat than it should.
You’re not using a comprehensive trading platform
What are you using to do your forex trading, exactly? The platform you’re using probably won’t make or break your chance to get millions for forex exchange. But choosing a strong one can increase the efficiency of your trading and provide you with more valuable information.
Some people don’t actually use a “platform”; they use a flesh-and-blood broker to do their bidding. But I’d recommend giving yourself a bit more control over the whole thing. Getting your hands dirty with the right software can help you learn so much more about the business. There is plenty of good software out there for it. You can download MetaTrader, for example.
You’re not trading with the trend
A lot of us have ego problems. Heck, I have an ego problem. And there are few things that can please our egos more than being right when everyone thought we were wrong. Perhaps this is why so many traders will go with ‘bottom’ currencies while they’re on a downward trend. If they finally spike, you could be making profit and you can get some bragging rights!
But the truth? This hardly ever pays off. To say that this would see a good profit one out of ten attempts would be a hopelessly optimistic guess. If you have to pick a ‘bottom’ currency, go with it while it’s on an upward trend.