As almost every trader knows, more than 90% of retail traders are struggling. Those who are making consistent profit from this market has extensive skills and knowledge. Developing yourself as a professional trader is not all easy. Unless you start working hard and push yourself to the edge, you are most likely to blow up your trading account. Things might seem really easy at the initial stage, but the moment you step into the real world of trading, you will understand the associated risks in the Forex trading profession.
Though there are many reasons for losing money in Forex, we are going to highlight the major mistakes of the rookie traders.
Failing to understand the nature of the market
Joining the retail trading business is a very easy task. The rookie traders simply open a trading account and start to trade the market without knowing the details of risk management policy. At the starting of their trading career, they might be able to make some decent profit but in the long run, they wipe out their trading account. You have to understand the nature of this market. The Forex market is one of the most complex markets in the world. Every second it’s changing its pattern. Unless you familiarize yourself with the market dynamics, you are bound to lose money in Forex.
Taking a huge risk in each trade
Trying to make more money by increasing the lot size is a big mistake. In fact, the new traders don’t really know the importance of professional brokerage firm. If you ever visit https://www.home.saxo/en-hk you will never trade with the low-end broker. The high-end broker never offers insane leverage to the novice traders. This greatly reduces the risk of trading. On the contrary, the low-end broker even offer 1:1000 leverage which doesn’t really make any sense. You can’t make any real progress by rising more than 3% of your account balance. No matter which trading strategy you follow, risk less than 3% of your account balance.
Trading the high impact news
News trading is one of the easiest ways to catch large market movements. Only the professional traders can make consistent profit by trading the high impact news. The new traders don’t really understand this fact, they simply start to trade the major news. At times, they might become lucky and make some decent profit but considering the long term consequences, they are most likely to blow up the trading account. This doesn’t mean, we are forbidding you to trade the high impact news. You need to train yourself and gain enough skill before you trade the volatile market. Use the demo account of Saxo and see whether you can make consistent profit in the demo account.
Failing to follow the basic rules
You must follow the basic rules of investment to protect your trading capital. Even after having a balanced trading strategy, many retail traders blow up the trading account. After losing a few trades, the new traders start taking excessive risk to earn more money from this market. Such revenge trading strategy always results in catastrophic disasters. If you intend to make living out of trading, you must follow the 2% rule of money management. Most importantly, you must have complete control over your emotions. Trading with emotions will always result in a big loss. Train your mind so that you can embrace small loses and wait for the good trades.
Conclusion
Losing trades are inevitable. But with proper caution, you can minimize the risk exposure and make a decent profit from the winning trades. Instead of scalping, try to become a position trader. Look for long term goals. Forget about the short term gains, EAs, bots, and indicators. Develop a written plan so that you can execute a trade without having any emotional attachment.
