The market can just go up or down over the long-term, then applying the most elementary 1:1 risk/reward rate, there should be at least 50% winners, shouldn't there? Well, there isn't.
A trader is their own worst opponent, and that human wrongdoing is at the heart of most difficulties. In summary, the central cause why Forex traders waste money is the traders themselves.
Financial trading, including the currency markets, needs continued and detailed preparation on many levels. Trading cannot begin without a trader's perception of the market basics and market conditions. Below I bring up the main 3 reasons that make traders fail to gain.
Overtrading is the most popular cause why Forex traders lose. Overtrading might be produced by many financial circumstances.
It takes cash to make a profit over the investment. One of Forex's biggest benefits is highly leveraged accounts. Traders with insufficient starting capital can however achieve profits.
Having a sufficient amount of money in a trading account increases a trader's odds of long-term profitability significantly – and also reduces mental stress.
But how much capital is enough? Here it is necessary to discover how to prevent losing money in Forex trading due to incorrect account management. The minimum Forex trading volume any broker can give is 0.01 lot.
This is also known as a micro lot and is equal to 1,000 units of the base currency that is being traded. Of course, small trade size is not the only way to restrict your risk. Interns need to reflect exactly the position of stop-losses. Beginner traders should risk no higher than 1% of their capital per trade. Trading with larger capital than this raises the possibility of making large failures.
Correctly adjusting leverage while trading cheaper volumes is a good way to secure that an account has sufficient capital for the long-term. For instance, to set one micro lot trade for the USD/EUR currency pair, risking no more than 1% of the entire capital, would only need a $250 investment on an account with 1:400 leverage. Still, trading with higher leverage also raises the amount of capital that can be misplaced within a trade.
3- Not Following a Trading Plan
A weak attitude and a failure to qualify for current market conditions surely play a part. It's very advised to handle financial trading as a model of business. Any serious business requires a business plan. A serious trader has to spend time and energy into producing an accurate trading strategy. As a simple point, a trading plan needs to study the best entry and exit points for trades, risk/reward ratios, accompanying with money management rules.