How do you lose money?

Hey all,

Just signed up and want to introduce myself. I have been demo trading for the past 2-3 weeks now using fxOanda as my broker (using my Android). I am still reading the babypips school and am stuck around the analysis stuff. That will take a while for me to understand. So far, the school has not been telling me how one loses money. Yes, I understand that everyone starts negative (whether long or short) due to the bid/sell spreads. And of course due to volatility, the market can easily swing your way or swing away from you. But I have yet to hit any boundaries where my broker automatically closes my trade due to excessive losses. Are there any articles that explain/expand any of this?..preferably something dumbed down as I’m still not fluent in forex terminology. Thanks in advance and hi to all :57:

Hi Juicer,

That’s the “ultimate” way to lose money, when you’re broker gives you a margin call. When you place a trade, it’s leveraged (thousands or hundreds of thousands) and when you get into negative territory, so does the leverage (your broker). There’s a cut-off point where the broker is happy to help you leverage to.

Explained a bit better here -> Margin Trading: The Dreaded Margin Call | Investopedia

Many thanks for that article. I am going to read all 6 chapters. At this stage of my forex career, this is much more important than understanding candlesticks and fib numbers. I have yet to hit a loss in my trades, so something’s off and I’m a bit perplexed.

Hopefully with all of your trades you’re placing a stop loss underneath (if you’re buying) or above (if you’re selling). If price goes the opposite way to where you’re expecting & you hit your stop loss, you’ll experience a loss :slight_smile: If you don’t, then enjoy the profits! :slight_smile:

This section of the babypips school also goes into detail: School of Pipsology The Number 1 Cause of Death of Forex Traders

While I have played with stop loss for a trade or two, I haven’t really been using it. This is simply because I’m trying to trigger the margin call in order to work with a risk that I am comfortable with when I do start trading for real. I am basically trying to fail (or testing the limits of failure) with a demo account. Thanks for the second link. Pip school does talk about it, but unfortunately I haven’t reached the undergrad level yet. So that explains a lot. Thanks a bunch.

I like your approach there Juicer of pushing your psychological comfort level, but only on demo haha. I think once you go live, and even only trading micro lots, you’re comfort level will definitely be tested.