Common reason why traders lose money

I would like to know the common reasons why forex traders lose money? Is it because they have a small capital or have a hard time making decisions?

It’s usually because they buy, and price falls.

Or they sell, and price rises.

The hesitation on decisions follow a few losses in a row.
Account size is immaterial.
Risk management is everything.

You could solve a lot of these questions for yourself if you went to the school, or used the search function here.

In FOREX trading, there are six major reasons traders lose money. If you can avoid these pitfalls then you can join the minority of winners that pile up the big profits consistently.

Here are the trading traps that will cause you to lose money:

  1. The Contrarian’s Disease

You should have a contrary opinion to the other Forex traders in the market – most traders lose money, so you want to trade in opposition to the herd.

Most traders lose because they lack discipline and money management - but they’re very often right about market direction. It’s the trader’s inability to maximise these opportunities when they’re trading the FOREX - and stay with the trend, that makes them lose money.

Many traders are looking to pick tops and bottoms, and never focus on trend following. Picking tops and bottoms is impossible. You can’t predict the turning points in FOREX trading - so you need to change your focus to trend following, not prediction.

  1. The Chartists Trap

In FOREX trading many traders fall into the trap of putting all their efforts into studying charts. Studying charts is important - but you must not be too subjective, or you will end up losing.

Avoid methods that need too much subjective analysis, such as Elliot Wave and cycles - and gravitate towards indicators that define trends - such as moving averages and momentum oscillators.

Be objective and not subjective in your FOREX trading.

  1. Ego

FOREX trading attracts some of the cleverest people in the world, these traders are smart - but they also have big egos. An ego is a bad trait in FOREX trading - as it means you always want to see the market, as you want to see it - and not how it really is.

Traders need to ask themselves this question: Do you want to make money or feel smart? The market won’t accommodate both of these desires – if you want to make money, leave your ego behind.

The humble trader who has an objective and disciplined FOREX trading plan, realizes the market can make him (and everyone else) look stupid. However, he’s only interested in making money, and he’ll generally out perform an ego filled trader, who wants to beat the market.

  1. Guru Syndrome

When you’re trading in the FOREX market, it’s tempting to follow someone who’s made money - or says they have.

It’s a fact that most traders want success given to them by someone else, and these traders can’t take responsibility for their own actions.

In the game of FOREX trading, the only way to succeed is on your own - if you can’t accept this, then do something else.

  1. Chasing your Tail

Many traders get impatient when FOREX trading - they start trading using one method, get frustrated with it when it’s not performing - they then switch to a different method, and so on.

Bad periods are normally followed by good trading results (if you’re using a soundly based system) - so patience and discipline are needed. By frequently chopping and changing systems, you’ll lose money.

If you have a trading plan that you believe in, then stick with it - and stop chasing your tail. Stay focused, and be patient with your system.

  1. Using Options Incorrectly

When you’re FOREX trading, using options gives you staying power - and limited risk, which makes options a great trading tool.

Many traders use options incorrectly - they focus on buying options with small time value, and that are way out of the money. This is a guaranteed way to lose money when options trading! What you need to do is focus on buying options, at or in the money - with lots of time value - also use spreads to increase your chances of success.

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inexperience…which only comes with time

considering all the threads you just posted up took up the past page of this part of the forums, did you even at least GLANCE at some other threads before asking all of these questions?

MY friend: advice for you do not open too much trades at a same time or at same rate in the case of loss it give too much loss it is my personal experience start trading donot worry ups and down is a part of life best of luck my friend

Insuffiently demo tested strategies can cost you money fast. A strategy has to be tested in all conditions before going live. A specific time period can not be a determination for testing a system. A strategy has not been fully tested unless the strategy has gone though major falls, major rises, news breaks, whipsaws, as well as all the normal roller coaster movements of a normal day. If it can do that and your account has either gained profit or is at the very least still alive, the strategy works. IMHO :slight_smile:

“I believe in my trading strategy completely and whole heartedly” ---- It’s critical to your trading success that you learn and trade with a strategy that’s proven and that you personally enjoy trading with. You have to follow it without deviation by remembering the fact that one loss does not negate the whole trading strategy. Don’t jump from one strategy or system to the next just because you stumble upon a few losing trades; losing trades are a natural part of any trading method. The key lies in losing trades properly and making sure you are trading with a strategy that is both simple and effective, like price action.

2 words

Over

Trading

I think, Fear, Emotion and Greed are some common reason behind loosing money by traders.

I lost a trade cause my cat was sick.

Take your pick.

The #1 reason people lose trades is they buy when they should sell. :stuck_out_tongue:

The market is liquid. There are buyers and there are sellers. They can’t both win. The reason traders both lose and win, is because the market is designed to work that way. the market couldn’t exist if there was no losing trades.

The most important reason is emotions … specially greed and fear … that what makes the traders lose money … the reason why some automated trading robots get positive results even more than the trained and well educated trader is emotions.
Although these robots don’t have the intuitive ability and flexibility of the human brain but they don’t have that disadvantage named EMOTIONS.

I think a better question would be ‘what are the common reasons why traders make money’. I don’t want to know how to loose it!

Good point. Statistically nearly all of us know how to lose it…thats the easy bit lol