Why do Forex Traders Lose Money?

Forex traders start trading for one reason and one reason only and that’s to make money. Some traders may enjoy the challenge but at the end of day, it’s all about making profit.

Why do Forex Traders Lose Money?

So why then do so many traders lose money? The thing with forex trading is that it comes with its own risks they are not taken into account and mitigated as much as possible then things can turn sour very quickly and this what happens to many traders. They find themselves losing far more than they gain.

But why?

Why do so many forex traders continue to lose money even with all of the software, tools and techniques out there?

Risks

As we mentioned before, forex trading comes with risk. It is a part of the package. One of the main reasons why so many traders lose money is because they ignore those risks.

There are numerous traders, especially newbie traders who are dazzled by the money and rather than take their time to learn the foundation of trading and strategies, they simply jump into trading blind and they lose. A lot.

When it comes to trading, you cannot simply jump in without knowing anything, even if you earn a little at the beginning, you will lose far more later on. It is just how it is. Trading forex takes time, patience and self control. Which brings us to our next point.

Emotions

Another reason forex traders lose money is because they let their emotions cloud their judgement. Markets can fluctuate for many reasons which means that one moment things can seem great then not so great a minute later.

This is why it is important to not let your emotions affect your judgement. It is why so many traders lose money. They act on emotion. Namely, fear. They often pull out in fear of losing and lose far more money in the long run than if they had stayed put.

Greed is the next emotion which affects so many traders.

When things are going great, instead of cutting their losses and claiming their profits, many traders will stay put in that position until things turn sour then pull out when it’s too late.

When it comes to fear, traders often quit too early and when it comes to greed, they quit too late. Both having the same result – money lost.

At the end of the day, forex trading is not something for everyone. Even with all the great benefits of trading and the ability to earn a lot, the risks mean you can lose a lot too.

Take this for example:

Jim is earning quite a pretty penny with forex trading because he manages his emotions, not the other way around. He’s patient and also understanding trading strategies and the principles which govern forex trading.

Clyde on the other hand is not having such luck because he simply jumped into trading without any prior knowledge and even when he lost, he reacted to his emotions without thought, pulled out too early and then later pulled out too late.

Don’t let your emotions cloud your judgement and don’t start trading until you understand the basics.

We wish you the best!

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