17 Reasons People Lose Money Trading FOREX

1. Risking too much.

A lot of new traders have a lack of capital and leverage heavily in order for their profits to look decent. Most traders believe a sensible amount to risk is 0.5% – 5% of their account, but that amount is still enough to damage a trading account after a streak of losing trades.

You should know your method well enough to distinguish if those losing trades are completely normal, or your method is just plain not working.

2. Focusing too much time and effort on a technical that doesn’t work.

Some people just refuse to believe that a technical is crap and can’t let it go. Usually the reason they can’t let it go is that they see someone else making money using it, or it’s popular amongst other traders, and they assume if it works for someone else, it’s going to work for them.

If the technical is not showing good results after a decent amount of testing time, let it go and try something else.

3. Ignoring stops. 

Don’t act like you’ve never done it

‘Oh let’s just move the stop 20 pips for a bit more breathing room…’, which then turns into moving it 50 pips, closing out a huge loss and wishing you exited the trade at the 20 pip loss.

4. Getting confused by too many opinions.

Forums, Twitter, blogs, news articles… there are so many opinions all over the internet!

The best thing to do is learn how to come up with conclusions on your own so you can’t blame anyone else when you make a mistake. Then it is up to you to figure out what you did wrong and come up with a plan to not make that mistake again.

5. Greed. 

I don’t think greed is 100% bad as it gives us some motivation to work harder. But when greed is making you risk a stupid amount, or is making you open trades based on poor or no analysis… then you have a big problem!

6. Making things way too complicated. 

If you are just starting out, you really shouldn’t be taking on so many pairs. Also, don’t put so many indicators on your chart that are essentially doing the same thing. Pick 1-3 pairs and get to know their “personalities”.

7. One minded sentiment. 

This means someone is so obsessed with trading a certain direction, or is so stuck on a fundamental opinion – even if the chart is screaming the complete opposite!

8. Fear. 

Fear of losing money, fear of losing your entire account balance, fear of getting trades “wrong”, and the fear that your method may all of a sudden stop working.

Fear can lead to us not entering good setups, exiting too quickly for a loss, and taking profit too quickly. Fear usually means you don’t know your method well enough and/or risking way more than you feel comfortable with.

9. No patience.

Oh if only I could bottle this baby and sell it! This seems to be the number one thing a lot of traders seem to battle with. Usually the problems relating to patience are not waiting for a clear setup before entering, freaking out if a trade isn’t immediately going to plan, and taking profits way too early.

10. Unrealistic profit expectations.

So many new traders jump in expecting to make thousands a week with a small account and think they are failures if they don’t. Unrealistic expectations lead to over leveraging in order to obtain those profit targets.

11. Not enough knowledge and not putting in enough learning/practise time.  

As I have said a million times before, FOREX trading is not easy. If it were easy, then everyone would be selling everything they own and trading FOREX.

You may learn quickly or it may take you years – there isn’t really an exact time frame.

Any other career requires months and years worth of study, and if you are expecting to bring in a similar income (if not more), you need to put in a decent amount study, practice and money.

12. Overtrading.

Trading is a dangerous world and can be scarily addicting. If you don’t approach trading in a healthy way you can do damage to yourself, your account and your loved ones. Please be very careful and only enter trades when you get a clear setup and risk appropriately.

You must know when to step away from the market! That may be because you have lost a huge chuck of your account and need to reassess your method, or you may be so obsessed with trading you are neglecting your loved ones

13. Technical difficulties.

Slow connections, network errors, crap computer, mouse malfunctions, etc.

14. Using trading as an escape from everyday life.

15. Trading with a poor frame of mind (drunk, high, tired, upset etc.). 

16. Blindly following the advises of self-proclaimed forex “gurus”.

17. Too much trading on demo.

Test your strategy on micro live account, it much better in comparison to demo trading. Most brokers provide much better conditions for demo trading.