Finance

Reasons Why Forex Traders Lose Money

Forex trading is the riskiest profession in the world. If you make any mistakes in this market you will lose money. In recent days, more people are showing an interest in this profession because if you can understand this market properly, you can earn so much money you cannot imagine it. But if you are thinking about joining this industry you need to know that almost $6.6 trillion transactions are made in this industry but only 4% of people are earning from this amount. The other 96% traders are just losing their money and some of them just leaving this industry by losing all of his trading amounts. The most important thing you need to know here is that if you lose your trading capital once then it is very hard to manage another trading account with money in it.

But we can assure that the traders who are losing their money through trading most of them do not understand the market properly. So if you make yourself educated enough then you might have a chance to make a career in this industry. In the following article, we will talk about the key reasons why traders lose their money so you can avoid making these mistakes.

The market is not your friend

The first thing you have to keep in mind that you are in this industry to make money from the Forex market. So you need to beat the market to earn money from it and it will be not clever to judge the market as your friend. Because if you make any mistakes the market will cost you money and I hope your friends are not always after your money. If any of your friends are after your money then I hope you don’t consider them as friends. Many traders try to think the market as his friend and as a result, they took a market very lightly. As a result of this type of thinking they lose money and sometimes leave the industry.  Learn more about trading environment from Saxo, one of the best brokers in Hong Kong.

Low balance to startup 

Trading is not a place where you can get rich quickly. Rather, it takes time to make your living from trading. We always suggest you start trading with a capital which you can lose without any regret. Many traders try to join this industry with very low capital and use high leverage. As a result, they cannot earn enough, and also when they make any mistakes their losses get multiplied because of the leverage. So we never encourage anyone to start trading with a low amount because of their safety and if you study enough about trading then you might be able to understand the reason behind it.

No risk management

As trading is related to real money, money management is a must if you want to survive in this industry. In Forex trading is you have to take risks with your money to earn more money and without risking you cannot earn a single penny here. We know that no one likes to risk his money but you can reduce your risk by managing the risk properly. Traders need to follow a money management rule and a proper lot size for each trade according to his trading capital for himself where he will follow a proper risk-reward ratio. A risk-reward ratio is a ratio between the amount you want to earn and the amount you want take to risk to earn. The risk-reward ratio must be a positive one and if you can follow it in every trade then it is impossible to blow your account balance. But many traders don’t follow this and use a higher lot size than his fixed one and as a result they blow their account balance.

So you can be sure that the market will not take away your money if you do not make mistakes and if you have lost money through trading then I hope you might discover mistakes by reading this article. So try to follow proper rules if want to achieve something in this industry.

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