While some traders are happily reaping their profits, it is a sad truth that there are more people who are actually losing money to Forex. Ever wonder why is that the case?
These are the common reasons why people lose money in Forex:
1. Entering the trade with a wrong mindset
Many people assume that Forex is a get-rich-quick scheme which can make them a millionaire in a short period of time with little investment. Consequently, they tend to overuse the leverage and lose their entire account. There are also people who think that making money on Forex is easy, which unfortunately is not the case. To be good in Forex trading, one needs to spend time to educate himself on the market, trading systems and trading strategies.
Without proper knowledge, one would be at higher risk of making mistakes and losing money. The fact that you are reading this article shows that you are on the right track. Keep it up!
2. Entering without a plan
Unfortunately, there are many who manage their trades based on tips from friends, relatives and sometimes even from rumours! They have forgotten the need to analyse the market themselves and plan before they enter the market, resulting in panic and inability to respond rationally when the trade goes against them.
Ideally, one should plan on targeted profit and cutting loss everytime before entering a trade.
3. Emotional trading
Sometimes, emotions can easily kick in when we see the trade going the wrong way, especially when we are trading our hard-earned money. Panic and anxiety would lead to bad decisions which harm their investments.
As long as you have done your pre-planning before you trade, detach yourself from your emotions and let your logic takes over your trading – leave when you have made enough profit and cut loss when you are losing more than you are willing to.
4. Using inappropriate trading platforms
Some traders do not spend time searching for the cheapest trading platform and end up paying a huge amount of commissions on every trade, to the extent it neutralises the profit they make from trading.
If you realise you are doing any of the above, stop it now to protect your investment!
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