What Causes Forex Traders to Lose Money?

by Andrew McGuinness     Jul 16, 2019

The biggest financial market in the world, believe it or not, is the foreign exchange market. Because of this fact, more and more people have become drawn to the world of trading. The thought often occurs to new traders that they too may someday become successful, and where better than on the largest financial market known to man?

Even though it is relatively easy to trade, this does not mean it is easy to trade forex successfully. It is as easy to trade as it is to make the wrong move and suffer substantial losses. So, whether you are experienced and curious about what you’re doing wrong, or inexperienced and still a bit naïve, here are the most common causes for the losses of forex traders.

1. Little to no research

Before you begin trading in forex and gaining experience of your own, it is important for you to do research concerning the market, the history of the companies you are looking to invest in, the latest news relating to forex trading, and the tips that successful traders have to offer.

These are just a few of the basics you should research, but if you want to be a successful trader, you are going to have to constantly be on your toes, reading, studying, researching, and analysing. Trading successfully is not as easy as it looks.

2. No broker/ wrong broker for you

If you are trading without a broker, you are very obviously new to the market. Make no mistake, a broker is essential for any trader and for any career in trading to properly flourish. Then again, having the wrong broker is even worse than having no broker at all.

In order to find a broker with a good reputation that is right for you, only keep an eye out for firms that are members of the National Futures Association as well as those registered with the United States Commodity Futures Trading Commission. This will guarantee that your money is safe with the broker you choose, because some brokers are not particularly reputable and cannot be trusted.

3. No practice

A lot of trading platforms allow you to create a practice account just to see what it is like and practice trading before the real deal. It is a bit like playing trade. You are able to make hypothetical, imaginary trades and most importantly become accustomed to the trading interface and where everything is located.

When using a real account, one false move can mean the difference between a substantial profit and a substantial loss. In order to avoid these simple mistakes, practice order entries on the demo account until you get a hang of it and would be able to trust yourself with real money.

4. Too many charts

When first becoming a trader, you might believe that charts and other analysis tools available on your trading platform need to be taken advantage of. Well, actually, this isn’t always the case. One essential tip from successful traders to other traders in the forex market is to use charts sparingly.

If you create charts for every possible criterion and every possible circumstance, you will simply end up more confused than you began. The charts will inevitably begin to contradict each other, and pull you in opposite directions. If you are to use charts, choose one significant aspect to analyse, stick to it, and always take the resulting findings with a grain of salt.

Get unlimited access to our Learning Center,
Broker Insights and Exclusive Promotions for Free!