The main preoccupation of people interested in Forex market is to find out why the major part of traders ultimately loses money. The research normally shows that each month only 20-30 percent of retail traders gain profit. But what is the reason that retail traders end up losing money? A number of attempts are made to find the exact answer of this question and here we’ll discuss the most obvious reasons.
1. Excessive Leverage
In Forex or CFD trading different brokerage companies offer their clients certain amount of leverage. The higher is the extent of leverage the more profit traders are inclined to get. For instance, if a trader is offered a leverage by 500:1 ratio he has a chance to start trade let’s say by depositing 5$ and take a position worth $2,500. This attracts most traders and even those with limited funds at their disposal.
Now what is dangerous here? Together with the increase of profit the risk of sustaining losses also increases. Do you imagine the situation when the market may move against you? Unfortunately, not all the traders are found to be careful and most of them think by only gaining as much as possible. However if each trader accepts and uses the leverage of 100:1, even in case of unsuccessful trade the loss wouldn’t be so high. Do not use excessive leverage in order to trade huge positions; this is the number one reason why traders fail.
2. Lack of Deep Knowledge and Experience
The failure in any sphere firstly comes from unawareness and surface knowledge. Listening to how others have reached success and being attracted by their experience is not enough to gain achievements. It seems to most people that Forex trading is the most efficient way to get rich quickly as they have heard of the impressive returns made by trading. They think that knowing all that is quite enough to start trading and instead of scrutinizing the market first they open real account. Never rush into trading immediately unless you have learnt what Forex is and got experience on demo account. Nowadays you can find hundreds of Forex e-books or other Internet resources where you can learn trading and find answers to all your questions.
3. Forex Trading is Complicated
Forex market is actually very complicated to understand completely. Moreover, as statistics has shown it is tougher than other forms of trading. This suggests that not many people can succeed in financial markets. If you are not sure whether trading is for you or you have some questions you had better apply for independent advice.
Conclusion
The only way of reaching perfection is learning and deeply understanding of what you do. Be well informed and the success is yours.
1. Excessive Leverage
In Forex or CFD trading different brokerage companies offer their clients certain amount of leverage. The higher is the extent of leverage the more profit traders are inclined to get. For instance, if a trader is offered a leverage by 500:1 ratio he has a chance to start trade let’s say by depositing 5$ and take a position worth $2,500. This attracts most traders and even those with limited funds at their disposal.
Now what is dangerous here? Together with the increase of profit the risk of sustaining losses also increases. Do you imagine the situation when the market may move against you? Unfortunately, not all the traders are found to be careful and most of them think by only gaining as much as possible. However if each trader accepts and uses the leverage of 100:1, even in case of unsuccessful trade the loss wouldn’t be so high. Do not use excessive leverage in order to trade huge positions; this is the number one reason why traders fail.
2. Lack of Deep Knowledge and Experience
The failure in any sphere firstly comes from unawareness and surface knowledge. Listening to how others have reached success and being attracted by their experience is not enough to gain achievements. It seems to most people that Forex trading is the most efficient way to get rich quickly as they have heard of the impressive returns made by trading. They think that knowing all that is quite enough to start trading and instead of scrutinizing the market first they open real account. Never rush into trading immediately unless you have learnt what Forex is and got experience on demo account. Nowadays you can find hundreds of Forex e-books or other Internet resources where you can learn trading and find answers to all your questions.
3. Forex Trading is Complicated
Forex market is actually very complicated to understand completely. Moreover, as statistics has shown it is tougher than other forms of trading. This suggests that not many people can succeed in financial markets. If you are not sure whether trading is for you or you have some questions you had better apply for independent advice.
Conclusion
The only way of reaching perfection is learning and deeply understanding of what you do. Be well informed and the success is yours.
Editors’ Picks
EUR/USD rises to 1.1800 neighborhood amid renewed USD selling and trade uncertainties
The EUR/USD pair regains positive traction during the Asian session on Wednesday and jumps to the 1.1800 neighborhood in the last hour, reversing the previous day's modest losses. The intraday move up is sponsored by the emergence of fresh US Dollar, which continues to be weighed down by persistent trade-related uncertainties.
GBP/USD regains 1.3500 and above
GBP/USD extends its advance for the third day in a row on Tuesday, this time retesting the area beyond the 1.3500 hurdle. Cable’s uptick comes despite decent gains in the Greenback and the dovish message from the BoE’s Bailey at the UK Parliament.
USD/JPY struggles below 156.00 as Trump’s address begins
USD/JPY turns south below 156.00 in the Asian session on Wednesday, retreating from two-week highs of 156.28 reached after reports that Japan’s PM wants the BoJ to go slow on future rate hikes weighed on the Japanese Yen. However, intervention fears cap the currency pair as Trump's State of the Union address kicks off.
Editors’ Picks
AUD/USD extends gains to near 0.7100 amid Trump's SOTU
AUD/USD rises further to test 0.7100 following the release of Australian consumer inflation figures, which back the RBA's hawkish tilt and boost the Australian Dollar amid a positive risk tone. The pair also benefits from a modest US Dollar downtick, induced by Trump's State of the Union address.
Gold stays firm above $5,150 as Trump's delivers State of the Union speech
Gold finds fresh demand and regains the $5,150 level following the previous day's pullback from the monthly peak as traders assess Trump's State of the Union address. Trade-related uncertainties and geopolitical risks seem to act as a tailwind for the safe-haven bullion.
USD/JPY struggles below 156.00 as Trump’s address begins
USD/JPY turns south below 156.00 in the Asian session on Wednesday, retreating from two-week highs of 156.28 reached after reports that Japan’s PM wants the BoJ to go slow on future rate hikes weighed on the Japanese Yen. However, intervention fears cap the currency pair as Trump's State of the Union address kicks off.
Bitcoin, Ethereum and Ripple post cautious recovery amid downside risks
Bitcoin, Ethereum, and Ripple are posting a cautious recovery on Wednesday following a market correction earlier this week. BTC is approaching a key breakdown level, while ETH and XRP are rebounding from crucial support levels.
The Citrini report: How a debatable AI narrative can shake Wall Street Premium
That AI-related headline alone was enough to rattle investors.US stocks slid sharply on Monday after a widely circulated Citrini Research memo outlined a hypothetical “2028 Global Intelligence Crisis”, warning that rapid AI adoption could push US unemployment into double digits as early as by mid-2028.
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