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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Japanese Yen trades just shy of 157.00 versus the USD
The Japanese Yen weakens across the board after BoJ announced its policy decision. A shortlived spike in the Yen may be testament to an attempt by the Japanese authorities to intervene. US PCE Price Index shows higher-than-expected inflation but does little to impact USD/JPY which almost touches 157.00.
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.
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