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 hovers around nine-day EMA above 1.1800
EUR/USD remains in the positive territory after registering modest gains in the previous session, trading around 1.1820 during the Asian hours on Monday. The 14-day Relative Strength Index momentum indicator at 54 is edging higher, signaling improving momentum. RSI near mid-50s keeps momentum balanced. A sustained push above 60 would firm bullish control.
GBP/USD softens to near 1.3600 as BoE hints further rate cuts
The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling softens against the Greenback amid growing expectations of the Bank of England’s interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Editors’ Picks
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Gold eyes acceptance above $5,000, kicking off a big week
Gold is consolidating the latest uptick at around the $5,000 mark, with buyers gathering pace for a sustained uptrend as a critical week kicks off. All eyes remain on the delayed Nonfarm Payrolls and Consumer Price Index data from the United States due on Wednesday and Friday, respectively.
AUD/USD: Buyers eyes 0.7050 amid upbeat mood
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Top Crypto Gainers: Aster, Decred, and Kaspa rise as selling pressure wanes
Altcoins such as Aster, Decred, and Kaspa are leading the broader cryptocurrency market recovery over the last 24 hours, as Bitcoin holds above $70,000 on Monday, up from the $60,000 dip on Thursday.
Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle
Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.
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