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 climbs to daily highs near 1.1820
EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.
GBP/USD trims losses, retests 1.3460
After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.
Japanese Yen gives back half of early gains against USD ahead of US PPI data
The Japanese Yen (JPY) surrenders half of its early gains against the US Dollar (USD) during the European trading session on Friday. The USD/JPY pair rebounds to near 155.90 as the JPY falls back, but is still 0.15% down.
Editors’ Picks
EUR/USD: Fed calm, ECB steady, but the Dollar still leads Premium
EUR/USD is still struggling to find real traction. The pair has tried to stabilise, but momentum keeps fading, leaving the door open to further weakness.
Gold: Falling US yields, geopolitics help XAU/USD hold ground Premium
Gold (XAU/USD) gained traction and climbed above $5,200, ending the fourth consecutive week in positive territory. The next round of US-Iran talks and crucial macroeconomic data releases from the US will be watched closely by market participants in the short term.
GBP/USD: Will Pound Sterling defend key 1.3450 support ahead of US jobs data? Premium
The Pound Sterling (GBP) entered a bearish consolidation phase against the US Dollar (USD), after having tested critical support near the 1.3450 level on several occasions.
Bitcoin: Another month of losses, and it’s been five
Bitcoin (BTC) price is stabilizing around $68,000 at the time of writing on Friday, but the Crypto King is poised to close February on a fragile footing, marking its fifth consecutive month of losses since October and a rare start to the year with back-to-back monthly corrections.
US Dollar: At a crossroads; Fed steady, tariffs in flux Premium
The US Dollar’s (USD) upward momentum from the previous week seems to have encountered a tough nut to crack in the 98.00 region, as measured by the US Dollar Index (DXY).
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