Did you know that only 10 percent of forex traders usually end up successful? The bigger percentage are usually quitters with some traders racking great losses in the undertaking.
But why is financial trading so complicated?
Well, forex involves currency markets that require detailed and long planning on different levels. The volatility of markets makes the trading process to be either very profitable or extremely risky.
That’s why if you are interested in forex trading you should read on to gain useful insights on why many forex traders end up losing money.
One of the greatest secrets to gain good returns in forex trading is knowing the right time to exit the market in question. While most of the traders are motivated by the need to rack up enormous profits, setting a reasonable goal is of the paramount essence. Most of the forex traders always want to go big, which results in overtrading and it is very risky. The reasons that results to this scenario includes the need to achieve unrealistic profits, insufficient capitalization, or market addiction. A good trader does not let emotions and greed to control their trading decisions and they know discipline is key.
It is a common notion with many start-up traders that forex is a cash cow—well, it’s not. Many of the beginners getting into currency trading usually get started with low capital with the anticipation of making big profits. With a large financial base, you get to trade large lot sizes with high leverage, which brings in good returns. Trading with small capital and going for large leverage is a sure way of draining your account. Notably, $1000 USD is the recommended amount to start-up forex trading. Always remember you have to use money to make money.
In Forex trading, failing to plan is planning to fail. Whether focusing on One trade forex or any other asset class, laying down a viable trading plan and sticking to it is key to success. A strategic trade plan helps investors mitigate the common trading pitfalls and help them accomplish perfection. Always remember that 90 percent of quitters are usually plan-less traders.
Financial 101; risk management is a crucial key to currency trading survival. Even skilled and professional traders get drained when they fail to stick to this technique. Becoming a successful trader means making big wins and suffering smaller losses. With poor risk management, you stand a chance of suffering consecutive losses, which may end up depleting your trading capital. It is vital to learn how to place stop-losses. also, understand how to move stop-losses when you have made a reasonable profit. Always remember your number one job in forex is to make profits rather than protecting what is in your trading account. Learn How to Outsmart Your Boss on Cheap Van Leasing and how to take advantage of it in t¡your business.
Did you know most of the currency traders suffer from trading remorse? This is where a trader opens a trade and start questioning their decision on whether they picked the right direction when they are making losses. In most cases, most of them close the trade while they are at a loss and reverse the direction. This is for sure one of the easiest ways to deplete your account. It is important to always make a decision and stand by it.
Forex trading is a complicated undertaking that needs a lot of planning. It is one of the ways that you can easily lose money. Also, it is one of the ways that you can make big profits within short time margins when done right. Always remember the higher risk the higher the returns.
FXJunction also offers copytrading services that are known for being simple, and easy to use. Through this platform, you would actually be able to communication and interact with traders of all levels based across the world. When you start copytrading, you would have the opportunity to follow, copy and even autocopy some of the best, most highly experienced and knowledgeable traders on the platform.
The brokers and platforms mentioned above are some of the best in the trading world. They offer top notch copytrading services, allowing you to make maximum profits, even if you are an amateur trader!
No one wants a losing trade. Everyone seems to get at least one though. Losing is not enjoyable, but everyone gets a taste of failure once in a while. This is why it is so important to acknowledge that some trades just won’t make you any money. In fact they will make you lose money and the longer you leave them to feed on your profits, the worse off you will become.
Greed is a difficult emotion to take hold of. Every Forex trader wants to be able to get as much profit in as possible. This is obvious. However, it is only the profitable Forex traders that understand that losses will come along every so often. The problem with greed, is that you will see a loss and let it run in the hopes of it turning green, but chances are it will just keep putting you deeper and deeper into the red.
Loss-makers should be spotted out fast and killed off as soon as they have been identified. If you spot a loser, kill it before it is too late. You want to cut it off before it eats away at your balance. If you leave it, it will feed off your profits and potentially even wipe your account.
The act of buying high and selling low, or the other way around, does feel counterproductive. It feels wrong to accept losses. When you withdraw a loss, it feels like you are cheating yourself, but you are actually doing yourself a favor. You are keeping your capital safe and it will love you for it long-term. The more you try and let your loss-makers flourish into profit-makers, the bigger your chance will be of failing in the long run. It only takes one big hit to put you out of business. Sometimes you have to ask yourself: do you want to take a small hit, or a big hit?
Of course what goes through the minds of most people, is: what if I keep taking small hits, I can’t afford that?! Well, this is a problem. You can’t keep taking small hits, but chances are once you are profitable, your profits will outweigh your losses, provided you cut your losses of as soon as possible. It is sometimes difficult to do this and it is easier said than done. You will also probably eventually find yourself cutting off loss-makers, only to find out that if you had held onto the trade it would have indeed became profitable in the end. You need to trade objectively though and ignore instances such as these.
If you are not confident with what you are doing, or you don’t think you will be able to keep up set Forex trading tactics, it might be a good idea to open a demo account if you haven’t already got one with your broker. Most Forex brokers offer demo accounts nowadays. From there, you will be able to trade as if you were trading with real capital. Then you will be able to start trying your tactics out risk-free, consistently and with real, live currency pair prices. This should help you to become accustomed with Forex trading tactics and you may well find that you make some nice profits. Just be sure you try to treat the capital as if it were real money. The whole point in practicing is to replicate the real Forex trading environment. Stay objective and don’t let your emotions take hold. Work hard at your Forex trading system and you should become a profitable Forex trader in no time.
Two big mistakes that Forex traders make are as follows: they let their losses run and they cut their profits short. Ideally, Forex traders should be doing the complete opposite in order to make some real profits.
The trouble is, when you make a profit, you want to cut it short just in case it sinks back down to a loss. It really depends on what Forex trading strategy you are adopting though, of course. If you are day trading, perhaps a quick buck (or less) will be enough for you to justify cutting a profit short to bag it and run. However, trailing stops would be more ideal for longer-term trading strategies, as they automatically adjust themselves as your profit increases, so your stops move up as your profits move up. Regardless of whether or not you take advantage of trailing stops though, your mindset should still be in the right place: think longer-term. Don’t see a profit and take it as soon as you can. If you truly believe in your trade, let it run its course before cashing out.
Similarly, make sure you cut your losses. Employ stops according to your Forex trading plan, which should be clear and precise. You should know your Forex trading tactics inside-out before you even enter the markets.
At the end of the day, it will be your profits and losses all added together that determine whether or not you are profitable overall. Obviously you want to be profitable. In order to become a profitable Forex trader, you do not necessarily need to make more profitable trades than loss-makers. In order to become profitable, the sum of your profitable trades need to outweigh your losses. So you might make lots more loss-makers than profit-makers, but as long as your profits are running and your losses are kept short, your profits will be able to outweigh your losses.
If you think you are guilty of cutting your profits and letting your losses run, make sure you change up your Forex trading tactics so that you can ensure you aren’t leaving money on the table. The money is there to be made, you just need to be able to effectively take advantage of the opportunities the Forex markets presents to you.
In conclusion, in order to become a profitable Forex trader, you don’t need to make more profitable trades than losses, you just need to let your profits run and cut your losses short. Becoming a profitable Forex trader is about letting your profits run and cutting your losses short, not about making more profitable trades than loss-makers. It is pretty simple advice, but lots of people make big mistakes and don’t even know it. Sometimes it can be hard to correct these mistakes due to factors like your emotions and psychology, but this is nothing you can’t overcome with practice and experience. It might take some time, but if you work at it, you will become a more successful Forex trader in no time.
Forex trading is not just about making money, but also holding onto the money you make and protecting it. You can make money in Forex trading. That is all good and well if you manage too. However, it is pointless even making money if you are just as good at losing it.
Lots of Forex traders lose. If you are in the industry and have at the very least made a few trades, you will know firsthand that losses are inevitable. They just happen. Remember that it is just a game of odds. You just have to bend the odds in your favor. Losses come and they can hit hard those who do not implement tactics to prevent them from being hit hard.
If you want to manage your money effectively in Forex trading, there are a number of factors that you should consider. First of all, make sure you only have an amount of capital in your Forex trading account that you can afford to lose. This will also help to ensure you do not let your emotions take hold later when placing orders. Then decide how much you are willing to risk on each of your trades, in proportion to your account size. You should certainly not be risking more than 5% of your total capital per trade, or at least according to many experienced Forex traders. Of course the percentage will differ for you according to your strategy. After you have decided the amount you are happy to risk on each trade, only then would you start thinking about how to protect yourself on each trade, once you have some basic tactics in place.
Now remember that you worked hard for your money, even if you can afford to lose the money in your Forex trading account. Limiting your losses is important, because money is money at the end of the day. You want to hold onto it. Ideally you want to grow it. Cutting your losses will help it grow bigger and faster.
Protecting your money in Forex trading is not particularly complicated. You may or may not have heard of stops, but a stop-loss is basically the way to go if you want to protect your money. A stop-loss simply closes off your trades once you hit a certain loss, so that your loss does not become any more significant. If the markets suddenly changed rapidly against one of your trades, a stop-loss would close the trade off early, to prevent a major loss.
Not only might you want to cut your losses, but also your profits. Take-profit stops will close your trades off once you hit a certain level of profit. The point in doing this, is to basically lock in your profits. Who knows what a market will do next? Once you have made a decent profit on a trade, a take-profit stop will close your trade for you automatically and add your profit to your account safely. With a long-term Forex trading strategy, you might even implement a trailing stop. This kind of stop is just like a stop-loss, except it adjusts itself automatically. If a certain trade seems to be profitable, your stop-loss will rise. This effectively locks in the majority of your profits without having to close the trade. This is particularly good if you are riding a long-term trend. You can do this manually of course, but trailing stops are great if you would like something automatic.
In conclusion, protecting your money in Forex trading is important. You should not only protect your money and profits, but also cut your losses in order to stay alive. Stop-loss and take-profit points are both used to help protect the money of Forex traders every day. Implementing these while having a solid understanding of money management, will allow you to effectively protect your money.
If you really want to make a lot of money in the Forex market, you will need to try not to take money out of your Forex trading account, at least in the beginning. Compounding returns work by keeping all of your capital inside your Forex trading account and letting it grow month-on-month, year-on-year.
If you have $100 of capital in your account and manage to make a 5% gain one month, you would quite simply end up with $105. However, what if you then took out that $5 to buy a few snacks? You would be back to where you started again. If you kept making a healthy 5% return each month overall, but kept taking your $5 gain out each month, you would go nowhere.
Now think about what would happen if you kept your $5 in your account, along with your initial $100. The next month, if you made another 5% gain, your $105 would become $110.25. Another month of a 5% gain and leaving your capital in your account would deliver a total of $115.76. After 12 months in total at a constant 5% gain per month, starting with $100, you would be left with $179.59 in your account. Your next month would then net you almost $9 instead of $5, which is of course not far off double.
Compounding returns can be pretty powerful, no matter what kind of money you have starting out. Of course if you want to make a living out of your Forex trading, you could make a salary for yourself. However, delayed gratification is something you should definitely consider. Would you rather make an amazing salary each year forever, or make a reasonable to low salary each year but one day make millions? Your decision is obviously totally up to you, but delayed gratification and compounding returns are worth thinking about as a Forex trader.
In conclusion, compounding returns can make Forex traders rich gradually over time. With decent, consistent gains, Forex traders can grow their money much faster by compounding their returns instead of taking their gains out.