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3 reasons why people loose money on Forex

May 13, 2012

1. Low start up capital + high leverage

Most forex traders think that Forex is an easy way to make fast money by using very small starting amount. Unfortunately most of the Forex brokers encourage their new traders to trade on high leverage which means on high risk. But guess what –   you must have some money to make some money. If you think that starting with 50$ you will make thousands you are totally WRONG! We advice you to calculate your interest(the expected profit) by percentage – not in dollars. So if your initial deposit is 50$ don’t expect to make 1000$ in 1-2 months. It is better to trade on low leverage(risk) and to put yourself a goal 100% profit in the next 6-12 months . However most of the traders who start with this kind of capital don’t appreciate when they make profits of 0.1-0.5$ with one position(based on their leverage) their goal is not to be on profit after 6 months, they want to make 1000$ in 1 month. That is why they start trading on high risk and most of them end up loosing their capital and  thinking that Forex is a scam. Forex is not a scam! But it is neither a casino! So it f you want to make 1000$ our advice for you is to start with 1000$ or more.

Advice: Do not use high leverage! Especially if you are a new trader your leverage shouldn’t be over 5! Calculate your interest by percentage, not by currencies!

2. Greed

Some traders are trying to take every last pip out of a move. And most of the time the market goes against them before they get their last pip. This can make you loose the good profit you already have.

Advice: When the market goes in your direction and you make 30-50 pips profit, but you don’t feel that it is enough just close part of the position and move your stop loss 30 pips behind. This way you will try to make bigger profits however if the market goes against your prediction you will insure the profit you have.

3. Indecisive Trading

People often suffer from trader’s remorse. This happens when you open a position and the price does not immediately go in your direction. Then you start thinking you have made the wrong choice, you reverse the position and… it again the market goes against you and you loose more money. If you regret your decision the best thing you can do is to shut the computer down and to go outside!

Advise: When you make a decision stick to it! Always put your stop loss and take profit levels and don’t jump around with every pip!

If you have questions feel free to ask in the comments below!

If you think that what is written here is correct feel free to share it with your friends on Facebook! It might be useful for them!

And of course if you are new on Forex we always recommend you to visit our website for more information and tips  – http://newonforex.com/

Good luck!

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2 comments

  1. this is so true. i have lost alot of money (42k usd) by not dealing with this steps and i truly recommend newcommers to take on these advice. move slowly and you will see a fortune rise. move fast and you will have nothing in a day when everything is falling.


  2. […] Recently I explored a lot of websites and forums orientated towards Forex traders and I realized that the most of the beginners (especially in India) think that if they “trade” on Demo Account for several months they will learn how to analyze the market and they will gain experience. And what happens? In the end when these “Demo Traders” put(eventually)  their money counting on their “Forex experience” most of them loose everything in a short period of time. […]



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