Posts Tagged ‘why people loose money on forex’

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Forex: Money management – what separates winners from loosers

May 15, 2012

Have you asked yourself what strategy do you need to learn in order to become a successful trader? Have you tried to learn a lot of analyzing tools and indicators? Trend, support, resistance, Fibonacci, Gann, MACD, Moving Average, Bolinger bands etc. And in the end of the day you loose your capital… What is the problem? You analysis is over 50% successful however you loose money.

The answer is simple – Money management! In my opinion it is very easy to analyze the market over 50% successful! The hard part is to stay calm, to be patient to control your greed and emotions.

Have you been in a position to know that the market is going up, to think again and again “Why shouldn’t I put more money in this position? I am 100% sure it will go up!”? And then you decide to keep it the normal amount and… the market is going up and you regret your decision with the feeling that you have missed a good profit. And the next time when you are sure it will go up you open a huge position with high leverage(you are 100% sure it will go up) and… this time it goes down… and you loose a lot of money.

So what is the secret? NEVER risk more than 1-2% of your capital!

What is your success rate if you open a position with 100 pips take profit and 100 pips stop loss? Generally it is 50/50 which means that in a perfect world if you open 30 positions this month you will have 15 winning and 15 loosing positions and you will pay only the commission to your broker. If you risk 1% of your money you will be able to do it, however if you risk everything you cannot afford to loose on a position more than 2 times in a row.

Now imagine if you develop a little bit in technical analysis and your success is not 50/50 but 60/40, so you have opened 30 positions this month, 18 winning and 12 loosing. Lets say that you are trading with 10000$ – 1 pip= 1$ and leverage 1:1 . You always put your stop loss and take profit levels 100 pips away.

Calculation:

12 loosing positions * 100 pips = 1200 pips on  loss

18 winning positions * 100 pips = 1800 pips on profit

30 opened positions * 3 pips spread = 90 pips commission

So 1800-1200-90= 510 pips on profit = 510$ for 1 month

This is 6120$ profit on yearly basis which is 61.2%. I think  this is  great!

On the other side if you trade on high risk there is a chance to loose your whole capital for 1 hour…

Do you understand now why Money Management is one of the most important things in Forex?

All you need is discipline, self control, and just a little bit knowledge about the Forex market!

I wish I have helped you with this article!

If you think that what we write here is good don’t forget the option to follow the blogs via email! We will write a lot more in the future! And if you think that this will help your friends to develop in Forex trading you can just share t with them!

Good luck!

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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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Welcome

March 25, 2012

Welcome to NewOnForex.com.

Some of us know, some of us have just heard of a place online where people are making money.Making money just by trading with curencies, few hours a week in a comfortable time.

Here we’ll try to explain more is it possible and how it is done.

Here are some advantages of the FOREX Market:

  1. You don’t necessarly need to be all the time infront of your computer in order to make profit.
  2. You can make money from home.
  3. You get knoledge about the financial markets.
  4. You can use up to 400 times more money then you have deposited (but you can Never loose more than you have deposited:)
  5. You control the situation (it is ynot like giving your money to a broker and trusting someone else’s decisions)
  6. You have your money available all the time.
  7. You’ll work with prestegious financial institutions.
  8. You”ll pay extremley commissions up to 0,03% of what you trade with (for the majir currensies)
  9. You have Transparency – everything is visable for you 24/7  (market movement, major news, your money etc.)
  10. You’ll be able to predict the market movements (most of the companies are offering free education and tools for that)

These are only few reasons why the Forex Market is so attractive for all of us no matter of our position in the sociaty – student or retired, unemployed or businessowner, woman or a men… After all we are willing to make money in order to support our life and our families.

FOREX is giving us this opportunity!