Foreign Currency Exchange Trading tips: Why Do 90% of All Forex Traders Lose their money?

Foreign Currency Exchange Trading can be one of the most profitable investments any individual can make. There are a great number of positive aspects of trading Forex… it is a 24/7 market, most of the trading is electronic, you can use a substantial amount of leverage to maximize your potential earnings, and much more.

Unfortunately, there are common mistakes that seem to be made by each and every newbie fx trader and sometimes even the pros.

You might ask yourself, how can I evade these errors and how do I identify them? Well, I am trying to do something different with this article, I am going to explain to you one mistake and then a way out, then another mistake and another solution and so on.

Over Trading:

I ‘m sure the majority of us have listened about this one, but if you haven’t please allow me to tell you. Over trading happens whenever a currency trader is looking for trading opportunities that aren’t really there. I have heard it all, “But if I trade more I will make more quicker”, “If this trading strategy works it will make money even if I trade it on 15 pairs”, “trading a lot of pairs doesn’t affect money management”... I could keep going for hours.

The truth: over-trading is the primary reason why a lot of traders lose money. Trading the foreign exchange can be challenging and it is easy to get puzzled by the large amount of information that is available via the internet (the problem is that most of this information is mistaken!).

The solution: The best way to become a wealthy currency trader and not over-trade is to have a trading plan; each and every successful trader I have met has one. Having a trading plan can assist you become a way more disciplined trader and of course a more successful one. This takes me to the next common mistake.

Not having a trading plan: I have been trading and building Forex strategies with some of the best and most successful foreign currency exchange traders in the USA and all across the world, and I have NEVER met any successful trader without a trading plan or that just trades what looks good.

For example, when a person wants to get a loan from a bank to start a business one of the most essential documents that the bank will ask for is a business plan. Why? They don’t want to lend money to an individual who doesn’t have a clear idea of what to do with it. The same happens in Forex.

You can be a very talented trader and have the best tools and resources but if you don’t have a trading plan you won’t be able to put it all together. Get it?

Picking tops and buttons:

Many new traders try to pinpoint and determine where a currency pair will turn around and go the opposite direction, this is a huge mistake. Picking tops and buttons is a very complicated task and even when it is done appropriately you might still get an generic result.

The best method to not commit this mistake is to stick to your trading plan and trading strategy. Hot tip: if your trading strategy is primarily based on reversals (tops and buttons) make sure that you demo trade for at least 2-3 months before you send your hard earned cash to your broker.

Making decisions based on emotions:

Emotions control, or at least determine everything we do and think, but unfortunately being emotional in Forex can very expensive.

Foreign currency exchange trading is a quite challenging arena and when you trade the forex market you are trading against some of the smartest minds all over the world, this is why you need to stay concentrated and not let your emotions control your trading decisions. Hot Tip: use automated software to help you to locate your entry and exit points and to take the trades for you, this will help you to keep emotions out of the picture.

Not using money management: money management plays a quite significant role in Forex currency trading. Not using any money management in your trading is like going to war without any weapons. The best way to incorporate MM (money management) in your Forex is to create a set of rules that you are going to adhere to when you trade.

As for instance, you can consider to not trade more than 2% in any given trade or to not trade more than 5% of your total capital every day.

Forex trading can become a extremely gratifying activity ( and that is bringing tremendous monetary rewards) or it might even become your Full time job. You are the only one that can take action, get well-informed, and start to trade Forex the right way.

I hope I was able to provide you with helpful information that you can apply to your foreign currency exchange trading today. Stick around for more.

Sincerely,
Jay Molina
Full time Currency trader & educator