About 90% of all traders lose money. In Forex trading the number is closer to 95%, which begs the question: Why do forex traders lose money?
Here are 5 of the most fatal mistakes that cause traders to lose money:
1. Lack of a Proper Trading Plan
Surprisingly, many Forex traders do not know the importance of forming a trading plan while trading. This is in fact essential for trading successfully in this highly volatile market.
Creating a proper plan with a clear definition of your trading goals and using the appropriate tools to set your entry and exit points as well as your stop loss will prevent emotions and guesswork from determining your trading strategy.
2. Lack of Discipline
Although you may have outlined a predetermined proper trading strategy, you must also have the determination to follow it rigorously. Many traders have the habit of discarding their predetermined plan and acting in the spur of the moment. i.e., instead of exiting the market at a predetermined point, they decide to use their own hastily determined exit point.
3. Lack of Money Management
Forex traders tend to forget that proper money management skills are essential for successful trading. Without proper money management, you cannot minimize the losses or maximize the profits of trades. You should trade in accordance with the risk level that is appropriate for the size of your account, since capital preservation is essential for lasting in Forex trading.
The Forex market often lacks a clear direction. At times, Forex traders may feel that they are missing out on opportunities in the market because they are not trading frequently enough. They begin to make poor trading decisions and over-trade. It is, therefore, crucial that you keep yourself in check and be patient in awaiting a suitable trading opportunity.
5. Averaging Losses
In most cases, traders tend to lose more when the market continuously moves against them when averaging down. To overcome this fatal strategic error, remind yourself that you should never average a losing position unless it is already accounted for in your predetermined trading plan. By using a predetermined automatic stop loss, you will be able to avoid falling into this trap.
Trading successfully and profitably in Forex require a tremendous effort on the part of the trader to overcome the aforementioned mistakes, which are made by many Forex traders. One way to avoid these mistakes is to use automated trading systems. This method of trading will actually help traders, both novice and experienced, overcome many of the hurdles detailed above.
DupliTrade is an automated trading platform that lets you copy the trades of experienced strategy providers (trading in their own accounts) straight to your own MT4 account. Please refer to our education section to learn more about automated trading.