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Guaranteed Ways of Losing Money in Currency Trading

losing money in foreign currency exchange

Every entrant to the currency trading world is focused on making money. However, there are characters and attitudes revealed by most traders which go on to ensure they never make as much money as they planned to in this market.

Overconfidence on a particular trade

While trading, the biggest driving force for many people is the fact that they are about to make some money.  This reasoning has an even greater effect when they remember that the last two or three trades ended in profit.  It is at this point that the trader goes ahead to increase their trade sizes hoping to make a kill.  Unfortunately, instead of making the kill, the trader’s account gets killed.

When you lose such a trade, you will end up giving back all the profits you may have generated within the week or month. If you are serious about making it to the “profitable trader”, you have to take it upon yourself to stay grounded and focused at all time. Overconfidence is not good in any field, and it is no different in currency trading.

Lack of proper management in currency trading

It is not enough to enter trades. If you do not know how to manage the positions, you will lose money regularly.  You need to know when to move a trade to breakeven, when to lock in some profit and when to close the trade entirely.  There is nothing more frustrating than seeing a trade go 150 pips in your favour, only to end up as a losing trade at the end of the day.

Inability to trade the reality on the ground

Many traders are guilty of this habit. After using a trading system to a comfortable degree of success, they start feeling psychic and try to single out points at which the system will generate a trade signal. Some will even enter a trade with the belief that the market will act in a particular manner and, so, the system will generate a trade signal in an hour or less. They end up forgetting the fact that this market is very unpredictable; and, taking a position before the trade signal is formed is the same as trading without a strategy.

Having all your eggs in one basket

Many people who trade this market do not bother to spend quality time on their demo accounts. After spending a few hours reading a few strategies and a few tutorials on trading, they go ahead to deposit large sums in their account in a bid to make as much money as possible from trading. Some people go as far as borrowing funds to invest in their trading account! This only puts the trader under immense pressure and, as any professional trader will tell you, a trader under pressure is a trader bound to lose money.

Avoid making the mistakes talked about here, and you will be staying away from the reasons why 9 out of 10 forex traders fail in the long run.

 

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