“95% of all investors fail and eventually end up quitting” is a common statement often repeated on Forex forums and websites, but no real article or official statistical data to support the claim. What we do know is that Forex investors can lose millions in a single day, and that many of these losses are the result of a single huge mistake or bad trade.
The truth is, Forex trading is an exciting, fascinating, and profitable business to get into. With a little research and a lot of effort, however, anyone who wants to make money in this market can succeed. Here are some of the biggest reasons why Forex investors lose money.
Mistakes and Wrong Signals – The best way to avoid losing money in this market is to learn how to read and interpret the signals that your computer gives you. However, even with the most sophisticated software, human emotions can still play a huge role in making trading mistakes, which means that even the best automated system is no guarantee of profits.
Why Forex Traders Lose Money?
Risk Factor – Although it is not possible to completely eliminate risk from Forex trading, there is a huge amount of it involved. A trader will need to understand how to mitigate this risk as much as possible, which is why it is essential that he takes a lot of time to study the market. He should also be prepared for any eventuality that could affect his trading in this volatile market.
Not Enough Research – There is absolutely no way to accurately predict which currencies will rise and which will fall before they are traded, and there is a great deal of speculation about what these trends will look like. This means that traders need to be prepared to take a number of risks if they want to make some serious money in this market. However, the upside potential is tremendous, so it is important to understand the market and its movements so that a trader is able to effectively analyze these potential trading opportunities and make informed decisions.
Overconfidence – As mentioned, human psychology plays a large role in making mistakes in trading, and the problem that most traders have is that they have too much confidence in their trades. When a trader’s confidence is at its highest, he can easily fall for the latest marketing gimmicks or easy trade targets that appear in his charts. Unfortunately, even experts who are used to dealing in this kind of volatile market have been known to make this mistake, so it is crucial for new traders to keep their wits about them and remain realistic.