Forex trading can be an extremely lucrative way to make a living especially on this present times advance internet based technology. The mixture of margin leverage and a low minimum amount required to start trading make forex trading ideal and attractive for a small forex trading investor. And yet, despite its vast opportunities for profit, majority of forex traders lose all of their hard earned money within a year trading in forex ( Foreign Exchange ).
Based on recent studies, these are the most common reasons that explain why majority of inexperienced forex traders fail:
1. Unlikely Forex Trading Profit Expectations
A lot of novice traders read about how easy it is to make money trading forex and they just take the plunge and lose enormous amount of their hard earned money before they even know what hit them.
Forex trading is not a get rich quick scheme. It requires hard work and research to be successful. And even then, you cannot expect every trade to be a winner. Even the best and professional traders also lose on tradunf forex. The key therefore, is knowing when to cut your losses and focus on the winning trading systems.
2. Failure to Acquire Sufficient Knowledge in Forex Trading
Forex trading is easy to learn, but difficult to master. Experienced traders make it seem so easy, but predicting currency prices is a complex endeavor. And as a small investor you are at a disadvantage. Large financial institutions have resources that you don't. They may have an entire staff analyzing the most recent economic indicators while you just have yourself. You must be prepared to spend some solid time learning before you can expect to win big profits.
3. They Became an Addictive Gambler Instead of a Smart Forex Trading Investor
The forex market can be very addictive as well as exciting because it involves lot of money. Hence, a novice investor may tend to trade based purely on luck, just like a gambler does. I've seen people do this and they usually pick a few winners and make some short-term profits, but in the end they just get slaughtered.
On the other hand, a smart forex investor do a research and study the market before picking a currency pair and soon became a winner by earning a handsome profit.
4. Short of Focus
Depending on which broker you use, there are possible dozens of currencies you can trade. But on the onset especially when you are just starting out, think small. Pick a few of the most popular currencies, such as the US Dollar, the Japanese Yen, and the Euro, and concentrate completely on these major currencies.
The more currencies you trade, the more data you will have to analyze in order to spot trends. It is much better to know a few currencies really very well than to know just a little about each currency pair.
5. No Reliable Forex Trading System
To win at forex you need to forecast market development. Multifaceted systems work better than simple ones. And to be a profitable technical trader, you need to learn from proven forex trading strategies and currency trading systems.
But definitely the most important thing a novice trader to do is to choose a system that is easy to understand and easy to use. There are literally hundreds, if not thousands, of different trading systems available. Some you will have to pay for, but many are free. Choose a system that is right for you based on your capital, your goals, and your personality.
Without a reliable forexx trading system, you might as well be throwing your hard earned money in the dark.
6. Failure to Follow and Stick to a Proven Winning Forex Trading System
Having a forex trading system is not adequate. As a trader, you have to follow it through good times and bad times. Though it's easier said than done, its easy to get greedy and go for the big score or get nervous and get out too soon. You must follow your system to determine both entry and exit points.
Do not ignore these or you risk of missing out on a big upswing or being stuck in a trade as it goes sour. Being a smart investor in the forex trading venture, you should know that knowing when to get out of a trade is even more important than knowing when to get in.
Everything begins with the right education. And learning to trade in forex market is no different. You need to get an excellent Forex trading education, so you turn into a successful Forex trader. Without the right Forex trading education and forex training, you will just be throwing your money away in the Forex trading market.
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