Just like stock and other financial instrument trading, not all forex traders profit from the market. There are many reasons for this, below are the some most common ones.
- Lack of Trading Discipline: Perhaps the simplest successful forex currency trading strategy is big wins and small losses. Traders have to limit their losses and to maximize their returns. They should have a sound trading strategy and good discipline for this. Letting the fear and greed to control the trading decision is the most common reason for failing.
- Not Having a Forex Trading Plan: Learning about the currencies, pairs and market movements are very important prerequisites for forex trading. Many traders do not have any plan at all for placing orders, stop-losses or risk management.
- Not Learning from Previous Experiences: Demo trading and learning most trading strategies are just initial steps for a successful trader. One should learn from his wins and losses and from the same of others.
- Keeping Very High Expectations: The ambition to be a millionaire overnight can be a very bad contributor to the trading losses. Actually it leads traders to a situation of gambling. They forget their risk-tolerance and try to bet for unrealistic gains; eventually losing all that they had in hand.
- Poor Money Management: Diversification of currency investments and proper risk management are important for trading success.
- Poor Leverage Management: Forex trading involves very high leverage and low margin requirements which allow traders to place very high amounts of currencies with low capital investment. This can magnify the profits and losses alike and can result in margin call from forex trading brokers. For more read Forex Leverage – An Overview.