Foreign Currency Exchange Trading tips: Why Do 90% of All FX Traders Lose Money?

Foreign Currency Exchange Trading can be one of the most money-making investments any individual can make. There are a lot of rewards of trading Forex… it is a 24/7 market, most of the trading is automatic, you can use a significant amount of leverage to enhance your potential earnings, and much more.

Nevertheless, there are common mistakes that seem to be made by every single amateur foreign currency trader and sometimes even the professionals.


You might ask yourself, how can I prevent these errors and how do I identify them? Well, I am trying to do something different with this article, I am going to explain to you one mistake and then a option, then another mistake and another solution and so on.


Over Trading:

I ‘m sure many of us have been told about this one, but if you haven’t please allow me to tell you. Over trading happens whenever a foreign exchange trader is looking for trading probabilities that aren’t really there. I have heard it all, “But if I trade more I will make more faster”, “If this trading strategy works it will make money even if I trade it on 15 pairs”, “trading many pairs doesn’t impact money management”... I could keep going for hours.

The reality: over-trading is the principal cause why most traders lose money. Trading the foreign currency can be confusing and it is easy to get puzzled by the enormous amount of information that is available over the internet (the problem is that most of this information is fallacious!).

The Fix: The best way to become a wealthy foreign currency trader and not over-trade is to have a trading plan; every single prosperous trader I have met has one. Having a trading plan can assist you become a way more disciplined trader and of course a more successful one. This takes me to the next common mistake.


Not having a trading plan: I have been trading and developing foreign exchange strategies with some of the best and most successful Forex traders in the USA and all across the world, and I have NEVER met any prosperous trader without a trading plan or that just trades what looks good.

As an example, when a person wants to get a loan from a bank to initiate a business one of the most relevant documents that the bank will ask for is a business plan. Why? They don’t want to lend money to somebody who doesn’t have a clear plan of what to do with it. The same happens in foreign currency exchange.

You can be a pretty talented trader and have the best tools and resources but if you don’t have a trading plan you won’t be able to put it all together. Get it?


Picking tops and buttons:

 Many new traders try to pinpoint and determine where a currency pair will turn around and go the opposite direction, this is a giant mistake. Picking tops and buttons is a very tricky task and even when it is done appropriately you might still get an generic result.

The best method to not commit this mistake is to stick to your trading plan and trading strategy. Hot tip: if your trading strategy is primarily based on reversals (tops and buttons) make sure that you demo trade for at least 2-3 months before you send your money to your broker.


Making decisions based on emotions:

Emotions control, or at least affect everything we do and think, but unfortunately being emotional in Forex can very expensive.

Foreign currency exchange trading is a quite challenging arena and when you trade the forex market you are trading against some of the wisest minds on earth, this is why you need to stay concentrated and not let your emotions control your trading decisions. Hot Tip: use automated software to allow you to acquire your entry and exit points and to take the trades for you, this will help you to keep emotions out of the picture.

Not using money management: money management plays a quite significant role in Forex currency trading. Not using any money management in your trading is like going to war with no weapons. The most effective way to incorporate MM (money management) in your foreign currency trading is to create a set of rules that you are going to adhere to when you trade.

As for instance, you can decide to not trade more than 2% in any given trade or to not trade more than 5% of your total capital per day.

Currency Trading can become a extremely fulfilling activity ( and that is bringing very nice monetary rewards) or it might even become your Full time job. You are the only one that can take action, get informed, and start to trade FX the right way.

I hope I was able to provide you with practical information that you can apply to your foreign currency exchange trading  today. Stick around for more.