If making money trading on the Forex markets was easy, we’d all be millionaires. Sadly, Forex trading requires a certain skill set, and a certain degree of luck. Nonetheless, if you manage to perfect your trading strategy, you can be one of those Forex traders who makes money. It might not be enough to make you mega rich, but it could be enough to pay for a few extras in life, such as a dream vacation.
In this article, we’re going to look at the most common reasons why Forex traders don’t make any money from their trading activities.
Reason #1. Fools Rush In
The number one reason why FX traders fail to make money is that they are in a huge rush to start making trades, without having a clue what they are doing. Demo accounts are there for a reason. Open a demo account and learn the ropes before you jeopardize your capital.
It can take a while to fully understand how the Forex markets work. You need to get to grips with numerous concepts, including spreads, leverage, stop losses, and various analytical tools. Only upgrade from a trading account once you have mastered your demo account and are making a consistent profit. Then you are ready to open a real Forex trading account with a reputable broker such as easyMarkets.
Reason #2. Letting Emotions Rule Your Trading Decisions
Successful traders are analytical. They weigh up the information to hand and make a trading decision based on the facts. What they don’t do is panic and sell when the price of their chosen currency tanks or buy based on a ‘gut feeling’. Smart traders never let their emotions rule their trading account. They hang in there if the evidence tells them it is sensible to do so, and they don’t abandon a trading strategy if it doesn’t appear to be working immediately.
Losses are inevitable. All Forex traders will suffer some losses. Trade when the conditions are right and when your trading strategy dictates. Do not jump in and start making extra trades in a misguided attempt to recoup your losses. If you do this, you may as well start playing on the slot machines, as the odds of a win are better.
Reason #3. Not Learning the Markets
You can’t make sensible trading decisions if you don’t understand the way the markets work. Get to know one currency at a time. Learn how it reacts to market forces. Read the financial news and have an economic calendar on your desk, so you know when the Fed is about to make important announcements about interest rates.
Lastly, have a plan and stick to it. And if you’re not making any money after six months, consider looking for a new, less risky, hobby. Make a point of following the experts to see what they do. Learn from their trading strategies and pick up pointers by following successful traders on Twitter or social trading platforms. This is how the pros learned the tricks of their trade back in the day.