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

Foreign Currency Exchange Trading can be one of the most money-making investments anyone can make. There are a lot of benefits of trading Forex… it is a 24/7 market, most of the trading is mechanical, you can use a big amount of leverage to increase your potential earnings, and more.

Regardless, there are common mistakes that seem to be made by every newcomer foreign exchange trader and sometimes even the professionals.

You might ask yourself, how can I prevent these complications 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 alternative, then another mistake and another solution and so on.


Over Trading:

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

The truth: over-trading is the MAIN cause why a good number of traders lose money. Trading the foreign exchange can be complex and it is easy to get confused by the large amount of information that is available via the internet (the problem is that most of this information is mistaken!).

The answer: The best way to become a lucrative FX trader and not over-trade is to have a trading plan; every single efficient trader I have met has one. Having a trading plan can enable you become a more disciplined trader and of course a much more successful one. This takes me to the next common mistake.


Not having a trading plan: I have been trading and creating foreign currency exchange strategies with some of the most brilliant and Most respected currency traders in the USA and all over the world, and I have NEVER met any effective trader without a trading plan or that just trades what looks good.

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

You can be a incredibly 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:

Lots of new traders try to pinpoint and define where a currency pair will turn around and go the opposite way, this is a big mistake. Picking tops and buttons is a really tough task and even when it is done appropriately you might still get an generic result.

The best way to not commit this mistake is to stick to your trading plan and trading strategy. Hot tip: if your trading strategy is based on reversals (tops and buttons) make sure that you demo trade for at least 2 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.

Forex is a really competitive arena and when you trade the currency 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 identify your entry and exit points and to take the trades for you, this will assist you to keep emotions out of the picture.

Not using money management: money management plays a really significant role in foreign currency exchange trading. Not using any money management in your trading is like going to war without any weapons. The most convenient way to incorporate MM (money management) in your foreign currency trading is to create a set of rules that you are going to stick to when you trade.

To illustrate, you can elect to not trade more than 2% in any given trade or to not trade more than 5% of your total capital per day.

Fx trading can become a extremely gratifying activity ( and that is bringing tremendous monetary rewards) or it might even become your Full time job. You are the only one that can take action, get trained, and start to trade Forex the right way.

I hope I was able to provide you with helpful information that you can apply to your Foreign Currency Exchange Trading today. Stick around for more.

To your trading success,
Jay Molina
Full time Forex trader & educator

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