I have seen many times that new traders don’t stick with their strategy. Forex market is very volatilities and it seems that there are many trading opportunities, but actually there are not, as market moves swiftly revert back to initial stage. So, don’t get tempted, just sit and wait for your signal
That is an oversimplification of the problem, I believe.
I disagree with the statement that someone can trade successfully without any trading plan. I feel that trading plan helps traders be more disciplined and discipline matters a lot in trading. Otherwise, you run huge risks of being influenced by your emotions and momentary feelings. I do think that each deal should be thoroughly prepared in advance in order to make sure that you know what to do whatever happens. I don't know, pehaps, it is just my mindset, but there too much uncertainty when I even think of trading without any kind of preparation.
More than that, I do think that it is important to differentiate different markets and the way the assets behave in different trading situations. I mean that stocks behave completely differently from the currencies or cryptos. It is vital to know the assets that you trade in order not to find yourself at a loss when something happens that you were not prepared for.
So, in conclusion I should say that the reasons for the losses are much more complicated than the ones which were described in this post. Such a simplification may lull traders into the false sense of security. Markets are mainly unpredictable and the traders need to deal with not only facts but with the probabilities as well.
There is so many reasons why trader gets loss, but the fact is forex market very dynamic, and trader make mistake in decision trading, lack of experience and knowledge is the general reason trader get loss, but how about experience trader that still suffers from loss, there is so many reason, FOMO often leading trader getting bad position trades, greedy or increase position size will mess up emotion, over trading will confuse minds to cover all position and many more.
Most of time I think traders lose their money because they have not able to utilize the strength of various technique in forex trading. Your losses can be minimized by using proper money management or risk management. But most of them tend not to realize that.
The reasons for losses can be numerous and all of them are quite individual.
Some traders simply don't have sufficient amount of knowledge for this activity. There are thousands of people who think that everyone can come to trading and start making profits immediately. These people are lulled by the very image of trading and they tend to think that all the traders do is just clicking buy/sell buttons and nothing more. However, it is impossible to show the actual process of making decisions of a professional trader. They do lots of hard work which stands behind the process of opening the deals.
Other traders do have sufficient knowledge but they are affected by the emotional factor which distracts them from common sense and logic. Psychology plays huge role in trading and only skillful and emotionaly stable traders can make decent consistent profits.
Some experienced traders may also have losses just because of the fact that they don't update and refresh their knowledge and trading strategies. It is an open secret that market is developing all the time and all kinds of knowledge become outdated quite rapidly. That is why it is vital for a trader to be on the move all the time and constantly modify their trading strategies.
These reasons are the most common, from my perspective, but there can also be some details which are individual, so if you want to see the reasons of your losses, you should pay attention to your trading strategies and the way you take your decisions. The best way to track down all of your mistakes is to make a trading diary where you should write all the thoughts prior to the deals.
Thanks for this excellent article. I agree on the note that almost all the financial markets work very similarly. If we are able to read the chart of a stock market, we should be able to read the chart of the forex market as well. There may be some extra things, which traders will learn if they be with the market for a while.