Why do 80-90% of beginner Forex traders lose ALL of their money?

georgequayle

Recruit
Messages
155
First, I'm going to ask that no one adds a comment of 'Thank You' to this thread, because 1) what I say is far from the last word, and 2) I'd like this thread to be a resource for ONLY those who wish to read an entire thread.
I'll put this on my 'monitored threads' list and take the number of viewers as all the thanks I need....I'm a Buddhist...we don't do gratification.
That said, I'd also have to ask, despite my lack of tenure, that each person who reads this thread to make a note on paper of the comments you'd like to make and wait to see if someone later in the thread has already addressed what you intend on commenting on.

Why do so many beginner Forex traders lose all of their money?

First, the FPA is here to protect you from the non-market risks, namely How to select a forex broker based on informing you how trustworthy the broker is, while trying to protect traders and prevent malicious slander in the form of spam. Another is to protect you from poorly programmed bots, or any other way to get your money away from you other than actual market movements.

I'd like to first point out that, on the same token as how an eight year old can't actually be a good judge of the quality of their teacher, if you haven't done enough reading then you'll inexorably feel that the movements of the market are chaotic. Now, they are chaotic, but to a surprisingly small degree to a well-informed and experienced trader. To sum up quickly, an experienced trader can profitably trade any purchasable or salable commodity, currency, or transferable intangible object.
One can't make that assertion on one's self just based on a successful month of trading on a demo account, and that means that both experience and knowledge are required before the jury can be let out on 'did this broker cheat me.' This is especially true because the traders on FPA are using different brokers, charting systems, and data feeds for current rates, so we can see if there's a discrepancy between the 'real' rates in historical fact and those that have been digitally manipulated by a broker for the broker's profit. I use this specific example to show one regular complaint of inexperienced traders to show that markets can be a major cause of the trader's complete loss of account independent of the broker.
For this matter, I'm going to avoid discussing non-market, or scam, reasons for complete losses of accounts.

First, have you noticed that most demo accounts let you trade with $50K?
In an article I have from just before the credit crisis, to be in the wealthiest 10% of the world's population, you need to have a net worth of $61K. At 100:1 maximum leverage in an account with standard lots, if you traded one lot the wrong way with no stop you'd have to be off by fifty US cents to empty your account. We saw the Swissy go from parity to twenty-one cents over during the credit crisis, but a ten cent drop is a real event. A one cent change is substantial.
It all seems simple. That said, if you have a micro account and you open it with $500, you'd be in the same position. $5000 in a mini account, and it's the same deal.
Wait a second...two things come to mind here. One, two times 5K is enough to buy a cheap car, and most people don't buy a car with a 50% downpayment. Of course there's the other matter of whom you'd trust with half a car of your money...a fool and his money are soon parted they say.
Back to the point though is most people don't have, or can't afford to lose 5K, so logically most forex accounts are started with less.
So you learn on a 50K demo account, and maybe you wing it and figure out rudimentary money management techniques for yourself. For example, maybe you figure out that although you only actually lose money when you hit a stop loss, you have to use stop losses for 1) when the basis of your prediction is clearly no longer likely or 2) capitalizing on the ability to reenter at a position even further away from your stop loss in order to get the profit from the new entry point to your old stop loss, plus the profit you initially attempted to gain. Maybe you also figure out to set your stop loss as less than your expected profit.
The first reason why beginners lose all of their money is because they're underfinanced. If you do a demo with a 50K account, you should only attempt to get half of the profits you aimed for on a live 25K account, a fifth on a 10K, and so on. If you are underfinanced then you won't have as many chances to absorb losing streaks (they really do happen to everyone), or deal with slippage or news events (expected or unexpected). Also, most people think they can use the same number of lots with the same risks on their new live account with their $500 as they could on the $50K, and they can't. I call this 'target management'.

The second reason why beginners lose all of their money is because they risk too much per trade. They're blinded by the potential profit, and they're out before they've had a chance to learn from their mistakes. Simple arithmetic shows that 19 bad trades risking 10% of current account per trade leads to a loss of over 80% of your account, where 19 bad trades at a risk of 2% is a 30ish percent loss. If you want to stay in the game you need to make sure you can be wrong a lot of times before you're out of cash, so I call this 'money management'. 19 bad trades can happen because you bet against the trend, news changed the fundamentals, you flip-flopped your long and short positions trying to catch the trend, you keep on getting nailed by straddling with double OCO orders, you're too impatient, you're overwhelmed by emotions, you're dealing in too many related pairs in the same direction, or your frikken cat sat on the keyboard.

The third reason is because they don't set a risk to yield ratio, or just trade from the gut. A risk to yield ratio is set in order for the profit from one successful trade to compensate for several unsuccessful trades. Thus, if you have a 1:3 risk to yield ratio, you set your stop loss at say 30 pips and your take profit at 90 pips. I also tend to find that if you set your stops too tight that it doesn't give your guess much time to be right, so I never set my stop at less than 15 pips. Now, I must admit that I don't stick religiously to this risk to yield rate if I'm actually watching the charts; I'll sometimes take profit and cancel my OCO take profit/stop loss order. I'll definitely stick to this idea if I have to leave the house or go to bed. If you have a full-time job and are forex trading to personally manage your savings, this is the only safe option. If you have a 1:3 risk to yield ratio you can be wrong twice and right once and still come out with a profit. I call this 'risk management'.

The fourth reason is overconfidence in the line studies that come with charting packages. None of them are 100% accurate all of the time, and that's because the freakin things ain't omniscient. Ichimoku means 'one look' but I promise that nowhere in its algorithm does it include, "Dubai is totally not going to have enough flow for that Dec. 09 $2 Billion maturing loan." In many ways a line study on a chart is like body language. If a person crosses their arms they might be defensive, threatened, disassociating themselves from the others...or just cold. You have to look in clusters to figure out what's going on. Sometimes you need to turn them all off and take a look at the price line, and on several different time charts.

The fifth reason is because you didn't understand all the parts of the last sentence of the second reason's paragraph. Ha! Tricky...forcing you to read the stuff again...THAT'S A GOOD THING!!!

The sixth reason is that we get spooked. Either we lose money we can't afford to lose and don't have enough to continue after learning from our mistakes, or just lose enough to hit our confidence and make us feel like we'll never be able to do it. Never is a long time, and as I've posted several times, the only way to finally fail is to quit. This doesn't mean that you should never quit; it means you should only trade with small amounts of money until you get confident. Let's face it; it wouldn't take much to beat the bank's interest rates these days if you only do slam dunk trades. Those are the ones where a currency is clearly undervalued and is in dire need of a correction. The problem is that when you're dealing with spreads of about 4 pips online instead of the hundred to hundred-fifty pips at a bank, it's hard not to get involved too early. If you're patient and keep abreast of the news, you limit your risk by a fair chunk.

We really do wish you luck, and the fact is that not everyone has to lose...if every one in the world was in some freakish synchronous rhythm in the markets then we actually could all profit with no loss. I wouldn't get my hopes up for that though.

Be Good, and keep your eye on what'll matter more on your deathbed than in your bank account.
Lack of strategy
 

Petezaa

Recruit
Messages
165
First, I'm going to ask that no one adds a comment of 'Thank You' to this thread, because 1) what I say is far from the last word, and 2) I'd like this thread to be a resource for ONLY those who wish to read an entire thread.
I'll put this on my 'monitored threads' list and take the number of viewers as all the thanks I need....I'm a Buddhist...we don't do gratification.
That said, I'd also have to ask, despite my lack of tenure, that each person who reads this thread to make a note on paper of the comments you'd like to make and wait to see if someone later in the thread has already addressed what you intend on commenting on.

Why do so many beginner Forex traders lose all of their money?

First, the FPA is here to protect you from the non-market risks, namely How to select a forex broker based on informing you how trustworthy the broker is, while trying to protect traders and prevent malicious slander in the form of spam. Another is to protect you from poorly programmed bots, or any other way to get your money away from you other than actual market movements.

I'd like to first point out that, on the same token as how an eight year old can't actually be a good judge of the quality of their teacher, if you haven't done enough reading then you'll inexorably feel that the movements of the market are chaotic. Now, they are chaotic, but to a surprisingly small degree to a well-informed and experienced trader. To sum up quickly, an experienced trader can profitably trade any purchasable or salable commodity, currency, or transferable intangible object.
One can't make that assertion on one's self just based on a successful month of trading on a demo account, and that means that both experience and knowledge are required before the jury can be let out on 'did this broker cheat me.' This is especially true because the traders on FPA are using different brokers, charting systems, and data feeds for current rates, so we can see if there's a discrepancy between the 'real' rates in historical fact and those that have been digitally manipulated by a broker for the broker's profit. I use this specific example to show one regular complaint of inexperienced traders to show that markets can be a major cause of the trader's complete loss of account independent of the broker.
For this matter, I'm going to avoid discussing non-market, or scam, reasons for complete losses of accounts.

First, have you noticed that most demo accounts let you trade with $50K?
In an article I have from just before the credit crisis, to be in the wealthiest 10% of the world's population, you need to have a net worth of $61K. At 100:1 maximum leverage in an account with standard lots, if you traded one lot the wrong way with no stop you'd have to be off by fifty US cents to empty your account. We saw the Swissy go from parity to twenty-one cents over during the credit crisis, but a ten cent drop is a real event. A one cent change is substantial.
It all seems simple. That said, if you have a micro account and you open it with $500, you'd be in the same position. $5000 in a mini account, and it's the same deal.
Wait a second...two things come to mind here. One, two times 5K is enough to buy a cheap car, and most people don't buy a car with a 50% downpayment. Of course there's the other matter of whom you'd trust with half a car of your money...a fool and his money are soon parted they say.
Back to the point though is most people don't have, or can't afford to lose 5K, so logically most forex accounts are started with less.
So you learn on a 50K demo account, and maybe you wing it and figure out rudimentary money management techniques for yourself. For example, maybe you figure out that although you only actually lose money when you hit a stop loss, you have to use stop losses for 1) when the basis of your prediction is clearly no longer likely or 2) capitalizing on the ability to reenter at a position even further away from your stop loss in order to get the profit from the new entry point to your old stop loss, plus the profit you initially attempted to gain. Maybe you also figure out to set your stop loss as less than your expected profit.
The first reason why beginners lose all of their money is because they're underfinanced. If you do a demo with a 50K account, you should only attempt to get half of the profits you aimed for on a live 25K account, a fifth on a 10K, and so on. If you are underfinanced then you won't have as many chances to absorb losing streaks (they really do happen to everyone), or deal with slippage or news events (expected or unexpected). Also, most people think they can use the same number of lots with the same risks on their new live account with their $500 as they could on the $50K, and they can't. I call this 'target management'.

The second reason why beginners lose all of their money is because they risk too much per trade. They're blinded by the potential profit, and they're out before they've had a chance to learn from their mistakes. Simple arithmetic shows that 19 bad trades risking 10% of current account per trade leads to a loss of over 80% of your account, where 19 bad trades at a risk of 2% is a 30ish percent loss. If you want to stay in the game you need to make sure you can be wrong a lot of times before you're out of cash, so I call this 'money management'. 19 bad trades can happen because you bet against the trend, news changed the fundamentals, you flip-flopped your long and short positions trying to catch the trend, you keep on getting nailed by straddling with double OCO orders, you're too impatient, you're overwhelmed by emotions, you're dealing in too many related pairs in the same direction, or your frikken cat sat on the keyboard.

The third reason is because they don't set a risk to yield ratio, or just trade from the gut. A risk to yield ratio is set in order for the profit from one successful trade to compensate for several unsuccessful trades. Thus, if you have a 1:3 risk to yield ratio, you set your stop loss at say 30 pips and your take profit at 90 pips. I also tend to find that if you set your stops too tight that it doesn't give your guess much time to be right, so I never set my stop at less than 15 pips. Now, I must admit that I don't stick religiously to this risk to yield rate if I'm actually watching the charts; I'll sometimes take profit and cancel my OCO take profit/stop loss order. I'll definitely stick to this idea if I have to leave the house or go to bed. If you have a full-time job and are forex trading to personally manage your savings, this is the only safe option. If you have a 1:3 risk to yield ratio you can be wrong twice and right once and still come out with a profit. I call this 'risk management'.

The fourth reason is overconfidence in the line studies that come with charting packages. None of them are 100% accurate all of the time, and that's because the freakin things ain't omniscient. Ichimoku means 'one look' but I promise that nowhere in its algorithm does it include, "Dubai is totally not going to have enough flow for that Dec. 09 $2 Billion maturing loan." In many ways a line study on a chart is like body language. If a person crosses their arms they might be defensive, threatened, disassociating themselves from the others...or just cold. You have to look in clusters to figure out what's going on. Sometimes you need to turn them all off and take a look at the price line, and on several different time charts.

The fifth reason is because you didn't understand all the parts of the last sentence of the second reason's paragraph. Ha! Tricky...forcing you to read the stuff again...THAT'S A GOOD THING!!!

The sixth reason is that we get spooked. Either we lose money we can't afford to lose and don't have enough to continue after learning from our mistakes, or just lose enough to hit our confidence and make us feel like we'll never be able to do it. Never is a long time, and as I've posted several times, the only way to finally fail is to quit. This doesn't mean that you should never quit; it means you should only trade with small amounts of money until you get confident. Let's face it; it wouldn't take much to beat the bank's interest rates these days if you only do slam dunk trades. Those are the ones where a currency is clearly undervalued and is in dire need of a correction. The problem is that when you're dealing with spreads of about 4 pips online instead of the hundred to hundred-fifty pips at a bank, it's hard not to get involved too early. If you're patient and keep abreast of the news, you limit your risk by a fair chunk.

We really do wish you luck, and the fact is that not everyone has to lose...if every one in the world was in some freakish synchronous rhythm in the markets then we actually could all profit with no loss. I wouldn't get my hopes up for that though.

Be Good, and keep your eye on what'll matter more on your deathbed than in your bank account.
Because most people don't have the mindset for trading unfortunately.
 

downtrend

Sergeant
Messages
878
Taking risk is no skill it is a total danger when you practice it without a management plan. This is the reason for loss for most of the traders some can lose a high percentage of capital and some are conscious after a small loss.
 

irenefernandes

Recruit
Messages
3
This is something very common with every beginner in Forex trading, we need to be patient, understand the price movements of currency pairs and choose the leverage ratio correctly, try to identify the potential risks and then take a decision with minimum investment at the beginning.
 

blueskys3434

Recruit
Messages
1
Hello, I am using mt4 for demo btc trading, which company in the USA provides 24/7 legitimate trading info and is a safe company to place you money with?

I have had a lady on a dating site to trying and scam me, but i did not fall for it.
 

justdefy

Recruit
Messages
1
First, I'm going to ask that no one adds a comment of 'Thank You' to this thread, because 1) what I say is far from the last word, and 2) I'd like this thread to be a resource for ONLY those who wish to read an entire thread.
I'll put this on my 'monitored threads' list and take the number of viewers as all the thanks I need....I'm a Buddhist...we don't do gratification.
That said, I'd also have to ask, despite my lack of tenure, that each person who reads this thread to make a note on paper of the comments you'd like to make and wait to see if someone later in the thread has already addressed what you intend on commenting on.

Why do so many beginner Forex traders lose all of their money?

First, the FPA is here to protect you from the non-market risks, namely How to select a forex broker based on informing you how trustworthy the broker is, while trying to protect traders and prevent malicious slander in the form of spam. Another is to protect you from poorly programmed bots, or any other way to get your money away from you other than actual market movements.

I'd like to first point out that, on the same token as how an eight year old can't actually be a good judge of the quality of their teacher, if you haven't done enough reading then you'll inexorably feel that the movements of the market are chaotic. Now, they are chaotic, but to a surprisingly small degree to a well-informed and experienced trader. To sum up quickly, an experienced trader can profitably trade any purchasable or salable commodity, currency, or transferable intangible object.
One can't make that assertion on one's self just based on a successful month of trading on a demo account, and that means that both experience and knowledge are required before the jury can be let out on 'did this broker cheat me.' This is especially true because the traders on FPA are using different brokers, charting systems, and data feeds for current rates, so we can see if there's a discrepancy between the 'real' rates in historical fact and those that have been digitally manipulated by a broker for the broker's profit. I use this specific example to show one regular complaint of inexperienced traders to show that markets can be a major cause of the trader's complete loss of account independent of the broker.
For this matter, I'm going to avoid discussing non-market, or scam, reasons for complete losses of accounts.

First, have you noticed that most demo accounts let you trade with $50K?
In an article I have from just before the credit crisis, to be in the wealthiest 10% of the world's population, you need to have a net worth of $61K. At 100:1 maximum leverage in an account with standard lots, if you traded one lot the wrong way with no stop you'd have to be off by fifty US cents to empty your account. We saw the Swissy go from parity to twenty-one cents over during the credit crisis, but a ten cent drop is a real event. A one cent change is substantial.
It all seems simple. That said, if you have a micro account and you open it with $500, you'd be in the same position. $5000 in a mini account, and it's the same deal.
Wait a second...two things come to mind here. One, two times 5K is enough to buy a cheap car, and most people don't buy a car with a 50% downpayment. Of course there's the other matter of whom you'd trust with half a car of your money...a fool and his money are soon parted they say.
Back to the point though is most people don't have, or can't afford to lose 5K, so logically most forex accounts are started with less.
So you learn on a 50K demo account, and maybe you wing it and figure out rudimentary money management techniques for yourself. For example, maybe you figure out that although you only actually lose money when you hit a stop loss, you have to use stop losses for 1) when the basis of your prediction is clearly no longer likely or 2) capitalizing on the ability to reenter at a position even further away from your stop loss in order to get the profit from the new entry point to your old stop loss, plus the profit you initially attempted to gain. Maybe you also figure out to set your stop loss as less than your expected profit.
The first reason why beginners lose all of their money is because they're underfinanced. If you do a demo with a 50K account, you should only attempt to get half of the profits you aimed for on a live 25K account, a fifth on a 10K, and so on. If you are underfinanced then you won't have as many chances to absorb losing streaks (they really do happen to everyone), or deal with slippage or news events (expected or unexpected). Also, most people think they can use the same number of lots with the same risks on their new live account with their $500 as they could on the $50K, and they can't. I call this 'target management'.

The second reason why beginners lose all of their money is because they risk too much per trade. They're blinded by the potential profit, and they're out before they've had a chance to learn from their mistakes. Simple arithmetic shows that 19 bad trades risking 10% of current account per trade leads to a loss of over 80% of your account, where 19 bad trades at a risk of 2% is a 30ish percent loss. If you want to stay in the game you need to make sure you can be wrong a lot of times before you're out of cash, so I call this 'money management'. 19 bad trades can happen because you bet against the trend, news changed the fundamentals, you flip-flopped your long and short positions trying to catch the trend, you keep on getting nailed by straddling with double OCO orders, you're too impatient, you're overwhelmed by emotions, you're dealing in too many related pairs in the same direction, or your frikken cat sat on the keyboard.

The third reason is because they don't set a risk to yield ratio, or just trade from the gut. A risk to yield ratio is set in order for the profit from one successful trade to compensate for several unsuccessful trades. Thus, if you have a 1:3 risk to yield ratio, you set your stop loss at say 30 pips and your take profit at 90 pips. I also tend to find that if you set your stops too tight that it doesn't give your guess much time to be right, so I never set my stop at less than 15 pips. Now, I must admit that I don't stick religiously to this risk to yield rate if I'm actually watching the charts; I'll sometimes take profit and cancel my OCO take profit/stop loss order. I'll definitely stick to this idea if I have to leave the house or go to bed. If you have a full-time job and are forex trading to personally manage your savings, this is the only safe option. If you have a 1:3 risk to yield ratio you can be wrong twice and right once and still come out with a profit. I call this 'risk management'.

The fourth reason is overconfidence in the line studies that come with charting packages. None of them are 100% accurate all of the time, and that's because the freakin things ain't omniscient. Ichimoku means 'one look' but I promise that nowhere in its algorithm does it include, "Dubai is totally not going to have enough flow for that Dec. 09 $2 Billion maturing loan." In many ways a line study on a chart is like body language. If a person crosses their arms they might be defensive, threatened, disassociating themselves from the others...or just cold. You have to look in clusters to figure out what's going on. Sometimes you need to turn them all off and take a look at the price line, and on several different time charts.

The fifth reason is because you didn't understand all the parts of the last sentence of the second reason's paragraph. Ha! Tricky...forcing you to read the stuff again...THAT'S A GOOD THING!!!

The sixth reason is that we get spooked. Either we lose money we can't afford to lose and don't have enough to continue after learning from our mistakes, or just lose enough to hit our confidence and make us feel like we'll never be able to do it. Never is a long time, and as I've posted several times, the only way to finally fail is to quit. This doesn't mean that you should never quit; it means you should only trade with small amounts of money until you get confident. Let's face it; it wouldn't take much to beat the bank's interest rates these days if you only do slam dunk trades. Those are the ones where a currency is clearly undervalued and is in dire need of a correction. The problem is that when you're dealing with spreads of about 4 pips online instead of the hundred to hundred-fifty pips at a bank, it's hard not to get involved too early. If you're patient and keep abreast of the news, you limit your risk by a fair chunk.

We really do wish you luck, and the fact is that not everyone has to lose...if every one in the world was in some freakish synchronous rhythm in the markets then we actually could all profit with no loss. I wouldn't get my hopes up for that though.

Be Good, and keep your eye on what'll matter more on your deathbed than in your bank account.
Wow really? 61k to be in the top 10 Percent? Bhaahha I guess im in the top 5 then. whoops.
 

JayJones

Master Sergeant
Messages
255
Because forex is hard.

But all the marketers try to make it look easy so you invest with them.
 

Albert Dcosta

Corporal
Messages
70
The reason behind the failure of 80% to 90% traders is that they not fully get knowledge of forex business. Having low trading experience, not able to make any plan or strategy for trading and risk management during trading. These all factors counts a lot. If they do not lose all their money they bear a huge loss. It Is obvious until they will not practiced with minimum investment they can not deal good with high investment.
 
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