5 Surefire Ways to Lose Your Money in Forex Trading

ByJoseph CK Chua

Expert Author Joseph CK Chua

While we all enter the forex trade to make money, we have also seen that there are things you can actually do or fail to do and your money will go down the drain. The truth of the matter is that losing money in forex trade does happen and sometimes it becomes the easiest way for some people to learn important lessons as they learn the ropes. There are millions of traders who failed or are on the brink of failure because of some of these simple matters. You can decide to remain among the successful people or choose one of these 5 surefire ways to lose money and learn the hard way.

1. Over confidence in one or more trades: When it comes to forex trade, your motivation plays an extremely important role; making money is a good motivation and while you may actually achieve it, this motivation can actually easily lead to your downfall. This motivation can easily welcome greed that could lead you to putting a huge amount of your trading account on trade at one go while trying to make a killing. You must remember that while things work out straight in the demo accounts there is usually no money that is involved and as such you should not imagine that you can double your money in one single trade. The best trading strategy has always been trying to make sure that you only risk 1% of your capital especially when you are a newbie.

2. Failure to put a correct stop-loss: While no one will force you to set a stop-loss point, it is always an important strategy that will automatically protect your investment when the program begins to take a downward trend. A proper stop-loss level will protect you from inadvertently losing your entire investment as a beginner.

3. Failure to trade on reality: A small dose of success can very easily blind a new trader to such an extent that strategy gets to sink and the emotions take over. You must remember every time those profits were made because you followed the correct principles and not really for the sake of whom you are or your personality. Any level of success that breeds over confidence that could easily get into your head and you end up losing your entire loot. You can only avoid a stop-loss order when you have become a professional and that takes time.

4. Putting all your eggs in the basket: There are thousands of new traders who never want to 'waste time' with demo accounts since they have learned all the correct principles and strategies and as such they open a live account straight away. The other group will be so excited with their performance on the demo account and end up putting a large chunk of money in their live account on the first instance. You must appreciate the fact that you are most likely going to employ your emotions the first time you begin trading and you will almost always lose the entire amount. Your money will be safe if you remember the following important tips:

- Don't open a live account with a huge amount of cash
- Make sure you use the success strategies you used in your demo account
- Any new system you improvise can only be tested on a small amount of money
- While losing money is expected, you cannot afford to make avoidable mistakes

5. Sometimes it just happens: It is possible that you have used all the correct strategies and principles but because of some forces beyond your control, you could still lose your money. When things happen because of reasons you cannot explain, you don't have to take a beating from yourself but just relax and tell yourself that you are going to try again. Don't allow any initial losses cause you to give up on your noble goals to becoming a forex trader.

Find out more about trading psychology and learn how forex trading success can be more about your mindset and less about the markets.