The Forex market is be the largest financial market in the world where participants can make good returns on their investments over a given period. This lucrative and liquid nature have attracted millions of traders all over the globe.
But the market also bears a huge amount of risk with it as both buyers and sellers are competing over various traded currencies
This risk factor if not carefully managed may cause serious losses to Forex traders & investors who don’t apply proper money management when trading on their investment.
I have therefore described 3 major reasons that causes losses to Forex traders. This list is for educational purpose only and it is not enough for you to based your money management principles on this list.
Greed is seen as a chronic cause for Forex traders loosing all their money, as trades that should hitherto been closed in small consistent profits end up been closed in major losses that eventually wipe out the entire account
Most Traders do not have a profit target, as they wait for more profits to the one they have already made in an open trade, ending up loosing everything in big losses.
This is another fundamental reason traders loose their funds in the market as they are not patient enough before a trade enters profit. Most times, the markets may range for days before moving into positive territory.
Many traders don’t have the time to wait for these movements, as they quickly close their trades in losses for the fear of avoiding bigger losses only for the market to move their trade direction some few minutes/hours later
For me, ignorance and inexperience is the most important factor that traders should be aware of. Its very important for traders to understand how Forex trading and the Forex market works before venturing into it.
Experience is very critical for a smooth Forex trading career, therefore it is advisable and highly recommended that would traders spend lots of time training and practising the act of of professional forex trading before starting to trade.
This list was conceived out of my thoughts, i believe there are still more factors that may also cause losses to Forex traders, so please feel free to include them in the comment box below so everyone could benefit.