The Forex Trader: 3 Reasons Why They Lose Their Deposits and How to Avoid Them
There are many reasons why Forex traders lose their deposits while trading currencies. Though these reasons are varied, I have simply considered three major ones. Any other suggested reasons could be adduced from these major ones because they are the most common among traders as can be seen from my discussion here. They are mainly:
The psychological effect of using real money to trade live as different from using virtual funds in demo trading.
The impatient factor in reading and interpreting the daily chart correctly by traders.
The problem of wrong application of trading rules.
In the first reason, we know that Forex trading platforms provide free virtual funds for traders to use and learn how to trade. These practicing Forex charts usually have between five thousand and ten thousand dollars free for demo trading.
Therefore when we make losses while trading, it hardly affects us psychologically. We try all sorts of trading practices and systems including the use of high lots to trade without bothering about losses. We know that the money is not real fund.
From my personal experience, I only feel bad for a short while when I lose money while trading with virtual funds. This is because I consider Forex trading as serious business and a demo trading account is a good starting point to develop trading strategy and learn how to protect my fund.
When we begin to trade with live funds, the feeling becomes different. We keep remembering that our hard earned money is at stake. We begin to get fidgety and panic whenever there is a draw down on our account while trading. This often leads us to take erratic decisions which eventually produce losses in our trade.
What then is the solution to this problem? It is simple. We should take our demo trading as serious as we will regard our live trade. We should experiment with smaller lots in our demo account as we will do with our real money or live funds. We should regard our profit in demo account as real profit and our losses the same way and trade with only 10% of our fund as in live funds.
If we get used to this idea, It will pay us better at the long run because we will trade with confidence in our live account.
In the second reason, some of us traders can not be patient enough to read and interpret the daily charts correctly. This often leads us into taking wrong trade decisions which eventually result to losses while trading. apex trader funding sale
Correct reading and interpretation of daily charts helps us to find out the possible directions of trade for the day. Forex traders lose their deposits when they enter trades in a wrong trade direction for a particular currency pair for the day.
The solution to this problem is that we should patiently read, understand and correctly interpret the chart for the minutes, hours and daily as a routine.
The last reason why Forex traders lose their deposit is the problem of wrong application of trading rules. Sometimes, it will not be enough to read and interpret the charts correctly. The result has to be applied correctly too.
I recall once when I made such an error and paid dearly for it. I had patiently read the chart as I was taught to do every morning. However I noticed that there was a difference in trade direction as predicted by higher time frames as against the lower time frames. I began with the lower time frame and made my entry I closed some trades and picked my profit leaving out the last one. When the direction of the trade on the lower time frame completed its runs, it failed to take action to close my trades and take profit because it did not hit the target. The result was bad for me.
AUTHOR: JAZZY EXPERT – Search Engine Optimization Team Head at Linkendin