Why do Traders Lose?

While trading in the Forex is simple and accessible to anyone around the world, it does not mean that each trade will result in profits. Opening a position on a currency pairs brings with it a certain level of risk that it will end up moving unexpectedly in incurring traders a loss.

This risk, however, can be managed by proper strategizing and execution since many losing trades are the result of undisciplined or information lacking traders. Some of the most common mistakes that lead to losses are the following:

Guessing instead of Analysing
When picking a currency pair to trade, there are many options available to determine which one can be the most profitable. You can either study its chart and price movement to find out what trend it is currently following or use economic indicator as clues to whether what direction it will take in the near future. Losing trades are those that skip this all important step, resorting instead to pick one at random and hoping it will turn out to be a good choice.

Disregarding the Plan
Traders should always know when they are willing to exit a position to either cash in their profits or cut off their losses. Sometimes, however, excitement or fear can take over and lead to traders not following their original plan. They could end up overstaying to a point that they lose what profit they already have gained or closing a position too early because it started to move in the opposite direction they wanted it to.

Not Using Stop Losses
Stop losses is a powerful risk management tool. By placing them on each trade you make, you can assure yourself that you will not lose more than what you are willing to risk to make a profit. This way, you can leave your positions open to garner larger profits. Failing to use stop losses means that you are leaving yourself vulnerable to losing your entire account.