Reasons For Loss While Trading Financial Instruments
Reason 1. – Nearly every losing Trader has no Money Management or Trade-Management-Plan!
As I told you before, you could pretty much flip a coin on any pair – and still, make very good money in Forex just by having the right money management in place.
I still think that it is even better to look for the best possible entries to make the odds of success as high as they can be, but it´s possible to make a lot of money, just by having the right Money Management and Trade Management System in Place.
If you want to become a consistently profitable trader, you need to have a good money management and also a good Entry and Exit strategy, that´s for sure.
I´m telling you, almost nobody got both of it.
They either have a terrible plan in place that doesn’t fit for the different types of markets, or they have no plan in place at all, and just trade “by feel”. Believe me, trading by feel is dangerous.
Reason 2. – Nearly every losing Trader ignores Volatility!
So many Forex traders have a trade management system in place that says to enter “x” amount of lots for every trade.
Never mind that the GBP/NZD has almost 3X more volatility than the EUR/GBP on the daily chart. YOU CANNOT TRADE THEM THE SAME WAY!
As a professional, you need to adjust your lot size and your stop levels and take profits, depending on the market conditions.
Reason 3. – Nearly every losing Trader cap their upside!
Another common way of managing trades is to have a profit: loss ratio like 2:1 or 3:1.
The problem these rations have is, that you cannot ride the Big Trends, and this is what holding you back from becoming consistently profitable. You need to understand, that my long runs, my big, successful trades combined with my capped downside made me a consistently profitable trader.
So make sure, that you give the market the chance to fill your pocket with a big move, every time you enter a trade.
Please understand, that It´s all about catching the Big Trends! This is how we make money.