Why are Forex traders losing money in 2022?

What are the reasons why the vast majority of traders lose money? This is an interesting question that will help you better understand the market and give you an insight into What you must not do although it is very contrary to what you have read so far.

A list of all the mistakes I have seen within the industry in all this time, some that I have made myself and others that I see repeated over and over again:

1. Insufficient training to start trading

Over 70% of beginning traders go bankrupt within the first month. This data already says it all. It’s not that they lose money, it’s that they lose all their money. It is curious as for any other type of profession such as a doctor, teacher, dentist… we dedicate years and to trade you turn on your computer, watch some free videos on the Internet and you already believe that you can make a lot of money in one or two days. Whoa, mom!

This does not mean that you have to spend years studying and training until you can start, just that your training requires time and doing things well beyond rushing and running and burning your account.

2. Bad focus and no perspective

As you already know, there is a lot of information on the Internet about the study of graphics (charting) and technical analysis. A lot of copied and pasted information that you start to devour and that many people apply over and over again. This has two consequences:

  • The vast majority of people lose money because apply the same and this ends up causing these patterns to not be fulfilled in the market.
  • This way or approach to analysis is very subjective and it makes you not know if what you are learning or applying works.

I do not mean by this that x thing it does not work. What I mean is that there are many people teaching how to trade from twenty page manuals without opening a real account or without results. exist few barriers to entry in terms of training and most of them are very theoretical.

All of this, coupled with the idea that you can open a $100 trading account and take it to $1,000 in a couple of days, is a fateful cocktail. Someone recently asked me if I could earn 5 euros a day with 100 euros. We are talking about 5% daily. My answer was “For how many days?”. You can earn 5% one day, but you can’t expect to earn 5% or 1% every day. You know why? Because profitability in such a short term does not depend on you. I like to say this because the reaction from the other person is usually to think “Okay, you don’t know, but you can”. After a while, that person usually remembers you. Sometimes the human being needs to be wrong to realize things.

All I can tell you in regards to all this is that you need to see this business with objectivity and with real perspective.

3. Emotions interfere with your trading

It is normal that you do not feel the same when your account goes up than when your account falls. We have emotions and that you feel them is normal. The problem comes when you do it the other way around and your emotions interfere in your operations. For example, your adrenaline surges and you start to increase your exposure and position sizes or, even worse, you are losing and start making trades without rhyme or reason. It works something like this, “Wow, I’ve had three operations and they’ve all been positive. From now on I’m going to double my tickets.” Or like this, “The last two operations have been negative, abandonment.”

you need to create a methodology that makes you make cold decisions. I have achieved this with algorithmic tradingI focus on creating systems and evaluating them, measuring them… and once they are running, I limit myself to supervising them. This way you gain x1000 peace of mind and feel relaxed, knowing that you do everything in your power.

4. Not limiting losses

I am not only talking about stop losses that limit your loss when an operation goes against you (of course you have to apply them). I’m talking about having the ability to eliminate strategies that are performing poorly for others that may work better.

What most traders usually do is apply a single strategy. As you know, every strategy has a winning phase and a losing phase. What can you do when you only have one strategy and it starts to lose? Wait, little more. However, if you work with different strategies you can remove from your account those that behave the worst and constantly incorporate those that do it best. This will make it not depend only on one system and your curve will be more stable.

Limiting losses is a key aspect for survival. Someday whatever system you are using will stop working. What are you going to do then?

5. Make predictions

If you are a trader, you will often be asked something like “what do you think of the bitcoin price?”. The reality is that no one knows unless you have inside information about it. And it’s not usually common unless a family member of yours is a colleague of Trump’s.

Making predictions in the press or social networks is very cheap. In the case of not complying, people usually delete the tweet or forget it. But if everything goes as they said, they will say that they were right and that they are experts at it. You should not as a trader depend on this.

You also don’t need to make predictions to make money. You need trading systems with a statistical advantage in your favor. Don’t be overwhelmed by how to do it, today there are tools that allow you to do it without programming and create your own arsenal. This is what I myself do and I recommend you do: focus on creating strategies, check that they are robust, apply them and monitor. That is all.

6. Trading scams

Yes, unfortunately there are many scams on the internet related to trading. Brokers without regulation, groups of signals that make up their results, martingale robots that will blow up your account… you need to know that all this is there and not fall to know what is best for you. Need to differentiate what suits you from what doesn’t.

Do you want profitability or do you want to lose everything now? Many people fall for this type of scam not because they are clumsy, but because they have the illusion of multiplying their money in a few hours and just in case they try… It happens in different sectors, in sports betting, online stores that do not deliver their products, etc. . This has been and will be there. The question you have to ask yourself when a broker calls you offering something is if it is aligned with your interests. This type of broker wins when you lose… Would you want a partner for your business that would earn money if things go wrong for you? Has no sense. Just get away from all this and keep your head clean to focus on what really interests you: generating profitability.

7. Lack of persistence

Many people are drawn to trading as a way to make a quick buck. They start, they start with a lot of risk and when a losing streak comes they stop. They don’t know exactly what the topic is about. They seek to earn money already doing anything. And they end up losing money doing many things. All without results.

Like any other business, you will need to take a time and not run away at the first opportunity. If you are not really attracted to trading and only look for results, you have many ballots for you to leave through the back door.

change the chip

It may seem complex but it is very easy to evade all of the above. From not reading news that biases you or predictions, from being relaxed looking at your screen while you watch how the EAs are running. I don’t know what will happen with the price of the EUR/USD pair, nor with EUR/GBP… I dedicate myself to creating strategies that have worked based on profitable patterns. I put them to the test and gauge their robustness and work with a high enough number that I don’t obsess over how one performs. I eliminate the ones that don’t work well and incorporate the ones that are working correctly.

It all comes down to work with systems that make you take positions without thinking too much and reacting on impulse. The only thing we have as traders is the ability to see how things have gone in the past. We do this through backtesting. Doing reliable backtests and managing your strategies in the present is the way I have managed to achieve results, doing all of this in a scalable and bearable way.

If you can automate to leave divergences out of control, do it manually, but you can start at your discretion. The important thing is not to automate for the sake of automating, the important thing is to apply strategies that work. This is what is in your hand. Now the question is, how do I know what works? The answer is simple, focus on the statistics.

And so far the most relevant points that I have observed in recent years and that take money out of the pocket of traders. If there is any other reason on your mind why you think Forex traders lose money, write it in the comments.

Thanks so much for reading! Share it if you think it can help someone.

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