Why do people lose money in the forex market?

Q:

Why do people lose money in the forex market?

A: 

Most individual investors lose money in Forex due to the wrong attitude.
Trading is an occupation. And, just like any other occupation, it requires a proper mindset, education, experience and discipline.

What one man can do, another can do. The problem is that the majority of people treat trading as gambling and wonder why they lose money.

Here are some ways people will lose out:

1.Poor risk management

Forex is leveraged trading and it’s incredibly easy to wipe out your account by risking much more than what you can afford.

What is the evidence that poor risk management is the major cause of project failure? It is very simple to claim that any adverse effect is due to poor risk management, so it must be true.

Poor planning is poor planning. Failure to perform risk management on poor planning can hardly be the cause for failure.

Having solid risk management will keep you in the game a lot longer, which means you get a lot more time to make mistakes and learn from them.

2.No discipline

Discipline is something that is often overlooked in an ocean of indicators, trading strategies and forex signals. But discipline is so incredibly important. Once you reach a decent level of forex knowledge, this is what most of us will be struggling with. So many people jump into trades, just to feel the excitement of being in a trade

3. No structure

It’s bad for 2 reasons: 

-  Since you have no record of your trades, you can’t figure out what works or what doesn’t. 

-  You’re much less accountable if you don’t have a clear trading plan and journal in place, so you’ll be much more likely to just impulsively try something. 

A trading plan and journalling every trade can provide that structure.

4. Strategy jumping

This is one I see a lot with beginning traders. They want to try some new strategy. After 3 trades, they figure out it’s not working and jump to another strategy. The same happens with indicators. What most traders forget to realise though, is that you need time to make a strategy your own. This doesn’t happen overnight! You have to learn the ins and outs, figure out what works and what doesn’t. Try out the strategy over a long enough period of time to make it statistically relevant.

5. Perseverance

Don’t expect forex trading to be something you can pick up in an afternoon!Treat trading as a business. Study, put in the hours, take it serious and above all, you should love trading. You’ll see that if you stick around long enough, results will come.

Good luck!

Source : quora