Why Do You Keep Losing Money in Forex Market?

Trading should be considered as an absolutely serious career under no matter which perspective and viewpoint that an individual owns: a full-time Trader or a Speculator. If you consider Trading as an emotionally-oriented job, you should probably stop. The obvious phenomenon is that after those careful consideration and evaluation of your trading performance at a certain time, you will find out the results is not quite ideal. What traders should not do in this case is getting over-worried about that because trading itself has never been an uncomplicated process, if not mentioned as extremely complex and reckless. Hence, not only do we need a measurable Trading Plan, we do imperatively have to follow it. In this article, the author only focuses on the principles to form a basic Trading Plan, not the details in an academic perspective, which helps traders to be assured of efficiency and ease of implementation. This plan might not help your trading get better, but it is completely enough for you to have a more effective preparation and risk management step.

In this article, the author will mention the Lessons drawn from the real experiences that every newbie in the forex market or even a full time trader can occasionally encounter. There is a chance that you will see yourself being reflected somewhere during this writing, and if it is so, do not over-worry because maybe the experiences that the author shares later will be helpful in terms of perfecting your trading process. Keep in mind always that Trading is a long-term story, it needs constantly updating and never let yourself be distracted by the current balance in your account as it is not likely the number that should be considered a Profit.

Forex - No one can control the market

What the author mentions here is the market trend. As Dow Theory had assumed: “Manipulation of the primary trend is not possible, the primary trend will remain unaffected”, especially for a trillion dollar market like Forex. News or events can make the market fluctuate temporarily (Flash Crash) and then the price will return to the old trajectory. No one can have enough market power to manipulate the market prices, you are of no exception.

Yet, not being able to control or manipulate the main trend does not mean that we can not seek for a profit, which is the main even the sole purpose of a trader participating in this field. “Do not try to tame the waves, follow them” is the very first lesson.

The most frightening psychological state in Trading appears when constant win and profit will give traders the illusion that they have already procured everything and the market will “run after their thoughts”. The more seriously you let this tendency of thinking persuade yourself , the higher price you will have to pay in the future and sometimes it could be all of your account balance.

In another aspect, the reason why you did not behave in the way that market told you was because of the trend mis-perception and you chose to take the risk instead of accepting it to cut loss. If you fall into this category, spend time focusing on the most basic terminology: Trend-line. The primary trend should always be prioritized, and in case you are a beginner, place an order during the reverse stage of a trend as limited as possible. And if you still want to play the “going against the world” hero, lower the trading volume to half of the amount you normally go for.

Stop Loss and Exit Point

Stop Loss is not simply a matter of accepting the fact that the individual Trading Strategy could be wrong, but it should be broadly understood as: Accepting small losses to seek Profits at a better and clearer opportunity. This factor is called opportunity cost in economics, whenever you open a position, it also means that you miss another opportunity in the market. No trading method system can resist without a stop loss level. And as mentioned above, when the market trend has already been confirmed, there will be no chance that you can survive the loss being made and waiting for the account to explode is the only choice.

If Stop Loss acts as an account insurance, the Exit Point represents yet another dimension of Trading Psychology: Greed and Do not know where to stop!

The Exit Point, under a broader angle, will be totally different from Take profit point (Expected profit target of the strategy), is used to liquidate the order to ensure capital adequacy and preserve the profits. The timeless story in Trading is: The price reverses and has a tendency of returning from the TP point even when it has not approached the TP point yet, traders go from taking profit state to trying in vain to cut loss state. Determining the Exit Point will be an important key to protect the account (in pair with the SL) as well as control the “Greed” in Trading.

Greed and Fear

Greed is Traders biggest enemy, being manifested under the circumstance that even though the market has already appeared to be in favor of your prediction and orders, you still does not want to take profits and continue to expect to gain more. You are earning $500 and the market shows signs of a reversal and you only have $400 left. Greed and nostalgia will emerge, and then that amount of $400 will gradually decrease and lead to a loss.

Another state of “Greed” is the situation when you try to take advantage of a favourable daily market and the matter of compounding in which you hope that everyday should achieve the same level of profit. In fact, the market is inherently complicated, this kind of mindset will quickly put your account into jeopardy because capital management process is considered most difficult when your asset is affluent.

The opposite side of Greed is Fear, the most typical of which is Fear Of Missing Out (FOMO). This syndrome is generated when Traders have a habit of observing market in short time frames or under the influence of the majority continuously.

Trading capital needs a clear signal and confirmation from the market. You may lose opportunities today but the market is still there, there will always be other countless better and clearer opportunities. Do not be afraid to take chances! Be afraid of losing money! (1) Follow your Trade intuitively and the signals of the trading system; (2) Prioritize the primary trend and practice on a large time frame. 95% of Traders who are losing everyday, most of them didn't follow these two rules.

In this Trading Logs, each strategy will be a lesson providing you a clear path to a non-stop development. The most important is that train yourself into the habit of strictly following this rule and principles. The summary can be found below and wish traders get better every day!