It has been said time and time again that the majority of people that decide to trade i’ll lose, the chances of becoming a successful trader are stacked against you but it is certainly possible. Having said that, even the most successful traders make some trades that end up with a loss. This is simply a part of trading, even good trades can lose, but what we will be looking at today is some of the reasons why people end up making bad trades that lose. There can be many reasons for it, some are user error and some are based around the markets. So let’s take a look at some of the reasons why some people lose their trades.
Not striking with a tried and test strategy:
Consistency is a major part of trading. The problem is that when you experience a title downturn it is very easy to just consider that the strategy that you are using just does not work and so you need to look for something else. This Is a bad move, most strategies are created with losses in mind and they are able to get through a series of losses with little damage to the account. So as soon as you jump ship and start a new strategy, you are simply writing off the losses that you have already incurred which is not a smart thing to do.
What you need to do is to do a little bit of experimenting, try using different timeframes, different currency pairs or assets, try trading during different trading sessions. Do this until you find the strategy and style that works for you. Once you have done this you need to stick with it, build a strategy around what works for you, as soon as you start using untested strategies or jumping between different ones, you are putting your account at risk and it will be far harder for you to be consistently profitable as even though you will have losses, a tried and test strategy will be able to get through that to become profitable in the long run. There is no need to rush to find the perfect strategy, the markets aren’t going anywhere, it should also be noted that you should be doing this testing on a demo account so you do not risk your own capital during this testing period.
Risking too much per trade:
Many of the so-called standard strategies out there will have you risking between 0.5% and 2% of the account. This is designed to keep the account safe, the problem comes when people start to go higher, there are those outta here that decide to risk 10% of the account per trade or even more, some risking everything with a single trade. We are sure that you can work out what happens next, with a lot of strategies you are bound to lose more trades than you win, as you are risking so much per trade this puts your account in a lot of danger. You need to be using proper risk management, as soon as you risk more, your strategy is no longer effective and you are putting your account in danger of both losses or completely blowing.
Make sure that your account has a proper risk management plan in place, this is designed to ensure that your account remains safe and includes things like the risk to reward ratio, your strategy may only require a 40% win rate, so do not get disheartened with each loss and ensure that you stick to the risk plan, do not start placing larger trades due to a loss, this will only lead to eventual losses overall.
Not being mentally prepared:
Being mentally prepared to trade is a huge part of trading and certainly trading successfully, the problem is that most people are not mentally prepared for it and simply go in blind. When we put some of our money on the line there are a lot of different emotions that come with it, things like fear, greed, and other emotions that can make trading quite hard. They can also cause you to make mistakes, so being prepared and knowing how to circumvent these emotions is vital for becoming a successful trader.
Not understanding the indicators, times, and the markets:
Trading and forex is an incredibly complex machine, in fact, it is so complex that there is not a single person on earth that knows everything, and there most likely never will be. What you can do however is to specialise on a small bit of the markets, to create your own niche that you will trade in. So once you have your little corner, you need to work out which indicators are relevant to your strategy, there is no point in putting 100 different indicators, this will simply make your charts a mess and impossible to read, instead, learn how a few of them work and how they impact your trades, then learn them and put them on, you should also work out the best times to trade for your strategy, all of these things are vital to understanding should you wish to become successful and profitable.
Simply having a bad day:
Sometimes we just have a bad day nothing is going right, it could be our fault or it could not be, but if you feel that everything you do is going wrong, it may be time to take a step back. Things outside of trading are causing you stress which you then bring into trading, step back, there is no harm in taking a day’s break from trading should you feel that you are not up for it, the markets will still be there tomorrow so you won’t be missing out.
So those are a few of the things that can cause people to lose trades, we have most likely done or experienced all of them at some point in our trading careers, but it is good to get an understanding of what they are so you can hopefully help prevent them from affecting you in the future.
