Why do forex traders lose money in the forex market? A Guide for all Nigerian traders

By: Damian Okonkwo

The desire to make huge profits from little investment has been the major factor causing more loss for forex traders in the forex market today. Driven by the desire to make huge profits, some forex traders tend to neglect the need for proper risk management. Many proceed to use excessive lotsizes beyond their capitals to take positions in the market. The results is that they lose their capital in any incidence of high market volatility. To make profits in the forex market requires discipline and a proper understanding of the structures that moves the market. Without this basic knowledge of the fundamental factors that cause volatility in the market, it will be all the more difficult to make profits in the forex market today.

Major reasons why forex traders lose money in the forex market today

A. Over-leveraging: The fact that forex brokers often provided enough leverage to traders for trading has often pushed some traders into choosing excessive lotsizes when taking positions in the market. This endangers their capital in cases of high market volatility especially when the market moves against their direction by a large pips difference.

B. Wrong predictions: Forex trading is largely speculative. None is sure of the market. Traders only predict the possible direction for the market over a period. However, there is no guarantee that the market will go in such a direction. Hence, traders tend to lose money when they make the wrong predictions and the market hits their set stoploss or when the loss equals their capital.

C. Market Manipulations: Some desk dealing brokers without proper regulations are known to manipulate the market, setting the market direction against the majority of their clients. It is therefore very necessary for every forex trader to ensure that he trades with a regulated and trusted forex broker.

D. Poor trading strategy: The strategy used for trading by a given trader often determines the number of profits he makes from his trades. A poor trading strategy could bring the trader more loss than any other factor. Traders are therefore expected to develop excellent trading strategies to help them maximize their profits.

E. Little Capital: Very often, some traders tend to begin their trading experience with very little capital often below $100.00. This is very risky as the trader tends to use the same lotsize for a $100 account to trade other accounts below $100.