Why Do Most Traders Lose Money?

<WikiFX Malaysia Original – Editor: Fion>

Although there could be a myriad of reasons why most traders lose money and end up giving up on trading, the most significant factor is this: they lose their capital by risking too much of their capital.

Many traders who do not succeed often fall into the victim mentality and blame it on the markets. The truth is, the market is always there, moving the way it is supposed to. What these traders fail to fathom is that they are entirely accountable for each trade they place and are wholly responsible for blowing their own accounts.

The biggest advantage of the currency markets is the low barrier to entry. Anyone could become a trader and enjoy the potential of reaping profits with just a few clicks after opening and depositing into a trading account.

(To find a reliable broker, visit www.wikifx.com or download the WikiFX app on Google Play/App Store.)

However, this is only the starting point. To become a successful trader, one must treat his trading account like a business.

Running a conventional business often incurs many variable costs on top of the initial investment, such as inventory, rent, wages, and overhead costs. Most of these expenses fluctuate regularly and the only thing a business owner could do is to keep such costs as low as possible to ensure long-term sustainability. Moreover, a business owner also needs to be realistic in their pricing and profit projection to stay competitive within the industry.

Understanding the concept of cost reduction and the importance of setting rational profit targets is crucial for a traders success. Instead of wishfully thinking to achieve a lifetime of financial freedom with a single trade, one should recognize that trading profits are accumulated via compounding. This could be achieved through careful planning of risk exposure, and steadily collecting profits at targeted prices by focusing on risk-reward-worthy trades. This helps a trader to keep his feelings of fear, greed, and overconfidence at bay to continuously make sound investing decisions.

It is about staying in business for as long as possible, not winning the lottery, and retiring tomorrow.

<WikiFX Malaysia Original – Editor: Fion>