Extreme volatility in the forex market and major headlines has made the currency trading market more popular than ever. Conditions in the market remain challenging and especially the new entrants in the market find it difficult to preserve money, leave aside the same turning to profits. So, let us take a quick tour of few reasons that why some strategies lead to losing money in the forex market.
Money management technique seems crucial
Practically and theoretically, it has been shown that new traders in the currency market follow poor money management strategies, even after possessing good analytical skills. Many traders possess excellent analytic and forecasting skills, but when it comes to actual trading they run short of success. Having a good money management plan thus seems crucial to acquire success in this highly volatile market.
Good money management means increasing profits and decreasing losses. There are many books and online resources, which constantly emphasize on this plan, but practically most new traders fall short of experiencing the same.
One must be aware of the hard facts as well
One must get aware about the trade tendencies, and one crucial fact about daily trading is that the profit-loss ratio is skewed towards sizeable losses. There are many days when traders loss more than they gain. In reality, the maximum one-day profit was approximately 130 pips, while the worst one-day loss was a 180-point fall.
Trading strategies: Successful Vs Unsuccessful
A trader needs to remain optimistic rather than just boastful. Any trader who boasts of being profitable about 60% times of his trade does not realize that the total losses for him are greater than the total gains. On the other hand, traders who are not so concerned with the trade consistency often are believed to have more profits against losses even though their winning days may seem lesser than the above-mentioned traders may.
In the end, it can be clearly seen that an effective money management strategy can easily help any person in becoming a successful or unsuccessful trader, in the currency market. Two such strategies that can help greatly are the RSI trading strategy and the moving average strategy