WHY TRADERS LOSE MONEY?

Most traders lose money simply because they have no importance in risk management. Risk management involves essentially knowing how much you are willing to risk and how much you are looking to gain. Most traders without a sense of risk management simply hold on to losing positions for an extremely long amount of time, but at the same time they take profits on winning positions prematurely.

There are a few key guidelines that every trader should keep in mind.

· Risk-reward ratio – traders should look to establish arisk-reward ratio for every trader they place. They should have an idea of how much they are willing to lose, and how much they are looking to gain. In total, professionals recommend 1:2 risk-reward ratio, and not risking more than 2% of your equity on any single trade.

· Stop-loss orders – traders must also employ stop-loss orders as a way of specifying the maximum loss they are willing to accept. This will help traders to avoid the common predicament of being in scenario where they have many winning trades but a single loss large enough to eliminate any trace of profitability in the account.

Here are some tips from the professionals, which will help beginners:

1. Start gradually – don‘t open many positions at the same time. It’s better to choose fewer positions, but weigh each of them carefully.

2. Stop-loss order – this will help to control the situation even if the rates change unexpectedly.

3. Rule of 1/6 – against risk more than 1/6 of your free capital when you arent completely confident.

4. Stick to the plan – each good trader has their own plan, and the best traders make an effort to hold onto it. Those who have the time, make daily transactions, others choose long-term strategies.

5. Multiple time frame – differentiate the time frames of analysis. Weekly graphs are used to observe trends while daily and hourly graphs are best used to observe the best time to open and close positions.

6. Dont stop the profit – one of the mistakes of beginners is closing the transaction too soon and not taking advantage of the full profit potential. Remember, that trends last longer than they might seem at first.

7. Dont play against the trend – transactions against a trend usually result in loss. Wait for a beneficial tendency and then make your move.

8. Trends have momentum – when trends start, they develop quickly because they are increased by the number of traders following them. Use trends in your favour.

9. Close the unsuccessful – experience shows that its best to close unsuccessful positions early and move on to others.

And, finally, get the free forex app WikiFx and trade safely.

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