11 Ways to Avoid Losing Money in Forex Trading • Benzinga

Almost every seasoned forex trader has gone through tough times where multiple losses seem to come out of virtually nowhere. This phenomenon can cause significant distress, especially to those new to forex trading. If you don’t have a prudent money management strategy, losing money in this way could quickly put you out of business.

Professional traders already know that a series of losing trades can occur, so they usually include a money management element in their trading plan to deal with such an event. A decent forex profit strategy will usually include a component of position sizing and where stop-loss orders should be placed to best manage your risk of loss. Read on for more information on this important topic for forex traders.

Why do most traders lose money?

The majority of those who start trading forex lose money, so it is very important to start off on the right foot. The main reasons why traders lose money when trading Forex tend to fall into several categories. The most common of these reasons are listed below.

  • Lack of knowledge: Knowledge is power, and nowhere is the saying truer than when trading the forex market. Currency valuations depend on economic and geopolitical events in the countries represented by the two currencies in a currency pair, so the more knowledgeable you are about these topics, the more likely you are to make a profit in forex.
  • No well-defined trading plan: Any seasoned forex trader will advise you to trade with a plan. Trading without a tested and profitable forex trading plan is like starting a long journey without a map; you will be directionless in the market, which could cost you a significant amount of money unless you are very lucky.
  • Emotional involvement: Emotional involvement in trading is the downfall of many traders. While making profits can be emotionally satisfying, most people fear losing money, which makes fear and greed the two most important emotions to control when trading. The most successful traders have an unbiased attitude towards wins and losses and stick to their trading plan, which avoids becoming overly emotional when trading.
  • Bad money management: A money management element in your trading plan is essential to making consistent profits as a trader. To make money with forex trading, you usually have to divide your account into trading units and rarely risk more than a certain percentage per trade. Careful money management, including stop-loss orders, has saved countless traders from certain ruin.

11 Tips for More Profitable Forex Trading

Most retail forex traders don’t make money, so to become one of the most profitable, you need to start off on the right foot. Benzinga has compiled a list of 11 tips to help you improve your chances of trading Forex profitably.

Study Forex Trading

Before you start trading Forex, you really need to do your homework. This means learning what moves the forex market and how to operate successfully within it. You will also want to develop and test a sensible forex strategy that has a decent chance of helping you trade profitably.

Work with a reputable broker

Not all online forex brokers are created equal, so traders should carefully choose one that has a good reputation and the oversight of a major regulator to avoid losing their deposited funds to a fraudulent broker. If you live in the United States, you will want to open an account with an online broker that is a member of the National Futures Association (NFA) and registered with the Commodity Futures Trading Commission (CFTC).

Learn to trade with a practice account

A practice or demo account allows you to try out trading ideas and methods without putting real money on the line. Practice accounts allow you to learn how to trade and can potentially help you avoid losing money. money because of rookie mistakes.

Know when to accept losses

Good money management techniques include taking small losses once in a while to eliminate the possibility of taking even bigger losses in the future. You can often enter a forex trading position at any market exchange rate and still make money if you know how to exit the trade correctly.

Keep graphics clean

Keeping things simple and efficient when performing technical analysis means you can usually make trading decisions faster. This practice will not only allow you to take advantage of more opportunities when trading forex, but it can also prevent losses from spiraling out of control.

Start small when going live

Practicing in a demo account cannot exactly simulate live trading due to the emotional implication you feel when your money is in danger. Avoid being overconfident by putting large sums of money on the line up front, as this can lead to larger initial losses. Instead, start small when you first trade on a real account and progress to larger positions over time as your confidence grows.

Keep your emotions out

Your emotional reactions cannot be fully prepared and understood until you have experienced trading in a real environment. When you get too emotional, you can overlook vital aspects of trading, so do your best to develop an objective trading system to prevent emotional responses from impacting your forex trading decisions.

Use reasonable leverage

Most experienced traders consider leverage to be a double-edged sword because it can magnify profits as well as losses when trading currencies. Make sure to use reasonable leverage ratios when trading, which can vary depending on the type of trading strategy you use.

Make record keeping a priority

Keeping good records when trading can help you identify the reasons why you remain unsuccessful so you can address them. For example, you may need to significantly alter your trading behavior or update your strategy to account for a change in market conditions. You can keep trading records in a notebook or spreadsheet, or you can use professionally developed trade logging software such as that provided by TraderVue.

Treat trading as if you were running a business

Keep in mind that individual wins and losses don’t matter much in the short term. To treat your forex trading activities more like a business, you must first have a plan. You should also focus on the performance of your trading activity over time and aim to achieve positive long-term results from a well-defined trading strategy.

Find out about the tax implications

It makes sense to educate yourself about the tax treatment and implications of your forex trading activity so that you are prepared come tax time. This will save you from unpleasant tax surprises and allow you to take advantage of advantageous tax laws. Consulting a qualified accountant or tax professional can help you develop a plan to minimize your tax liability when trading forex.

Best Benzinga Forex Trading Platforms

To trade forex online as a retail trader, you will need to use a forex trading platform supported by an online forex broker. Benzinga has taken some of the guesswork out of selecting a decent forex trading platform by creating the following comparison chart listing some of the major forex trading platforms.

Claim exclusive offers

  • CedarFX is not regulated by any major financial agency. The brokerage is owned by Cedar LLC and is based in St. Vincent and the Grenadines.

Frequently Asked Questions


Can I lose all my money in forex?


If you put money at risk by taking a position in a forex trading account and the market moves against you, you could lose all that deposited money. If your account does not have negative balance protection, you may even owe your forex broker additional money depending on where your losing trades were automatically closed.


Do Forex Brokers Want You To Lose?


It depends. Forex brokers who also operate as market makers can benefit financially from market moves against any positions you establish that would cause you to lose money. In contrast, online brokers who use straight-through processing and electronic communication network models tend to benefit more from your earning money, as it means you can continue to trade, which will require you to pay them commissions and widen trading spreads over time..


Can you make a living day trading?


Most professional day traders operating in large financial institutions earn money for their employers, and they receive a decent salary and a performance-related bonus for doing so. Some retail traders may be successful in making a living from day trading, but most do not.


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