Why do foreign exchange always lose money?

I have always believed that the trading industry is very special. The special thing is that even if you try your best, you may end up with nothing. Forex trading is more polarized. The winner has nothing to worry about. Loser, down and out. And since you have chosen to trade, you should continue to move forward, otherwise you should turn around and leave as soon as possible.

The money earned by luck will sooner or later be lost due to one's own ignorance. Trading is just like the trend, it will not remain static. Trading behavior determines your ultimate height. Although the market is cruel, avoiding pitfalls may not necessarily make you money, but at least you can reduce your losses.

​Losing money during the transaction

⑴. Pursue the entry signal of 99.99% winning rate. People like certain things and hate risks. This is determined by human nature and it is difficult to change. I believe that under the premise of the same profit amount, you will choose the one with a higher winning rate. Of course, this is not to say that there is no entry strategy with a high winning rate in the trading market, but finding an entry strategy with a high winning rate is a low-probability event, and it is thankless. The purpose of trading is to make money rather than the basis for entering the market in pursuit of a high winning rate, and the winner of the transaction is the last laugh. Due to psychological factors, there are many people who pursue a high winning rate in reality. If the 28th law is used, will the effect be better if it is done in the opposite direction?

It is worth noting that the winning rate is too low. Not only is the account shrinking, but more importantly, it is a blow to the confidence of traders. I personally think that the winning rate should be above 40%. (PS: Those who say that the success rate of Buffett Soros is only 20%, please turn right when you go out, and don’t send it away. Think about the reason yourself)

⑵. Heavy warehouse transactions. I have been immersed in the foreign exchange market for many years and traded heavily. I have never seen a profitable one. They all ended their trading careers with liquidation. Such traders regard trading as a casino and put all in. How can such trading behavior make money in the foreign exchange market. There are two kinds of heavy positions are advisable, one is close to the pressure level, the stop loss space is small (occasionally it is harmless), and the other is to increase the position with floating profit (increasing the position under the premise of ensuring that the transaction will not lose money).

⑶. No stop loss, like to carry orders. Such traders completely ignore risks, and most of them are novices who have just entered the foreign exchange market. When they have experienced the Swiss franc incident in 2015 (the stop loss of this incident is useless) and the recent experience of the unilateral rise in gold, they will not carry orders.

⑷.Frequent trading behavior (ignored by quantitative institutions). Traders want to pocket all the profits through frequent transactions, fearing to miss opportunities. Frequent trading is a sample that increases risk from another level, because every time we enter the market is a risky event. Trading is for profit, not for trading.

⑸. I want to run away when I make money, and I am afraid of profit-taking. What is more uncomfortable than losing money is missing the opportunity of the trend market, and what is more uncomfortable than missing the opportunity is profit-taking. This is also one of the reasons why it is difficult for ordinary traders to hold for a long time. Once the money is in your pocket, it is really not easy to take it out.

Losing money is because there is no trading system or imperfection

Trading has never been a simple act of entering and exiting the market, but a complex of behaviors. Every step must be calculated quite accurately, so as to reduce the occurrence of errors in the transaction process. For example, in terms of entering the market, ① what is the reason for the transaction to enter the market, ② what size of position to use, ③ what to do if the price does not go out of the expectation after entering the market, ④ what kind of price behavior can continue to hold, etc.

Platform provider's choice

Since it is a foreign exchange transaction, the choice of a platform provider is very important. If you encounter a black platform, how much money you make is just a book figure. At the same time, as a trader, you must reduce transaction costs as much as possible, such as the spread of the platform, the handling fee, the ratio of overnight interest and rebate, etc. But don't think that this is just a small amount of money, any accumulation of small money will be a scary figure.

Profitable transactions are all the same, and losing transactions have their own reasons. I can't write about all the situations where money can be lost, trading is ultimately up to us. Trading is not easy, stick to it, and the future can be expected.

The author of this article is the chief analyst of Huichacha-Damon