Why do you always lose money in foreign exchange trading? Because you are always one step behind
Anyone inforeign exchange marketFriends who have been trading for a while know that most retail foreign exchange traders will eventually lose money, but why do retail investors always lose money?
In fact, there is an old trading proverb that says:90% of retail investors lose 90% of their principal within 90 days.
If at this moment, you are about to transfer your hard-earned red bills to your newly opened trading account. Let me share some little secrets with you first.
In the following article, if you find that you have exactly one or all of these mistakes, you just need to follow some simple instructionsTrading rulesIf you can avoid mistakes, you are likely to stand out in this red ocean.
So, let's get started!
Retail investors enter the market too late
There are many reasons why this happens, but the most common is because retail investors are basically gambling. They trade based on scrolling computer screens or popular stocks or other financial products recommended by financial websites. Such strategies can be said to be difficult to make money.
Let me give you a great example of a company I'm sure you've heard of, Uber Technologies.Uber is best known for its ride-sharing and food delivery services, and it successfully went public in May 2019.Due to the fact that the company's pre-IPO market promotion was well-done, it really caused a lot of popularity, which attracted a lot of investors, initially mainly institutions and funds.On the day of its IPO, UBER opened at $42 per share.Over the course of several weeks, the stock has been on a roller coaster ride, peaking at $47.08 per share, up more than 13% since listing.
At this moment, the mainstream media added another fire and continued to hype it. At this high point of $47.08, more and more inexperienced retail investors gathered to enter the market. They believed that this was the signal of a bull market, and they would surely enter the beginning of a long-term upward trend. All they could think about were the dollars that were about to be pocketed.
More and more retail investors are unable to withstand this temptation, and the main team in the market only needs to sit in a chair and wait for the pick-up man to take the initiative to come to the door.
You will find that after the high of $47, the market starts to make you doubt your life, and UBER falls day after day, week after week.
Retail investors come out too late
Yes, you can imagine that if people come in too late, they will usually come out too late.
So let's talk about why this happens. Why retail investors tend to be stubborn and tenacious in losing trades, either turning small losses into big losses or from winners to losers.
"Because I hold it, it will definitely go up!" This is usually where most retail investors become religious and religious at this time.
When the trade goes against them, they are not out, but their belief is what keeps them going.
Retail investors have no trading strategy
As you can see, the most crucial thing is left to the end, because this can help you solve or eliminate the two problems we discussed above.
First, let's answer the question. What is a trading strategy?
Trading StrategyThis can provide you with three key pieces of information that you need to understand before entering a trade.
First, it tells you what you want to trade.
Is it stocks, foreign exchange, futures, or cryptocurrencies?
Each product has its own unique attributes. Don't put dozens of products in your favorites as if you can do anything. This is also a mistake that most retail investors who have just entered the market will make. We must remember that trading is not about volume.
Successful traders often delve into just a few products, and if you understand their attributes, they can bring you huge profits. The stock god Buffett also said that the key to his success is "focus".
Compared with product promoters, it is necessary to know all product information, because only in this way can sales be achieved.
Second, it will tell you when you are ready to enter the arena.
If you have selected a few products to focus on, then you need to use technical indicators to help you judge the timing of trading. Although there are hundreds of trading indicators, and there are various fancy usages and names, I still like to look at three traditional technical indicators, candlesticks, moving averages, and MACD. When the indicators are consistent, a clear signal appears, which tells me that this is the position to enter the market.
The point is that when you have your own trading strategy, stick to it. Don't use this indicator for a few days, and then hear that other indicators are easy to use, and immediately use another one. Don't give up just because you lose a few times in a row, because there is a good chance that you will be able to make profits in the next few times.
Therefore, whether it is right or wrong, first adhere to the implementation for a period of time, and only then can you verify the accuracy of the strategy, and then make corrections and improvements.
Do not pursue those flashy or complex indicators, because the purpose of using technical indicators is to increase your accuracy. It is essential to be simple and practical, and to use them yourself.
Third, when you are ready to play, it will also tell you whether to exit at a profit or loss.
We still use the same technical indicators as when entering the market. For example, when you enter the market, the indicator tells you that there is a long signal, but now it seems that it has become short, which means that your long order is about to exit the market. Whether you are currently making a profit or losing money, you should follow the signal told by the indicator.
Why do retail investors always lose money?
So as you can see, there's no big secret to why most retail investors keep losing money. As long as you have your own trading strategy and maintain good self-discipline, you can avoid the problem of entering and leaving too late.
The experience of trading mentality will not be explained too much here, because only through actual combat can we gradually become stronger. At the same time, you can read biographical books to deepen your understanding of the market.
You can also click to enter "Forex Academy"Read more popular articles in the column.
Okay, that's it for today. Thank you for reading.
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Disclaimer: The content of this article does not represent the views of the Institute of Foreign Exchange. The content is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.