What is the reason why foreign exchange has been losing money?
- Asymmetric risk of return:
Experienced foreign exchange traders keep their losses small, and when their currency bullishness is proven to be correct, they will offset these losses with considerable gains. However, most retail traders do the opposite. They make a small profit on some positions, but then lose money for a long time, leading to huge losses. This can also cause losses to exceed the initial investment.
- No information advantage:
The largest foreign exchange trading banks have large-scale foreign exchange transactions that are closely connected to the foreign exchange world and have information advantages that retail traders cannot obtain (for example, commercial foreign exchange flows and secret government intervention).
- Currency fluctuations:
High leverage means that during periods of abnormal exchange rate fluctuations, trading capital may quickly dry up.
- Over-the-counter market:
The foreign exchange market is an over-the-counter market, not as concentrated and strictly regulated as the futures market. This means that foreign exchange transactions are not guaranteed by clearing institutions, which increases the risk of counterparties.
- Fraud and market manipulation:
Fraud occasionally occurs in the foreign exchange market. Market manipulation of foreign exchange interest rates is also rampant, with some of the largest participants also participating.
- Compliance foreign exchange dealers: that is, regulated dealers. The orders that customers trade directly enter the bank and the market. The regulated dealers provide channels for banks and traders, and they can only use technology Analysis can make a profit in the foreign exchange market.
- Non-compliant dealers: They are not regulated by regulatory agencies or false regulatory agencies. Investors only conduct counter-dus with dealers, which is the so-called internal trading. Investors lose money to the dealers. Their purpose Just put the money in your pocket into your own pocket and will not be responsible for the investors’ funds.
- Human greed and fear
Although everyone wants to make money, many people ignore the risk of making money in the foreign exchange market and encountering losses in trading. Reality once again paralyzed our recurring thoughts when the market breathed a breath after a winning streak. Why not get some more profit came to the mind of traders. In this way, a struggle will begin in the heart of traders, the root of which is greed and fear.
- Will not manage capital heavy trading
Perhaps the most important reason for a trader’s loss is that the fund management determines the transaction ratio based on the account funds, the number of currency pair transactions, the trading plan, and the risk-return ratio used. This is just to build a reasonable fund management system. Because they make too many transactions to earn as much money as possible, they will eventually lose money. In addition, when traders hold too many positions at the same time, it will increase the risk of the trading account. Excessive trading is one of the main reasons why traders lose money. .
Similarly, heavy trading is another reason why traders lose trading. We all hope to obtain huge profits in a short period of time. However, the market will not change at such a pace. The result of heavy trading is often that retail traders bear corresponding risks. A small counterattack from the market is enough to trigger the possibility of a margin call.
- Not enough time to trade
You may want to be a trader, but if my daily work restricts me to less than 2 hours per day, then you may not be able to continue to profit from the volatility of the foreign exchange market.
There are many reasons, from technical to fundamentals, the fundamental reason is related to economic activities, the market has been changing, thus affecting the performance of transactions. Sometimes just a lack of screening time is enough to turn a successful strategy into a failed strategy transaction. It’s not that game trading is serious and has both huge opportunities but also significant risks. If you only regard trading as a hobby, then you are not responsible for your own funds. The time and energy spent by a good foreign exchange trader far exceeds the time and energy of a hobby.
Solutions to Loss in Foreign Exchange Trading
- Follow the trend in the unilateral market, and proceed cautiously at important resistance or support levels; in the oscillating range, simply rest or place orders at the upper and lower breakout levels.
- Setting the stop loss position must have a technical basis, and leave a margin ranging from 5 to 30 points according to the market. Normal unilateral markets can be kept less, and unilateral and oscillating markets that rush too quickly should be increased. In order to balance the operating psychology, a compound stop loss can be used when judging hesitation, adding points for some positions and not adding some positions. It is best to use trailing stop loss to protect profit and increase the possibility of profit.
- The exchange rate is inappropriate. Do not force the market, predict the breakthrough point, and enter the market in an ambush with reference to the breakthrough point. The prediction of the breakthrough point should look at the short-term candles and find the key resistance or support positions. This can be done with the help of the pivot point system that will be introduced later.
(4) The setting of the take-profit level must have a technical basis, or a previous high point or a trend line, and leave a margin ranging from 5 to 30 points according to the market. The normal unilateral market can be reserved less, and the unilateral rush is too fast Cities and shocks should be added.
In order to balance the operating psychology, a compound take profit can be used when judging hesitation, and some positions take profit first. It is best to use a chase take profit, which is actually a chase stop loss.
Before actually entering the market, you should predict the time to take profit and the conditions for the turnaround. One of the two is available, and the other is met but not profitable. You should reconsider the market and place a new order as if the transaction is completed. Reorder the stop loss and stop In a profitable position, you can even consider closing out first.