Forex Trading

How to Lose Money and Sanity Trading the Forex Markets

Forex trading can be a profitable, life-enhancing exercise. Your brain can get sharper, you can learn a lot about financial markets, and you can make a nice living.

When you learn forex trading, however, you can also lose your entire life savings and go stark raving mad. The FX markets are a double-edged sword, and a quite big one at that. If you're not careful and don't know what you're doing, you're just swinging that steel willy-nilly, you are bound to lose a limb or two.

Avoiding loss of capital and sanity, then, should be the first and foremost goal of every forex trader and forex broker but especially for new traders. Unfortunately but it's a fact of life when you're trading forex, losing money and sanity is pretty easy to do.

Here are four forex trading mistakes that can help you squander both your money and your sanity, a two-for-one deal that can't be beat:

1. Market Orders Are Your Favorite

The 4X trade markets may seem like a giant casino when you're first starting out, but you must be careful about taking a gambler's approach if you really want to make money trading the foreign currency markets.

The most common expression that you're gambling instead of investing/speculating is a preference for market orders over limit orders.

Market orders means that you're buying or selling the market at the best price you can get right now. A limit order, by contrast, indicates that you have thought about what price you want to pay and you're willing to wait for that price if need be.

Especially when you're starting out in forex trading, use limit orders as much as possible. The "fire, ready, aim" nature of market orders can guarantee that your forex trading career is short but not sweet.

2. Overtrading Is So Fun and Exciting

Do you know that there are wildly successful forex traders who wait until Thursday to make their first trade of the week? There are such patient people, and they are, often, successful.

And then there is the other half of the retail crowd: the always antsy overtraders. If you are looking for "action" and "excitement," you have to have a trade on rain or shine, day or night, you are asking to lose money and sanity trading forex.

You are asking, for example, to pay your forex broker way too much money to host your account, and you are asking for your "real life" (for instance, your family or job) to suffer as a result of your burgeoning forex addiction.

Pick your spots in the market or else expect the market to explode your wallet and your mind.

3. Want to Lose Money? Try Not to Lose Money

You know how when you need something, you can't get it, but when you don't need something, it seems like it's all around? For instance, the week after you get married, you are suddenly much more desirable to the opposite sex, whereas before you got married you were ugly and pitiful?

Yeah, that's how life goes.

That's how the forex markets go, too. If you need money so badly you can taste it, you are a strong candidate to get absolutely slaughtered in the FX marketplace. Perhaps you're trying to quit your job or replace income from a lost job, but we can assure you that the forex markets do not care about your need for money, and will reward your desperation with devastation.

The classic example of this is traders who set their stop losses too close to their trade entry points. Yes, you want to limit your losses, but you also need to allow room for market gyrations and, frankly, for success.

You need to have a reason why you're making this trade and you need to believe in that reason--and that reason shouldn't be because you "need the money."

4. "I Love It! I Hate It!"--Goodbye

Probably the most difficult thing about trading forex successfully is mastering your emotions, fear and greed in particular. It's not personal for the markets. It shouldn't be for you, neither.

If you're loving the FX markets and thinking you're a genius, you're in danger of losing your entire account balance. If you're hating the FX markets and thinking you're an idiot, you're in danger of prematurely giving up when you could be just around the corner from a breakthrough.

Once you start taking forex trading personally, you are on a direct path to losing money and sanity. If that's not the path you want to tread, it's time for an attitude adjustment on your part.

Turns out that meditation isn't anti-capitalist after all.

Important Forex Information

The most important step in currency trading is finding the right broker; our forex experts can help. See our
reviews of forex brokers for more information.  

Advice from certain individuals can markedly increase your chances of becoming a successful forex trader. Find out if it's worth paying for forex training.  

Finding a good forex community, sharing good advice and tips, can vastly improve your trading. Figure out how to use the forex community.  

Forex trading hasn't always been around; understanding how it came into being can help you succeed in trading this market. Read about the history of foreign exchange trading.