Leverage

Leverage in forex trading magnifies the potential gains associated with making profit in a trade but at the same time it also magnifies the mirror losses as well.

Due to this nature of leverage, it attracts traders with a hope of maximised profits but it should be noted that it comes with a high degree of risk for significantly sized losses.

Volatility of the Market

While comparing the stock market to the foreign exchange market, the volatility of currency prices is much more. Sudden, unexpected and unpredictable events can alter the market from top to bottom and cause significant changes to currency prices. This is true of other markets as well, the forex market is particularly prone to unforeseen changes.

Trading System/Platform

Making the right i.e when to buy and sell is one thing, but even if your calls are spot on–be them long or short trading—you are limited in your ability to profit or by the trading platform at your disposal.

System failures and malfunctions are not unheard of amongst forex traders which is so unfortunate. Whether this is due to system overloading, loss of electricity or a single computer crashing, if you’re unable to close a trade you’re unable to cash in when the timing is right. Even minor delays can prove costly and give you huge losses if a transaction doesn’t go through in time.

Even traders with stop-losses, which are designed to limit the amount lost by automatically selling when the price drops to a specific point, can be held back by the intensity and swiftness of the volatility in the forex market.

Holding On To Losses

Many forex traders make losses through trading because they hold on to losing positions for too long.. Often the willing to avoid making even a small loss causes traders to err and hold on to the losing trade for even longer. This, of course, results in a more substantial loss and can often be higher than the investment put in initially.

Experienced and large traders operate in the opposite way: they offset their small losses with sizable gains wherever and whenever possible.

Institutional Investors get Asymmetric Trader Information

Often the massive institutions have rigorous and highly sophisticated trading systems put in place to give them a competitive edge on information relating to world currencies.

Often this information and their sources are not available to a regular retail trader. This asymmetric information only compounds the risk of making a loss. As a crude and limited analogy, it would be like playing Poker against someone who has a pretty good idea what the next cards are.

Trading is art.

People trade forex to make money but forex trading is not like making money. You must understand the way of making money with the positions you are opening and the reasons behind it. You should be patient while trading. Trade for 2 or 3 months on a demo account. If you make success on a demo account, you can open a real account and start real trading.

Suppose if you don’t have success on a demo account then something is wrong. Perhaps your strategy does not respect money management rules. Or something else you are doing wrong. After you see the mistake you can correct it and after that restart trading on a demo account until you get recurring success.

Practice until you feel you have learned enough then move on to live trading.  

Start Small

A frequent advice every experienced trader gives is that everyone ought to recognize that forex trading is not a shortcut to immediate wealth. While there are people who are lucky enough to make it big with their first trade, for 99% of traders, it takes time. It will not matter how skilled you may be, you should always start small.

Once you start live trading, do not immediately begin trading 400,000 dollars on a 10,000 dollars’ account. Chances are, you will probably lose 20% of your account in a matter of weeks.

Always start small and increase your leverage with time. That is the foundation of making it big in forex trading.

Get yourself committed in learning

Everyone is a sum of the knowledge they have, and in the same way it is for forex that will determine how successful you are. The thing about forex trading is that it is not constant, it changes every single day. The factors that affect the falling and rising of a particular currency are continually shifting.

Thus it is necessary that you get committed in learning more, and to keep yourself updated in the industry if you are to remain competitive. At the moment, traders who initially embraced cryptocurrencies and machine learning are raking in money merely because they noticed an oncoming change and were quick to adapt and learn. The trick to forex trading success is always to be open to learning more. Never stop learning.

Do Your own Research and grasp the Advantage of the Tools Available

In the today’s world, there are enormous tools that help a trader. The main trick is in identifying which device is right for you. It could be Fibonacci tool, a tool which will help to find good chance for an entry in trading or SSI, a tool that tells you the traders who are short vs. those who are long on a specific currency pair.

The tool could also be copy trading or social trading; a tool that allows you to learn from and copy more experienced traders. In essence, the tools available are so many. Thus make adequate research, combine that with what you have learned and pick a tool you are convinced will make you a better trader.