10 Reasons You're Not Making Money with Forex Trading

If you've been trading for a while and still can't make a profit, the good news is that you can "easily" understand why, identify mistakes, and discover where you're going wrong. The reasons why some traders don't earn money (according to an estimate, 80-90% of the total) are more evident to an expert's eyes. Once you've realized the reasons for your failure in the reference market, in this case Forex trading, you can proceed with the most important task: correcting errors and getting back on track. Only in this way, at the end of a long journey, can you finally make a profit. Don't be discouraged if you find yourself in a terrible situation with many losing trades behind you. You must take one thing into account: no one, not even the richest trader, started making money right away, despite this being hardly credible to beginners reading the stories of the most famous investors. Earning requires time, as well as economic and intellectual efforts. Above all, it takes time to understand your mistakes, correct them, and move forward stronger than before. Fortunately, once you get the hang of it and take the right path, everything becomes easier. Here are 10 reasons why a trader can't make money:

You're Trading Too Much

A good portion of traders who end the year in the red or lose a lot of money make exactly this mistake: they trade too often. The problem is difficult to self-diagnose, as the most frantic traders simply don't know that frequency is a problem, that quantity doesn't mean quality. In fact, they often don't realize they are "over-trading". Those who practice the unhealthy activity of over-trading very often don't have a sufficiently structured trading system behind them, which also involves the concept of rhythm and dictates the timing. Moreover, "over-traders" often lack discipline, so the problem is more behavioral than technical. Here are some signs that suggest you are simply trading too much. When you invest, you don't know exactly what you're looking for. You don't have a clear idea of the signal, or the type of signal, that will make you enter the market. This also means that you don't have a good trading system, since one of the elements that should characterize it is precisely the space given to the concept of a signal. You can't follow a strategy. Even if you have a strategy that others consider good, it doesn't mean the worst is behind you. A strategy, besides having one, must also be followed. Those who trade too much tend to go off track, not respecting their own strategy. You have too much confidence in yourself. If you believe you can master the market and feel particularly optimistic, you are seriously mistaken. Not even the greatest traders have this sense of control. If you are too confident, you are most likely trading too much. You feel too comfortable in the market, even if you shouldn't, so you "frequent" it often.

You're Not Managing Risk Properly

It may seem obvious, but it's worth dedicating a few lines to it. If you don't manage risk to the best of your ability, you simply can't make a profit. Or, rather, you will always lose more money than you earn. What does it mean to manage risk? First of all, knowing your limits, which in technical jargon becomes "knowing your personal risk tolerance". It depends on your economic availability but also on your relationship with money. Risk management involves other complex elements that require the use of (only apparently) complex formulas, but the basic principle, the foundation of a healthy approach to the concept of risk, is exactly this.

You're Not Saving Money for the Best Trades

Those who lose a lot of money do so because they invest in trades that are not particularly safe or that, even if they turn out to be winning, wouldn't yield much. The advice, therefore, is to save your capital for better times. To follow this advice, it is necessary to develop a fundamental skill: patience. Specifically, the patience to wait for the best signal, the trade that will make a lot of money. To understand this concept, you can compare the trader capable of saving money for better times to a sniper. Compared to an assault soldier, the sniper fires fewer shots, consumes fewer bullets, yet achieves the best results. Why? Simply because he waits, and specifically waits for the most favorable situation. You should do the same if you want to become a trader who makes money with Forex.

You Rely Too Much on News

Fundamental analysis is important, but it should not be considered predominant over technical analysis. At most, the two disciplines are equivalent in importance, or rather, they complement each other. If a hierarchical scale is necessary, technical analysis has priority. The reason is simple: technical analysis is based on data that, if not scientific, is very close to it. Fundamental analysis is based on statistics and historical data, but also on a good dose of interpretation. Moreover, fundamental analysis has news as its main ingredient, which is always an element of uncertainty. For this reason, it is best not to rely too much on news, since its influence on price is sometimes totally unpredictable. The advice, therefore, is twofold. On the one hand, simply avoid trading when major news is about to be published. On the other hand, but only if the signals from technical analysis are very strong, proceed anyway without thinking too much about the possible consequences of the scheduled announcement. Obviously, there is no remedy for sudden and disruptive news. In this case, you simply need to cross your fingers and hope that everything goes well, and if things go wrong, exit the trade.

You Spend Too Much Time on the Internet

Obviously, by internet we don't mean Facebook and the like, but rather opinion sites. Those, for the trader, can be harmful if not handled with care. What risks do you run if you read too many opinions and are excessively influenced by them? You're wrong if the information is given "in a certain way" because there is an underlying interest. And the interest usually doesn't coincide with yours. You're wrong if the source is not authoritative. If you learn the wrong information or the wrong advice, and on top of that you believe it, then you're in big trouble. It's best to take everything with a grain of salt.

You Invest Little Money

Many beginners, perhaps out of fear of losing or because they don't feel comfortable or confident, start by investing truly negligible sums. The risk of losing money is there, but this is part of the game. However, you simply can't earn enough if you don't invest enough. This is didactic. According to some experienced traders, all investments under $500, assuming a medium-term time horizon with moderate multiday, lead to nothing. The advice, therefore, is to roll up your sleeves and find the capital. If you don't have the right capital, or simply can't scrape it together, you might as well dedicate yourself to something else. Obviously, having pointed this out, it is necessary to specify that the investment should be decided according to the soundest principles of money management.

You're Not Positioning Stop Losses Correctly

One of the biggest reasons a trader can't make a profit is because they lose too much money, and one of the biggest reasons they lose too much money is the incorrect positioning of stop losses. The best way to position a stop loss is to refer both to money management, i.e., the maximum tolerable loss, but also to technical analysis evidence. In short, the goal of the stop loss must be to limit losses, but it is a goal that is achieved if elements such as pivot points are taken into consideration. There are many useful tools to identify supports and resistances, so it is good to use them and base stop loss positioning activities on them.

You're Not Disciplined Enough

This is a key point. Discipline is one of the most important virtues for a trader. This is true because Forex trading activities have nothing to do with improvisation. Those who gamble improvise (and even that is true only to a certain extent). Investing means planning, developing a strategy, and following it. This also applies to unforeseen events. In short, it is necessary to plan your reaction when your predictions do not come true. It is obvious that to do all this, i.e., in the execution phase of the plan, discipline is the most important resource. It is not easy to be disciplined, also because during trading activities, considerable psychological pressures emerge that erode clarity and undermine confidence in the trading system.

You're Not Patient Enough

Patience goes hand in hand with discipline. One does not exist without the other; they complement each other. What is patience used for in trading? Simple, to resist the temptation to enter the market, to wait until the most favorable moment emerges. Again, the metaphor of the sniper returns. The sniper is patient by definition; it is part of the cliché.

You Don't Have Precise Objectives

"Making money" is not a precise objective. How can you earn if you don't know exactly what you're doing and, above all, what you're doing it for? Like any self-respecting strategic elaboration, identifying concrete and truly achievable objectives occupies a predominant space. You need to have a clear idea of the goal you intend to reach; only then is it possible to bring the path that leads there.