A commonly known fact is that most traders fail. In fact, it is estimated that 96% of forex traders lose money and end up quitting.
Low Start-Up Capital
Trying to beat the market with too little capital and trading too aggressively until eventually trading against the trends.
It is common for forex marketers to encourage you to trade large lot sizes and trade using high leverage to generate large returns on a small amount of initial capital. It takes some money to make some money, and it is possible to generate outstanding returns on limited capital in the short term.
However, with only a small amount of capital and outsized risk because of too high leverage, traders will find themselves being emotional with each swing of the market’s ups and downs and jumping in and out at the worst times possible.
Failure to Manage Risk
Risk management is key to survival as a trader as in life. A very skilled trader can still be wiped out by poor risk management. The number one job is not to make a profit, but rather to protect the initial trading capital, if capital gets depleted, the ability to make a profit is lost.
Trading Psychology & Discipline
Some traders feel that they need to squeeze every last $ out of a move in the market. This causes traders to hold positions too long and set them up to lose profitable trades. The solution seems obvious here, just don’t be greedy.
Financial markets continue to move every day so there is no need to get every last $ out of a trade, there are always new opportunities.
Indecisive trading, often caused by draw downs, will result in multiple consecutive losses. Even if each loss is small, switching back and forth will result in continuous losses until the investment capital is depleted.
Lack of trading discipline and risk management also means that traders refuse to be wrong and hold on to losing trades in the hope they will eventually turn around.
It’s possible, but it carries an opportunity cost and worst case almost all investment capital is lost before the market trend changes, trend changes take time and require confirmation.
Digital Asset Trading & Investing
Although the majority of people that entered the distributed ledger technology space to speculate on digital assets, the extreme bull market that lasted about 2 years up until Jan 2018 surprised both inexperienced and experienced investors & traders in its severity and subsequent violent and deep market correction.
During the uptrend speculators adopted a false sense of confidence as out-sized gains were easily achieved. Most people and funds with digital asset holdings experienced significant value reductions, sometimes 95% without leveraging their positions.