Do you Hafiz know why most forex traders fail?
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Perhaps the biggest reason people fail in forex trading is because they can't seem to take enough winning trades, right?
Wrong.
The biggest reason people fail trading is because they don't let their profits run.
Sorry. Still wrong.
Because they attempt to day trade.
No, that's not it.
Most people who fail in forex trading do so because they trade with too much leverage. Trading at 100:1 is asking for trouble. Why do the brokers advertise it so heavily?
Because it's good for you? Because they have your best interests in their heart? Because they make a lot of money when you do?
No.
Most brokers trade against their traders because they know that most are losers. So all they have to do is take the opposite side and over time they will be net winners.
Shocking? Disgusting?
I don't think so. Don't hate them. You'd do the same if you were in their place. Sure, if they truly cheat or steal, that is another thing. But don't hate them just because they are trying to maximize their money.
Back to the main point. Too much leverage will kill you. Do you realize that at 100:1 (the most common leverage offered) you will be wiped out if the price moves just 1% against you (if you have no stops in place).
At 200:1 leverage just 1/2% of price movement against you will empty your account. In truth, you shouldn't (in my humble opinion) trade at higher that 10:1. In other words, ten cents would control one dollar (or whatever currency is your base currency).
Let's backtrack. If you noticed above I said that you wouldn't be wiped out at 100:1 leverage if you have stops in the market. If that is the case, then what is the danger? Just make sure you have stops, right?
No.
The percentages still hold true. At the higher leverage the market may only have to move a hundredth of a percent to take out your stop. All the market has to do is hiccup, and you're out.
On the other hand, if you've got your leverage small, you can give your trade more room, because each pip is worth less. More room means the market can move against you before moving in your favor.
How many times has the market touched one of you stops (taking you out of the trade), before moving in the "right" direction? That wouldn't have happened if you'd had been less leveraged.
Leverage kills traders. Repeat that. Over and over.
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