Approximately 5% of traders succeed. But why do so many traders lose money?

FX Copy presents the most common causes of failure;

Lack of a Proper Trading Plan or Strategy

An alarming number of traders arrive at the market without a proper trading strategy. This is a shortcut to failure in a highly complex and volatile forex market. Find a strategy which suits your style and personality i.e. risk averse or more aggressive, scalping or longer term, and so on. Use appropriate time frame charts and analytical tools to set your entry and exit levels, as well as Stop Loss levels. A proper trading strategy will prevent your emotions and guesswork from determining your strategy for you.

Lack of Money Management & Equity Protection

Forex traders often don’t employ proper money management skills or tools which are essential for market survival and profitable trading. Without proper money management, one cannot minimize losses and maximize profits. You should trade in accordance with a risk level that is appropriate for the size of your account balance since capital preservation is essential.

Catching a Falling Knife

The trend is your friend is an old saying in forex. To trade profitably, you need a strategy. Your strategy should account for market trend, so you do not outstay your welcome in counter-trend trades. Trade in the direction of the main trend as a safety net to prevent runaway losses.

Lack of Discipline

You need to execute your strategy precisely and consistently. Many traders have the habit of breaking the rules of their own strategy, instead acting on the spur of the moment. Executing a strategy consistently is vital to success. Plan for different scenarios according to your strategy, so you know what to do quickly and automatically - without getting emotional over decisions - if and when the various scenarios arise.

Failure to Let Profits Run

This, of course, requires a good exit strategy to avoid turning a winning trade into a loser (or such a small win that it feels like a loss). You could try closing the trade in parts, say at two or three different price levels, to practice letting profits run. This lets you close part of the position earlier than the remainder, which satisfies the human urge to exit positions as soon as they enter profit. The remainder of the position can be left to run more easily by employing this tactic.


Cut your losses before they cut you. If one of your trades becomes a runaway loss, it is more beneficial in the long run to cut your losses rather than let the position run in the hope that it will reverse and turn into a smaller loss, break even, or even reach profit. Therefore, stop loss orders should not be placed too far away from the entry level, thus preventing huge losses on any one trade.

Averaging Losses

Do not let greed lure you into adding positions while winning, and do not try and beat the market after a loss (unless this is part of a proven winning strategy, but that is highly unlikely). You should have a good reason as per your trading strategy to enter, exit and modify trades, as opposed to basing decisions on emotion.

Overcomplicating Things

Keep it simple. An overload of information can at times create a misleading picture about the market. To prevent yourself from gaining a false impression, it is wise to keep your trading strategy simple and concise, especially if executing trades manually.

Failure to Consider the Risk / Reward Ratio Correctly

Consider how much of your account balance you can afford to lose before entering trades. You should also consider how much you will profit by entering into a trade. In short, you have to ask yourself if a trade is worth the risk to which it exposes you.

Not Checking the Daily Economic Calendar

Large fluctuations in currency prices often occur when important economic news is announced. You should always take note of the time and date of when such announcements are scheduled to be made.


Trading forex profitably requires a tremendous amount of discipline and effort on the part of the trader to overcome the aforementioned mistakes which are common sources of failure. The best way to avoid making these mistakes is by trading with an automated trading system, whether it the form of an Expert Advisor or an Automatic Trade Copier. Automated trading systems help traders, both novice and experienced alike, overcome many of the hurdles and pitfalls detailed above.


About the Author

FX Copy are professional forex traders and signal providers. The team have years of experience with top-tier banks and hedge funds, now managing personal fortunes exceeding $2.5 million.