Many forex brokers require various amounts of margin, which translates into the following popular leverage ratios:. The reason many forex traders fail is that they are undercapitalized in relation to the size of the trades they make. It is either greed or the prospect of controlling vast amounts of money with only a small amount of capital that coerces forex traders to take on such huge and fragile financial risk.

And every loss, even the small ones taken by being stopped out of a trade early, only exacerbates the problem by reducing the overall account balance and further increasing the leverage ratio. Not only does leverage magnify losses, but it also increases transaction costs as a percent of the account value. The higher the leverage, the higher the transaction costs as a percentage of the account value, and these costs increase as the account value drops.

While the forex market is expected to be less volatile in the long term than the equity market, it is obvious that the inability to withstand periodic losses and the negative effect of those periodic losses through high leverage levels are a disaster waiting to happen. These issues are compounded by the fact that the forex market contains a significant level of macroeconomic and political risks that can create short-term pricing inefficiencies and play havoc with the value of certain currency pairs.

Many of the factors that cause forex traders to fail are similar to those that plague investors in other asset classes. The simplest way to avoid some of these pitfalls is to build a relationship with other successful forex traders who can teach you the trading disciplines required by the asset class, including the risk and money management rules required to trade the forex market. Only then will you be able to plan appropriately and trade with the return expectations that keep you from taking an excessive risk for the potential benefits.

While understanding the macroeconomic, technical, and fundamental analysis necessary for trading forex is as important as the requisite trading psychology , one of the largest factors that separates success from failure is a trader's ability to manage a trading account. The keys to account management include making sure to be sufficiently capitalized, using appropriate trade sizing, and limiting financial risk by using smart leverage levels.

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These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. In episode of the Desire To Trade Podcast, I sit down to discuss why you may over trade Forex, Over-trading is an issue that a lot of aspiring traders face, Mandi Pour Rafsendjani, trading psychology expert, explains what causes over trading and revenge trading as well as what steps you can take to stop over-trading.

In episode of the Desire To Trade Podcast, you'll be hearing a compilation of advice from highly successful traders. In episode of the Desire To Trade Podcast, I am joined my trading psychology expert Mandi Pour Rafsendjani to discuss how to achieve the mindset of a profitable trader as well as what separates the successful traders from the ones who aren't profitable. As a guest on this podcast, it was great to be interviewed.

This podcast actually has things that you can use in your trading. Great job. Etienne really knows how to pull valuable information out of his guests.

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You can also tell that he has a great passion for trading in the way that he speaks about it. Apple Podcasts Preview. Customer Reviews See All. The Ramsey Show.

I did not make much profit though, I would win, loss, win then loss again and on and on like that. I started working on some strategies and market dynamics. My research paid off as I got one strategy from baby pips that seemed to work almost all the time. This worked well for some time and I was beginning to feel like George Soros when one day, I was very arrogant not to look at what was going on with fundamental releases, I joined a trade with the usual arrogant, must always win attitude.

To cut the long story short, I blew that account in 3 minutes. I went back to the drawing board.

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I have added risk management strategies to my arsenal. The truth is that my numerous forex mistakes have made me a more experienced and conservative trader. I have studied and mastered it so well. I have developed a very powerful trading approach to it that wins at least 8 in every 10 trades with good risk management.