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Nial Fuller

NIAL FULLER
Professional Trader, Author & Trading Coach

Why Do Most Forex Traders Lose Money?

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By in Forex Trading Articles Last updated on | 50 Comments

stop_losing_moneyNote: If You Really Enjoy My Forex Lessons, Could you please do me a ‘Huge favor’ after you have finished reading today’s forex lesson. Please click the Facebook Like button below this article, then click the twitter button / post it to twitter and facebook etc. You can even email it to a trading friend. Most importantly, make sure you make a nice comment with your feedback at the bottom. As I always say, If you get value from these lessons, all I ask is that you share it around with friends and other traders who will benefit from it. I appreciate your support and will talk soon. Enjoy this lesson. :) Nial.

Statistically speaking, trading the Forex market with a 1:1 risk reward ratio and no strategy or trading edge has a 50% chance of success (minus fees) over a long series of trades. Thus, most traders should approximately breakeven over the long run because trading with a (truly) random entry and a 1:1 risk reward is analogous to a random coin toss.

Why do most Forex traders lose money then? What human variables contribute to the success rate being much lower than breakeven for most traders?

Perhaps the main reason most traders lose money is because the majority of people have little self-control and cannot resist the temptation to over-trade and over-leverage when there is no one to be accountable to. Another main reason most traders lose money is because they try to buck the trend for some reason, even though they KNOW they have a statistically higher chance of winning by sticking with the trend until it is clearly finished. In this article I will share with you my thoughts on why otherwise totally rational and successful people fall apart when it comes to trading the Forex market.

• Not accepting responsibility for losses and mistakes

As human beings we all have a tendency to pass the blame and find fault elsewhere. However, when you are trading badly, it is your fault and no one else’s. If you find you are losing money in the markets it is not your broker’s fault, nor is it the result of a bad quote, a bad tip, or a hardware failure. There is no mysterious “They” out to get you or steal your money from you. Everything that happens to you in the market, good or bad, is ultimately your fault; blaming anyone else or thing is not going to help you become a successful trader.

Accepting responsibility for your losses and trading mistakes is paramount to turning your trading around. If you use a “tip” or a piece of advice from a broker or from someone else, and you lose money as a result, it’s your fault for listening to them; at least the second time around. The first step in any self-help group like Alcoholics Anonymous is admitting you are the problem and that you have a problem. If you continually blame other people or things for your trading losses, you will never improve your trading because you won’t feel any need to correct your weaknesses if you don’t believe you have any. So, a big reason many traders fail to make money is because they won’t admit they are to blame for their losses. If you want to improve your trading you need to take full responsibility and go into Forex traders’ rehab.

• Over-trading and not trading higher time frames

One thing that definitely prevents most traders from making money in the market is over-trading. Traders who just jump in and out of the market on emotion and greed, will not only suffer many more losing trades, but they will also rack up a lot more fees via spreads and (or) commissions over the course of a year than traders who stick to the higher time frames and understand the value of self discipline and having patience. Trading lower time frames causes many traders to over-trade because they end up thinking they see many more trading signals worth trading, when in reality there is just a lot more “junk” signals and “noise” on lower time frames.

So, if you are currently losing money on a consistent basis and you are trading lower time frames, you will definitely benefit by switching to higher time frame Forex trading.

• Risking too much

How many times have you won a few trades in a row, made some money, and then given it all back quicker than you made it? This happens all too often for traders who have not yet learned to risk the same amount every trade or who have not yet learned to manage their emotions effectively. Trading should not be viewed or treated as gambling, you don’t want to “double down” just because you are up some money. That is not how it works. You have to stop and ask yourself, “Are you a Forex Trader or Gambler?

As price action traders, our aim is to “master” our trading strategy to the point of knowing exactly what we are looking for in the market every time we sit down behind our computer screen. However, just because you know exactly WHAT you are looking for in the market, this does NOT mean that it WILL work out. Price action trading gives you an “edge”, just like any other method does (although price action is clearly the best way to trade), and what you need to understand is that no matter what your edge is, it’s not going to work out in your favor EVERY time, and you don’t know for sure if any single edge-event will work out.

So, if you are equally confident in every trade you take, because you have mastered price action trading, there really is no reason to risk substantially more or less on any single trade. You want to keep your risk amount approximately constant relative to your total account value. The only time you should increase your risk per trade is if your account value increases, never increase risk per trade just because you feel “totally certain” that THIS trade will work out, because as we discussed above, YOU DON’T KNOW if it will or not.

• Poor Forex trade management / no trade management

If there is one single thing that most traders do wrong who lose money on a consistent basis, it is poor trade management. Every trader knows after a little practice and education on a high-probability trading method like price action, they can pick near-term market direction with pretty good accuracy, at least enough to get into open profit. This is not the hard part of trading. The hard part comes after you enter a trade. Most traders have no forex trade management plan, either because they don’t understand trade management, or don’t think they need to do it. What these traders don’t understand is that they are sabotaging their own effort and potential skill as a trader by thinking they will somehow behave more logically and effectively AFTER entering a trade than BEFORE. This is just ridiculous. No human being on Earth will be more objective or less emotional than they will be when there money is NOT on the line. It’s a fact of human psychology that when something you care about (money, relationship, etc) is at risk, you become more emotional. Everyone knows this. So, if you are guilty of not managing your trades BEFORE entering them, accept responsibility right now and start changing it.

A related topic here is having a Forex trading plan. Your trade management plan should just be one part of your overall Forex trading plan. If you don’t have a written down plan of attack on how you will trade the markets, you are probably going to go nowhere fast. Your trading plan should also include a Forex trading journal.

• Entering randomly / not mastering a proven method

Traders who don’t have a definable and “mastered” trading method are hurting themselves because they essentially have no trading edge and are just shooting in the dark, so to speak. When you learn one effective trading strategy like price action, and truly master one Forex trading strategy at a time, you will largely eliminate the problem of fear and second guessing your own trades. The key here is that you REALLY NEED TO MASTER an effective trading strategy, like price action. Most aspiring traders just jump around from one trading strategy or system to the next, never really giving one enough time to truly master it. So, the first thing is that you need a truly effective trading strategy, and then you have to give it enough time to truly master it.

Human beings have a tendency to see patterns that don’t really mean anything. This is especially true in trading; if you stare at a chart long enough you can make up all kinds of things that “should” happen based on what you “see”. The bottom line is that price action strategies really do give you the edge you need, so that you aren’t guilty of “manifesting” irrelevant patters in the market, but you HAVE to put in the time and get the education required to master them.

• Unrealistic expectations

expectationFinally, one thing that is definitely common to all traders who are losing money in the markets is that they have unrealistic expectations. If you have $500 to trade with, there is no way on Earth you are going to be able to live off your trading. You have to take into consideration what you can REALISTICALLY expect to make each month or week, given the amount of money you have to trade with. This is assuming you will commit to effective Forex money management, because if you are properly managing your risk on every single trade, there is just no way you can make enough money to live on if you don’t already have a lot of money to trade with.

This doesn’t mean you can’t be a successful trader however. Being a successful trader means you are consistently making money in the markets. If you have a small trading account but are making consistent profits that are in-line with your small account, then you ARE a successful trader. The same habits that make a trader successful on a small account are the SAME habits of successful traders of large accounts. Remember that. Forex trading success is not measured by whether or not you get-rich-quick, it is measured by your consistency, and the only way you can become consistent is if your expectations are in-line with the reality of your current financial situation and the reality of the markets.

About Nial Fuller

is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 20,000+ students since 2008. Checkout Nial's Professional Forex Course here.
  1. Mominfx July 2, 2017 at 1:46 pm

    Nial I like you and follow you.

    Reply
  2. Binnie November 10, 2016 at 10:29 am

    Yes this is a good article Nail.
    I think I have over trade and not discipline enough
    I will change my taught and learn more in price action.

    Regards

    Binnie

    Reply
  3. Ayi Bram August 8, 2012 at 10:28 am

    This article very useful for newbie. thankyou Nial :))

    Reply
  4. Sudip Ahmed March 15, 2012 at 9:50 am

    Reading and learning from your site, very informative and useful, thanks Nial.

    Reply
  5. qais December 20, 2011 at 7:26 am

    Hi thank you so much for posting all these useful information we all have this problem and need to stop them before losing lots of money very helpful tips thank you so very much

    Reply
  6. Jim Foster August 2, 2011 at 7:22 pm

    Good advice as ever Nial. Especially the part about expectations…

    Reply
  7. Mark Yerima July 1, 2011 at 5:41 am

    you are really my inspiration, i started forex live trading this week and lost $30 my first day. i maade corrections and now i m trying my best to gain back my money.

    Reply
  8. eric July 1, 2011 at 2:47 am

    you’re the best forex mentor Nial, thanks a lot !!

    Reply
  9. eric July 1, 2011 at 2:47 am

    you’re the best mentor nial, thanks a lot

    Reply
  10. Herve June 11, 2011 at 2:23 am

    Thanks a lot, Nial. Very good advices.

    Reply
  11. andrew June 8, 2011 at 1:37 pm

    thank”s for the cool lesson. cheers andrew

    Reply
  12. Kenny R June 6, 2011 at 10:31 pm

    A smashing good read for me! I used to have those unrealistsic expectations but no longer. I am in sync with the market and my money management because of the methods learned through price action!

    Thanks Nial! :-)

    Reply
  13. rikus June 6, 2011 at 3:00 pm

    Hai Nial,

    Your lessons gave confidence to my trading n I am getting
    better with price action signal.

    thanks nial.

    rikus

    Reply
  14. Kelly June 6, 2011 at 1:49 am

    After going over Nial’s website reading and watching his videos, reading all the comments from people I believe I have found the proper way to learn to trade in the fx market. I will be joining your website as soon as I can to learn what it takes to be successful.

    Kelly

    Barrie, Ontario

    Reply
  15. sanjaya June 5, 2011 at 11:48 am

    thanks nial for such a great lesson,pl do send such more articles ,thanks again.

    Reply
  16. Filopastry June 5, 2011 at 5:45 am

    Gday Nial and Forex Friends,
    I am a gambler and I accept responsibility for my trades. But I find it hard to break the Habit. I am trying to change my brain to be a forex trader.
    I try and talk myself out of being near a computer screen but I end up sabotaging my trades. It comes down to being confident in price action and my ability to read a signal.
    I will come out of this tunnel a forex trader.
    Thanks again for Nial for a concise and succinct article.

    Reply
  17. Ng June 4, 2011 at 4:46 pm

    Hi Guru Nial,
    good article,it is true to just apply ur teaching to be consistently profittable,i joined as a member in Feb.2011 and my demo account is consistently making profit,will trade in demo for another few months,then real a/c.only use pin bar & inside bar,Daily time frame.PATIENCE like u said.
    thanks alot nial, keep on teaching us imformations,bless you

    Reply
  18. shah June 3, 2011 at 10:15 pm

    i still trade using price action but what time frame is easy to looks the price action

    Reply
  19. Mick June 3, 2011 at 4:29 pm

    Some good home truths in this article.
    Thanks Nial.

    Reply
  20. Ed June 3, 2011 at 11:56 am

    Thanks again Nial

    Reply
  21. Ramli June 3, 2011 at 11:07 am

    Thanks Guru with super advice.
    Thruthly amazing thought.

    Cheers

    Reply
  22. Rob June 3, 2011 at 10:14 am

    Good article Nial and thanks for sending information that we can use. Rob

    Reply
  23. Mukesh Patel June 3, 2011 at 9:30 am

    It’s true that self discipline is a must in forex trading. I made a good return on my money ( 5 times in one month ) and then again lost every thing just because of over trades & greed. Hrad lesson learned even after getting good tutoring from you.So the bottom line is to stick to price action & self discipline

    Reply
  24. Tomson June 3, 2011 at 8:16 am

    Hi Nial,

    Great article again, Thanks a lot we need it.
    I do like this way to focus on things like what to do after the enter of a trade, as I think is something that is hard to handle.
    Both when the trade is going your way, or the other way, it is truly important to have a plan before entering the trade.

    Thanks again!

    Cheers Tomson from the westcoast of Sweden.

    Reply
  25. Michael June 3, 2011 at 8:00 am

    Hi Nial
    Another wonderful article thank you

    Reply
  26. Ervin June 3, 2011 at 6:59 am

    Great Lession – Always like every other lession

    Thank you Nail

    Reply
  27. Kizito June 3, 2011 at 1:29 am

    Hi Nial,What a great article!!!Thanks you for sharing with us your exprience Im always looking forward for these articles they make my weekend tick….your’re a blessing.

    Reply
  28. Gurpal June 2, 2011 at 11:51 pm

    Hi Nial,

    Hope you are well. Another fantastic lesson, thank you very much for your fantastic insight.

    Thanks and Regards

    Gurpal

    Reply
  29. Cliff June 2, 2011 at 11:39 pm

    Great lesson, Nial…Always easy to read and understand…

    Reply
  30. Steve June 2, 2011 at 11:20 pm

    Hi Nial

    AS I read your words, I personalise each action by asking myself the question.
    Do I accept responsibility for my losses and mistakes?
    Do I over trade?
    Do I risk to much?
    You get the idea. It is easy to just read an article and flip the page over. What a waste.
    Your article is a reality check for me. I take my trading very seriously and look for what leaps out at me.
    OK 4 out of 6 is not bad. That is why I am a member, to work on getting my act together for successful trading.

    Thanks again Nial,

    You seriously have my attention
    Steve

    Reply
  31. Eudes June 2, 2011 at 10:58 pm

    Nial. Thank you for all. Today I trade with PriceAction only. You teach me all forms of sucess with it. Regards. Eudes

    Reply
  32. Terry June 2, 2011 at 10:19 pm

    Have been introduced to your site by a friend. I look forward to learning real skills in forex trading. Cheers.

    Reply
  33. Adrian June 2, 2011 at 10:15 pm

    Great read Nial. Have had all those issues, but my main problem was over trading with a small amount. Had some good results and a few negative ones. Trouble is the negative ones were higher values than the positive, and so traded even more. Eventually, took a step back from actually trading altogether, and went back to basics – paper trading and working the model and risk / reward ratio. Summed up all the issues I had, and am still working on perfectly. Thanks

    Reply
  34. ahmed June 2, 2011 at 9:29 pm

    good day boss . you r excellent a matter how the other unrealistic pepole will try to tarnish ur repetation,u deserve every peace of respect and admiring, greetings from lebanon

    Reply
  35. Maurice June 2, 2011 at 9:19 pm

    Excellent Nial. I look forward to each lesson you post. This information must be read many times before it really sticks.It is so easy to read the wrong information into a chart. Thanks

    Reply
  36. Dick June 2, 2011 at 8:33 pm

    Another great article. Over trading is akin to playing
    video games. I have done it in the past, but no more. With your help I am becoming more profitable every day.
    THANK YOU for all you do for us.

    Reply
  37. Louis June 2, 2011 at 8:21 pm

    Thank you Nial, you have helped me allot with these newsletters.

    Reply
  38. reza June 2, 2011 at 7:48 pm

    One of the best articles which I have ever read. The things that you have mentioned on yo9ur article Nial, are more important than most of knowledge that traders should have. Great Jobs and Thanks Nial.

    Reply
  39. Ken June 2, 2011 at 7:42 pm

    Yes Nial, it needed to be said and you said it straight and to the point. A useful reminder to us all. Thanks.

    Reply
  40. petr.s June 2, 2011 at 6:29 pm

    Thank you for another great article. I am always looking forward to a new one. Your arcticles help me from psychological point of view and I read them over and over again.

    Reply
  41. graham June 2, 2011 at 6:10 pm

    I look forward to your lessons.i am guilty of the habits you mention and i don’t mind a “kick up the butt”each time you write.Thanks and keep kickin’.
    GrahamD

    Reply
  42. Nyoman June 2, 2011 at 5:23 pm

    Really great article Nial, I think you have well pointed out and explained the hidden secret to becoming a consistently profitable trader rarely found elsewhere.

    Reply
  43. Kevin June 2, 2011 at 5:04 pm

    Nial – great article. I am enjoying reading the previous ones too.

    Is risking 1% of trading capital per trade a good level of risk to trade with? i.e. is this too low / high?

    Kevin

    Reply
  44. Nick June 2, 2011 at 4:43 pm

    Good post Nial, another reality check from the master!

    Reply
  45. Manjula June 2, 2011 at 4:32 pm

    Your lessons bring immense physiological confidence on trading while educating the reality of the market.
    Thank you Nial. Pleasure to be as a member of your community

    Manjula

    Reply
    • nial June 2, 2011 at 4:34 pm

      Majula, thanks for kind words, glad to have you on board. :)

      Reply
  46. Phil June 2, 2011 at 4:31 pm

    Yes, good article. I have experienced those lacking areas before. Happy to report trading more successful now. I would add one more area to evaluate. Is my trading method limiting or flawed somewhere. Make adjustments or find another method that does work better for the Trader.

    Reply
  47. TAA June 2, 2011 at 4:30 pm

    Interesting article, thanks. Regarding realistic expectations, Nial what do you feel is realistic to make each month or week with a $10,000 trading account? What type of profits are realistically consistent with this amount of trading capital?

    Reply
    • nial June 2, 2011 at 4:34 pm

      TAA, hard to tell, it will depend on your risk per trade, and your skills etc. On 10k, if your a good trader, you could make good profits, but remember it’s not the size of the account, it’s how much your risking per trade.

      Reply
  48. Dave June 2, 2011 at 4:12 pm

    You Are An Amazing Coach and Mentor nial. I am really happy to be member of your group and love all your teachings and ideas on trading. I always look forward to your weekly lessons and videos. Your trading course and commentary are the best I have EVER seen in 4 years.

    Reply

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