Why Most Traders Lose Most/All of Their Money – Part II

We’re back with the second part of the blog we put out a couple of weeks ago.  If you recall, we discussed why traders lose and are part of the high percentage of those who cannot make a profit in the Forex market.  Read on!

Decisions Decisions Decisions

There are those who find themselves experiencing something called “trader’s remorse”.  This usually happens when you open a trade, and it begins to go against you.  So you think, “I’m on the wrong side”…and immediately close and reverse your trade, only to watch price turn around and head in its original direction.

Now, imagine this happens every time you open a trade.  Bit by bit, you’ll lose your trading capital until it’s completely gone.  Do yourself a favor, follow your algorithm to take that indecision out of your trading decisions.


There are some traders who absolutely refuse to be wrong.  Without a system in place, traders who hang onto losing trades is just account suicide.  Pride and ego have no place in trading.  It also indicates that you’re trading “by the seat of your pants”, which is probably the worst kind of trading.  You’re going to be wrong.  We’re all wrong at times.  It’s part of the game.

Buying Someone Else’s Junk

Occasionally, we come across an advertisement for a system touting 90% (or some other unrealistically high win rate) accuracy with incredible returns.  It’s so attractive, right?  I mean, wouldn’t it be wonderful to plug this system into your platform and either follow the signals or have it trade for you (called a
“robot” – we talk a little more on this below)…watching the money flow in like water?  Let’s think about this for a moment.

There really is “no free lunch” when it comes to trading.  Why on earth would anybody disclose their *AMAZING* system for a few bucks (some of them can be very inexpensive to outright ridiculous).  By all accounts, the developer of this INCREDIBLE system should be a multimillionaire from their own program, not engaged in the day-to-day hassle dealing with selling it.  Just develop your own system.  This way, if it does not work the way you expect, you have the ability to change it until it does.

Trading the News

Probably one of the most ambiguous (and dangerous) ways to trade…news trading appeals to some due to the extreme, volatile movements of the market.  If you’re on the right side of the trade, it can be an exhilarating and intoxicating, watching your profits race to the moon.  We have some personal “war stories” that are worth gathering around the camp fire to hear.  They’re quite the doozies.

However, if you’re on the wrong side, your account may suffer an extreme drawdown.  In fact, you can easily lose more than you intend if your stop loss does not get filled.  Oh yeah, this can happen.  The passage below comes directly from a broker who specifies that your trade can far exceed your stop loss level.

“During extreme market conditions, the time period from when a market order is received as compared to when the order is ultimately executed may increase. This increase in time period can result from many factors including but not limited to: market volatility, available liquidity, pre-trade available margin check, and price validation etc.

What they’re saying is that your stop loss is not guaranteed during exceptionally high volatility market conditions.  Very scary stuff.  Imagine watching your account value plummet to zero and not having any control to mitigate the losses.  

Bye-bye money.


Arigato Mr. Roboto

There will come a time when you will come across someone selling a “robot” trading program, sometimes called an EA (Expert Advisor).  A robot in its simplest form is a set of instructions.  Think of a flow chart.  If this, then that.  Data in, decision out.  Pretty simple.

Those selling this software will claim their program will efficiently automate the process of trading, so all you have to do is “click” to either start the process or open and close a trade based on instructions from the robot.  “But, they have an equity chart demonstrating amazing profits”.  Yes, they do, don’t they.

What they don’t tell you is that they run the program many, many times across all time frames, markets, dates and currency pairs.  The issue here is that the market is constantly changing; dead, volatile, trending, and range bound, and they will cherry-pick the one that looks the best to demonstrate how lucrative their program is.  But, they don’t tell you that…of course.  Sneaky.

Remember, there are different market conditions…and currency pairs (or other securities) will behave differently from each other, so a robot’s “rules” may not be able to adjust for those dynamic situations.

Let’s Wrap it Up

Now that we’ve investigated why traders lose money, how did you stack up against the “list”?  We’re you free and clear of the anchors holding you down, or did you find your list had a lot of check marks?

As we asked in part I: “Can you break free from that group?”  The answer is, “Without a doubt”.  It may take some time and a bit of trial and error, but at the end of the day, trading the NNFX way can remove many of the obstacles found elsewhere.

Trading should be a series of objective “yes” or “no” decisions.

“Is there any significant news which we have identified for you?”

“Is there sufficient market volume?

“Did price cross and close above/below a particular line?”

“Did the indicator turn from red to green?”

“Did the volume histogram extend beyond the level?”

“Do you have your risk profile identified?”

“Do you have an exit strategy in place?”

Each of your actions should be reduced to a simple “yes” or “no” based on what you see on the chart…not what you think what might happen in the future.  You, or anybody else…are not wizards, warlocks, fortune-tellers, seers, have access to time travel, or can determine the future with any real certainty of repeatable accuracy.  Remember what we keep saying…”Develop your system, put it to work…and stay the hell out of its way!”

More to Come

There’s a lot more to come.  If you haven’t signed up on our contacts page or subscribed to the YouTube channel, please consider doing so to receive notifications as we continue to publish helpful, relevant, and informative Forex related material to support your quest to becoming a better trader.

To become a more effective trader, consider taking our advanced course.  You can access the content description HERE, and the course, HERE.

Our only goal is to make you a better trader.

BTW – Any information communicated by Stonehill Forex Limited is solely for educational purposes. The information contained within the courses and on the website neither constitutes investment advice nor a general recommendation on investments. It is not intended to be and should not be interpreted as investment advice or a general recommendation on investment. Any person who places trades, orders or makes other types of trades and investments, etc. is responsible for their own investment decisions and does so at their own risk. It is recommended that any person taking investment decisions consults with an independent financial advisor. Stonehill Forex Limited training courses and blogs are for educational purposes only, not a financial advisory service, and does not give financial advice or make general recommendations on investment.