If you understand what is the reason for most Forex losses, perhaps this will help you not to repeat the most common mistakes and achieve stable profitability.
An interesting study was done by one of the trust funds, which helps to understand some of the psychological aspects of this issue.
The study reveals the relationship between the amount of reward and the amount of risk, as a rule, these two indicators are closely related when using margin trading .
1. The price of risk.
• First, a group of people were asked to choose from two options:
– Take $1,000 at once or.
– Toss a coin and if it comes up heads – take $ 2,000 already, of course, when it comes up tails, the player does not get anything.
Most people chose to take $1,000 straight away, although the odds were 50/50.
• In the second case, the choice was more difficult:
– Take $1,000 straight away or.
– Roll the die and on a roll of 6 get $7,000. Surprisingly, the majority of respondents chose the second option, although the chance of getting money is only 1:6, but the desire to win a large sum makes them close their eyes to the risk.
A similar situation develops in Forex, trading with your money is difficult to lose a large amount, and with an increase in leverage, the risk of losing all capital increases significantly, but traders close their eyes to this fact because of simply fabulous winning prospects.
Given the unpredictability of the trend, the chances of losing everything are much higher than the chances of earning large profits, so the number of losers on the stock exchange is dozens of times greater than the number of winners.
2. Ability to wait.
The experiment was conducted among 30 children aged 6 years old, they were offered a cake, which can be eaten immediately or wait 15 minutes and get two cakes already.
Nine children coped with the task, Twenty-one preferred to receive one cake, but immediately.
For 30 years, researchers have observed the participants in the experiment as a result, it was found that the percentage of successful people in the group of more patient was several times higher than among those who preferred the minimum, but immediately.
In this example, the analogy with trading is perfectly visible.oh, most successful players open trades only when it is really profitable and do not risk in vain. Instead of using leverage, they gradually increase the deposit at the expense of profits and investors’ funds.
Surprisingly, it is quite easy to find similarities between real life and playing on the stock exchange, someone studies for a long time and then occupies a high position in society, and someone takes risks and even loses what they had.
