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How to avoid losing money in Forex

Why forex traders lose money - Official Olymp Trade Blog

Just like any other business venture, trading on the Forex market comes with its risks. To help you avoid becoming the person who pulls out their hair and screams, “I lost all my money in Forex!” we’ll tell you all about why Forex traders lose money and how to protect yourself from sharing the same fate.

The Forex market is actually a friendly environment — even for newcomers 💚 With no nine-to-five rule, it’s open around the clock except on weekends and holidays, providing plenty of opportunities to capitalize on price differences at a relatively low financial barrier to entry, so you won’t go bankrupt right after creating an account. Unfortunately, going bankrupt is easy enough to do if you don’t steer clear of common pitfalls and avoid losing money in Forex. Let’s see what can be done to stay afloat and succeed.


Interact with the underlined words and green dots to get additional details and explanations.

The art of trading

Due diligence and knowledge are the first things you need in order to avoid losing money in Forex. Traders can only become pros and earn a lot of money if they try hard enough to study the market and master the process of trading. Part of it comes naturally with life experience, but research also plays a great part. In our case, theory and practice go hand in hand.

To avoid losing money in Forex, it’s important to not only dig into the basics and watch at least a couple of videos on the subject, but also scan the news for factors that may be driving currencies’ performance and market behavior. The Insights section on the Olymp Trade platform is an improved version of an economic calendar: Check it out to keep up with updates on current affairs relevant to the financial world.

Absorbing as much knowledge as you can about trading is a must. The Olymp Trade blog and platform provide tons of opportunities to learn the ropes. Not only does the platform itself include educational videos and explanations, but the Education section of Olymp Trade Blog is jam-packed with resources to get you from beginner to professional-level trading. We have a crash course on Forex trading, in-depth explanations of technical analysis and associated tools and strategies as well as video lectures, articles, webinars and other formats to suit every taste and learning style.

In broker we trust

It only makes sense to start trading when you have every reason to trust your broker. Regulation is what makes consumers feel safe about making deposits, agreeing to withdrawal conditions, and trusting the charting software.

Never judge a book by its cover: A broker’s website may look professional, but that’s hardly a guarantee — anyone can hire a flashy web designer 👩‍💻 Do your homework and check everything you can about the broker you’re thinking of opening an account with. Look at its main hits on Google, check forums where real users share opinions, and do some investigative research on the trusted bodies the broker is connected to.

For example, Olymp Trade is a member of the Financial Commission, one of the most respected regulators protecting individual traders.

Helpful and responsive customer support is definitely one of the key attributes of a well-established broker, as is a stable, low-latency, user-friendly platform. Delayed trades and inability to quickly resolve issues are a trader’s worst nightmare that lead straight to what we’re all trying to avoid: losing money, and in this case losing money in Forex.

Free lunch is actually a thing

Experience makes all the difference. Before your money is placed on the line, it makes sense to test order entries and different strategies.

Even the best success stories start slowly and cautiously. Demo accounts are a perfect opportunity to understand the trading process with zero expense and no risk of losing money in Forex. A live account will be waiting for you once you get the hang of the key principles and feel confident enough to test yourself out on the real market.

No rush — no crush

When you think the time has come to go live and engage in real trades, keep in mind that it’s vital to start small and refrain from diving in headfirst. Sure, less money means less profit, but being careful about your first trading decisions will definitely mitigate risks that you’ll later consider easily avoidable.

Evolving from an amateur trader into a seasoned professional is a step-by-step process, it never happens in one day. There may be some beginner’s luck, and we urge that you don’t let it get to your head. Answering the question, “How’s your trading going?” with “I lost all my money in Forex” is a conversation nobody wants to have, so let’s hold our horses for a while to reap the benefits later.

Risk management in Forex trading
The face of poor risk management

Increasing your investment amount sounds like a good idea only when it’s clear that you’re actually gaining much more and losing much less.

Multipliers: Sometimes less is more

Properly used, a multiplier (also called leverage) offers huge profit potential: Small investments can bring big gains. Olymp Trade’s multiplier goes up to 1:500 — that is, every $1 in your account can be turned into a $500 position in a snap.

But the higher the multiplier, the higher the risk: Sometimes bold moves blow up in your face and turn into the reason why Forex traders lose money. Remember that smaller positions help drastically cut down risk, especially when you’re still at the beginning of your trading journey.

Be reasonable when using this tool, and may the force be with you!

Safe side of the moon

Entering a position is easy, but the real trick is to exit at the right time and price. For protecting what you’ve already earned and preventing further losses, it’s recommended to follow risk-management protocols and use Stop Loss and Take Profit commands.

If you don’t stick to your limits, you might get irrational in the heat of the moment. Deciding when to stop, wait or trade is crucial to minimizing the risk of losing money in Forex. Take Profit and Stop Loss tools will help you do that. They are available in Forex mode on the Olymp Trade platform.

Why do Forex traders lose money? Because they don’t know when to stop! Set limits to protect your earnings.
Fig. 1. Stop Loss and Take Profit on Olymp Trade

Follow the winds of change

Any market is like a living, breathing being with its own character. It evolves, changes, gets depressed or even furious from time to time. These fluctuations can cause great inconvenience, but there is also the potential for great personal achievements.

In an ultrastable environment, there are no alarms and no surprises (whether pleasant or unpleasant), thus no hopes for volatility and dramatic price shifts that can be profited from. Forex traders need to adapt all the time, so just take the market as it is and try to keep your mind open to change. This way, you’ll be able to avoid losing money in Forex from not being mentally prepared for a merry-go-round of market conditions and news.

Dear diary...

A trading journal is a kind of a diary with entries of all your trades, be they on good or bad days. Feel free to write down any relevant info (not only dates and tools, but also emotions and expectations) that may be useful to look back on and learn from. Pick any format that’s convenient for you, whether it’s an old-fashioned notebook or a spreadsheet stuffed with statistics, charts and formulas.

Sneak a peek from time to time, and you’ll find some precious feedback flooding from the pages: A bigger picture of your behavioral patterns and decision-making process. Neglecting to keep a proper record of trading activity and mentality is another reason why Forex traders lose money, as they won’t be able to learn from their own mistakes and as a result, will most likely make them over and over again.

Keep calm and trade on

First of all, remember that the Forex market is the biggest and most stable of them all. It won’t burst like a bubble no matter what. Now, if it has survived some major ups and downs (looking at you, 2008 financial collapse), so will you.

Even the best laid plans can go awry, so there’s no need to get too emotional about losing money in Forex from time to time. Success makes all of us feel good — losses don’t, but they will happen anyway and tend to bring valuable insight, it’s all part of the process.

Stay patient. When you decide to learn how to play the guitar or dance the salsa, you brace yourself for years of practice ahead. Trading is no different in this sense. Don’t be demotivated from the inevitable bumps on the road, rather consider them a tuition fee for success.

Lessons learned

It would be so cool if we knew all the rules from the beginning and could just feel it in our gut what to do. Unfortunately, this combo almost never happens. Avoiding losing money in Forex is a skill that needs to be developed from the ground up, then practiced and nurtured.

Make your trading journey as smooth as possible by taking advantage of Olymp Trade’s educational portal, global news and success stories — it’s all there to get you to the top. The more you absorb, the more you know, and the more you succeed. It’s a simple equation!

Like any job, however, trading requires soft skills as well as hard skills. Controlling your emotions (especially greed and fear) will let you keep a cool head and progress faster. When you lose, learn from it, correct your strategy and carry on. Ironically, making mistakes is one of the best ways to stop making them.

Olymp Trade will support you every step of the way — you just have to be brave enough to take them. Trading tips, complex terminology made simple, the best tools to use and the deepest trading secrets — it’s all for you to avoid losing money in Forex and become a force to be reckoned with on the markets.

Take Your First Step

Risk warning: The contents of this article do not constitute investment advice, and you bear sole responsibility for your trading activity and/or trading results.