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4 Reasons Traders Lose Money

By November 20, 2020No Comments

4 Reasons Traders Lose Money

If you go into the trading business, which is a very tough business to be consistently profitable in, you should know why you are losing money as a trader by learning about the 4 reasons why traders lose.

Before you jump into the day trading world, read this blog and watch the ASFX Youtube video here.

By bringing awareness to the 4 reasons traders lose money, you can avoid the same fate. 

Let’s start by saying that, we as humans and traders, have DNA flaws that cause us to lose money trading. 

There are 4 main characteristics that we all do that result in a loss.  

1) Over-Trading

Why are you LOSING Money as a Trader? The 4 Reasons Traders LoseThis is the most common characteristic that traders have in common.

This is the number one reason why traders lose money.

You’re never going to be impermeable to over-trading. It even tries to creeps in on Austin every day and tries to infiltrate his mind while trading but you need to have a trading plan that you stick to.

It’s conditioned in your brain to want to trade to make the most money, but in reality, the ones that trade the least, trade the best setups and the biggest size are the most successful and make the most profit.

Let that encourage you when you are debating your 4th trade of the day.

Do it less. Do it better. Do it bigger.

2) Stop-loss Being Too Tight

Another reason why traders lose is their stop-loss is put in place so that if a trade takes a sudden turn in the opposite direction , they are automatically taken out of the trade. Stop-losses are a good thing so you don’t blow your account, but you have to give your trade room to move.

Austin has had a couple of trades where he has the direction perfectly, he takes the trade, manages it properly, but it pins him out and then continues back in the original direction that he thought it was going to go.

How do we fix this?

A consistent risk management system so that, sometimes, if you get pinned out too early, you will still be in those trades long term because you have a detailed plan you are following.

Don’t fret about your trading decisions, don’t get scared, don’t move it too quickly and get pinned out.

3) Over Leveraging

This starts with brokers giving crazy leverage. For example, they give you $1,000 of buying power for every $1 you give them. This is not realistic.

There is no real successful prop firms, big profitable traders, or big money management funds using that type of leverage. The most leverage anyone should use is 1:50, but Austin doesn’t think you need leverage at all because it will burn you more times than not.

4) No Risk Management Strategy

This is when a trader loses 5% or more in a single trade. It may not seem like a lot, but if you have a couple of these in a row, then you’re down 5, 10, 15, 20% and you need to make up 20% or more just to break even. This is super hard to come back from.

These losses are typically a result of over-trading and over-leveraging, which can result in potentially wiping you out.


The most important and common mistake = over-trading.

Over-trading 2.0

Over-trading is what you should think about the most when you sit down at the desk.

Are these trades selective enough for me?

Am I going through my checklist trying to weigh all the probabilities evenly to see where is the highest probability trade set up?

If you’re asking yourself questions like that, then over trading will not be an issue.

A good system is key.

If you don’t have a system in place, you won’t ask yourself these questions and you’ll potentially be doing 5, 6, 7 different trades a day.

There are some people who buy and sell the same pair on the same day. This is called chasing money, and it will burn you in the long run.

Tight Stop Loss 2.0

This is the easiest mistake to fix.

Do your chart markups, study your system.

Back test your system.

Prove to yourself that those stop losses are a good system because you’re confident in them.

For example, Austin has a specific system in place for stop losses. It looks like this:

A setup = He doesn’t move his stop loss until 2R is reached. This means he’s not moving his SL up into profit until he has a 2x return on his trade.

C setup = He has the exact same system as before except he moves his stop loss when 1R is reached as the probability is a little bit lower, so it’s more important to take the profit sooner.

Over-leveraging 2.0

Stay away from unregulated brokers – don’t let them take your money!

Big losses 2.0

Don’t do it! Austin can talk about this because he’s experienced it when he was first learning how to trade. He has been that trader who lost 5% in the beginning of the day, tried to make it up, and lost another 5%.

You need a good system like ASFX with the A1, D1 and D2 systems.

You’re the one coming to the desk every day. You’re the one putting in the hours to hone your trading skills, you’re the one clicking the buttons, so you also have to put in the work.

We can help you beat these 4 mistakes that traders make by proving you with a great system. ASFX has a lot of full time and part-time traders using the ASFX system to consistently make money.

After reading this blog and watching the YouTube video, ask yourselves these questions:

  • What’s my leverage?
  • Is my stop loss too tight? 
  • Is my stop loss too far? Am I going to take a 5% loss?
  • Is this a high probability trade? Should I even be in this trade? 

If you can sit, analyze and answer these questions you drastically reduce the number of mistakes you make.

If you have any questions or comments about who we are and what we do please don’t hesitate to reach out to us on any of our platforms. We can’t wait to connect!

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