Regardless of how knowledgeable and intelligent a trader maybe about the markets, their own psychology and emotions will cause them to lose money. What can be the cause? Are the markets so enigmatic that only a few succeed in making profit?

Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade and take this 3 hour Fibonacci Trading video course by Neal Hughes. Download this 1 Minute Forex Trading System FREE. Try Forex Samurai Trading Signals from  a leading American Banker.

The most likely main cause is that many currency traders commit the same common mistakes.  However, the good news is that these mistakes while they can be emotionally and psychologically challenging, can be solved.

Risk-reward ratio is very important for you to know and understand. As a trader you should calculate a risk-reward ratio for every trade that you make. In more simple words, you should have an idea of how much you are willing to lose if the trade goes against you. You should also know how much you are expecting to make in a trade. A general rule of thumb that you should apply is that your risk-reward ratio should not be less than 1/2. With a solid risk-reward ratio, you can eliminate a trade that is not worth the risk by not entering it.

Use stop loss orders to specify the maximum loss that you are willing to accept. Using stop loss helps you avoid the scenario where you have many winning trades but a single loss large enough to wipe out all your profits. Using trailing stops can be good.

Another volatility based method is to use the Parabolic SAR indicator. It displays a small dot at the point on the chart where you should place the stop loss. Parabolic SAR is a volatility based indicator.  You can find it on the charting software provided freely by your broker.