It is commonly reported that more than 90% of forex traders fail. Now I am not sure how a “failure” is described, but I would think it means they quit trading after having lost more money than they made. So since the failure rate is so high, why should you be interested in trading the forex? I think we can answer that question by looking at how most traders fail.

1. Most traders start trading with real money with very little trading experience

Beginning traders usually start trading before they are ready. That, in my opinion, is the #1 reason traders fail. In fact, during my first few trading years, I almost joined the 90% failure group.

Several years ago, I received a $5,000 profit sharing check from the company I worked for. I had been trading the forex for only about 3-4 months, but for reason, I decided that I would have no problems making money in the currency markets. So I opened a live account and sunk all $5,000 into the markets.

In less than 3 weeks, I was down to only $800. I closed my foreign currency exchange trading account and decided that I needed to learn more about how to trade properly before I risked anymore money. But the lesson wasn’t cheap – it cost me $4,200.

2. Most traders over-leverage themselves

One reason that the forex is so popular is because it allows normal people like me and you to control a whole lot of money. Without this leverage, you would have to invest millions of dollars to make any money at all. But while leverage opens the door for us to trade currencies, it can absolutely destroy a newbie trader.

For some reason, beginning traders believe that they can risk 10%, 20%, or even more on a single trade. They think that if they can just make a few profitable traders, they will double their money easily. The problem is that most beginning traders can’t make profitable trades at first. And even if they do, these fleeting wins only encourages their reckless gambling and eventually causes them to lose every penny.

So how much should you risk on each trade? I recommend no more than 3%. 2% per trade is optimum once you have proven to yourself you can trade consistently.