The Reason Moving Averages Fail

Posted by on Dec 29th, 2010 | no comments

A new person who enters the forex trading field is unable to success because they don’t know how or they mismanage funds. Yes, there are some that know what they’re doing and have succeeded in making a profit using the two popular analysis methods. You must be able to predict future trends to succeed.

Good forex trading and investing involves increasing profits and decreasing probabilities of loss. This is not done, especially by newbies in the field. They do not know proper trading strategies.

Measuring the Cold Hard Facts about Forex Trading

If you use information given by FXCM, you will be able to see the trend amongst traders of forex. Daily profit and loss changes show there is a large loss and this means traders do not profit and end up losing money instead. The gain per day was only 130 pips and the highest loss was a drop of over 170 points.

There are several groups of traders and most of them are successful because they know the market conditions and unsuccessful traders who don’t have knowledge. There are strategies used that show some of the problems in the forex market.

Let’s take for example, a trader makes a profit on most of his trades. He doesn’t lose a single penny. This person is overconfident that he will never lose money but unexpectedly takes a loss. The trader loses 4 times more than what he made in profits. This means his techniques were imperfect. He may have received 80 pips in profit but the market of over 1000 points created a huge loss.

Another forex trader does care too much about getting a return on investment and experiences a loss. This trader loses and his wins are on average, much larger than losing. When he wins the game, he wins double what was lost. This shows a balancing in winning and losing and keeps the investments open to get a profit at a later time.

So what is the point?

Based on the examples, you can clearly see the flaws in the strategies that are used. The mentality behind it is what creates losses. How you handle your money is key. People fail because of how money is mismanaged.

Using the RSI strategy of trading will work better than the moving average method. It requires being more careful with your money and can help eliminate the possibility of taking a large loss. The moving average method involves more risk than any other methods and will cause a loss if not careful.

Not all methods are work, nor will they guarantee you will make a profit. Choosing the best strategies and having knowledge are what will help you win. Knowledge is king and will help you in the long run. The challenge will be difficult in the beginning but as you learn more, and practice soundly, you will have success. Don’t give up because the learning experience will pay off in the long run.

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