Recently FXCM just conduct a research why beginner traders keep on losing their money trading the financial markets. The fact is quite shocking. Despite many of those investors are lack of trading knowledge and experience, many of them got started on the wrong step. What I mean here is that most beginner traders are depositing very small amount of money hoping to grow their tiny live account to big account. This is possible but for someone to get to this level, they will require a very long time to understanding how the markets works in the first place.

The FXCM researchers were doing some research to know why most beginners are keep on losing their money yet many of these beginners are not exactly beginners. They are people with trading knowledge and experiences. The fact that they losing money is something that hard to believe. That is why because of that reason; these researchers conducting investigation of what might be the problem.

When the truth revealed, that quite got us shocked a bit. The fact is that many of these beginners make their deposit with very small amount of money and they trade the market using big leverage. The report telling us that according to the stats, those with small amount of capital always using big leverage which automatically lower the profit they are having while in the same time increasing the risks of them doing overtrading. According to the stats, investors with larger accounts are more averse to leverage utilization, therefore, they are trading more diligently compare to those that are using bigger leverage.

The stats shows that investors with money less than $1K in their trading account, engage a lot more than those with bigger money in their account. This is because most of these small investors leveraging their trading account 26 times than the normal investors who’s got $10K of cash in their trading account. The average profit percentage of traders with smaller account is only at around 20%, while bigger account investors hold a profit average percentage up to around 37%.

This is a very big profit taking percentage we are looking right now because with only 20% of average profits, the smaller traders have, they also got around 30% risk potential on every transaction initiated. While the bigger account holder only got around 20% of risk potential on each trade. Why is this? It is because of how the leverage is been used.