What you are about to read below may surprise you. And it is probably not what you want to hear about trading experiences on the Forex market. It can make the experienced masters and the media angry because it is based on uncensored facts about the foreign exchange industry. All of this you need to know before making any more transactions.

If you don’t want to be crushed and kicked out of the market, you need to read carefully and remember what I am about to share with you below.

The online media and the “propaganda” that you hear every day have the same purpose of luring noobs into traps. Yes, the noobs here are you, and for sure, they don’t want you to know. Basically, this industry wants you to trade without thorough preparation, or without a clear sense of what you are doing. Because they know it’s the fastest way to hook dollars out of your pity pocket.

Please don’t blame me. I don’t mean that you can never be successful with the Forex market. But if you are still following the path of the crowd out there, chances are that you’re still struggling with billions of theories as well as accounts shrinking. This is exactly what the industry wants you to do, like a fat pig waiting to get slaughtered.

This article is for you if you are looking to learn about the forex market, or starting to try trading with your real account. Please read it.

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How the foreign exchange market REALLY works

You may not have read these anywhere

You may not have figured out yourself being “driven” by the Forex machine yet. This industry does everything it can to get you focused on its glamor and its best aspects.

The truth is: (most of) blog sites, forums, websites, and the media directly or indirectly make traders misunderstand the risks and possible profits in trading foreign exchange. Basically, they direct you to the “abattoir”, the foreign exchange market. Markets and brokers don’t care if you are at a loss. And if you make a good profit, they will notice you. They will note you down in a list of tracking accounts and do shady things that some tricky platforms do. Your blood will be “sucked” slowly, little by little.

To understand the reality of forex trading experiences, you must look closely at the mechanical routing of your orders. The retail forex market is structurally divided into two primary broker models: Market Makers (B-Book) and Electronic Communication Networks (ECN/A-Book). Market makers create an internal, artificial market for their clients. They quote their own bid-ask prices and take the opposite side of your trades. This means when you buy, they sell, and when you lose, they profit directly from your losses. This model creates a severe conflict of interest, where the platform’s financial health is directly tied to the failure rate of its traders.

On the other hand, ECN brokers act as intermediaries, routing your orders directly to liquidity providers (large institutional banks). While this removes the direct conflict of interest, it does not guarantee a profitable outcome. ECN brokers profit by marking up spreads and charging commissions on every transaction. Even when trading with the most transparent broker, transaction costs—such as spreads, commissions, and overnight swap fees—act as a constant, quiet drain on your equity. In addition, when high-impact news occurs, you will encounter slippage, where orders execute far away from your intended price. The mathematical edge is stacked heavily against you from your very first trade.

When you trade with your forex broker, they always earn brokerage fees whether you win or lose. This industry is full of brokers who always want and influence you to trade as much as possible. They do not need to know and do not care whether you have learned the basics or not, have had any Forex knowledge or trading experiences.

The less amount of knowledge you know, the more money you “gamble” on the market and lose. If you intend to or are trading with a real account without the most complete knowledge as possible, then stop immediately. You are groping on a minefield without knowing where the mines are hidden. Stop it.

You should not spend money on robots advertised that will help you earn several thousand dollars a month without doing anything. Also don’t waste your money on courses, seminars, and promises to bring you riches quickly. You need to learn to understand the market, read the candle signals, etc. Trade yourself, and learn from both successes and failures. Do not trade imitating others. Do not trade with robots. Automated robots are built on historical data fitting; when market volatility patterns shift, they fail completely and liquidate accounts within hours.

Get down to earth and see what’s happening in reality

If you are having great hopes and expectations for forex trading, I will not be the one telling you not to dream anymore. I am the one who pulls you out to stand in reality. Once your expectations don’t “match” with reality, that’s when “pain” happens.

You’ve probably seen (many times) software or Forex trading bots for sale, with great promises of how much you can make even without doing anything or having any experiences. They show you a series of photos of real trading accounts with daydreaming results. Be careful, they can easily be edited or created with Photoshop software. Marketing campaigns in this space exploit the human desire for quick wealth. They show backtests with perfect curves, but deliberately omit execution slippages and catastrophic drawdowns that occur in live trading environments.

This is also the reason I will never show my account with you. I believe that through what you read in this blog, you can evaluate my trading ability. “Don’t believe what you hear and half of what you see.”

Regarding courses or seminars (usually up for selling), do not believe if you just see them offer the monumental and rich images of “successful” traders. (Up to here, I remember the foreign exchange course of Jimmy Wang organized by Babylon when I first learned about the foreign exchange market years ago. It has always been full of pictures of supercars and villas. I didn’t go to this course. And I heard a lot of complaints on some of the forums about this training course.) All they want and try to do is to bring you a false and dreamy look. The individuals selling these courses make their primary income from course fees and broker affiliate commissions, not from the market. If their systems were truly money-making machines, they wouldn’t need to spend millions advertising $49 e-books or $2,000 weekend bootcamps.

To give you a clear perspective on what separates a struggling retail amateur from a professional market participant, examine the table below:

Never be too confident when you’re still a newbie

Overconfidence is one of the big problems that newcomers get into, especially after they become very successful with a demo account. Many times, I heard from you guys that in just a moment, your account lost half of the money or even burned out. Most newbies do not use a stop-loss. Even if you place a volume of 0.1 lot, the amount you lose in a few seconds is too terrible.

This is the classic “demo account trap.” Trading on a demo account is highly misleading because it lacks the primary element that determines trading success: human emotion. When trading with virtual money, fear, greed, and hope are completely absent. If a trade goes against you, you do not feel the physical pain of losing hard-earned cash. You can easily hold onto a losing trade for days until it eventually turns back in your favor. This instills a highly toxic habit of holding losses and hoping, which works when resources are infinite, but guarantees immediate liquidation on a real account.

Foreign exchange trading is a form of short-term investment which is much shorter than securities trading. You can’t hold an order for several months or a year like securities. And more specifically, stop-loss is something you must have in order to survive. Never execute an order without a stop-loss. It is very likely to happen once your order is placed on the market and you are immediately setting up a stop-loss. With those few seconds, your account is dead. The high leverage offered by forex brokers (sometimes up to 1:1000) means that a tiny adverse price move can trigger a margin call instantly if a stop-loss is not pre-defined in the order entry window.

Do not be overconfident if you are having several consecutive winning orders. Do not think you have soon understood the market or have grasped the “broker”, etc. You will return all the profits to the market soon.

After many years of losses and continuous learning, I eventually know what I’m doing and need to do to survive with the market and make money from it. If you are new or your transaction time is not long enough, never go subjective. Trade with a small account and determine your initial goal. It is not about making a lot of money, but simply not burning out your Forex account and learning experiences to observe the market movements.

I, and many people I know, know that in order to make real money on the Forex market, it takes years to have experiences and fairly understand what is going on in the market and trade properly. I feel that it will be more fortunate for you if right from the start, you encounter losses or even burn out a few accounts. Success and making a lot of money as soon as entering this harsh market can become a disaster. Early success leads to the Dunning-Kruger effect: a cognitive bias where traders with low ability overestimate their competence. They believe they have found a secret shortcut, increase their position sizes, and eventually lose everything when market dynamics normalize.

A lot of people think that because they have experiences of succeeding in a certain field, they can do the same thing when trading in the forex market. My friends and some people I know are very successful people in fields such as real estate, phones, restaurants, etc. But they all lost a lot of money with forex and stock. This thought is definitely a mistake. Trading, like any other field, takes a long time, effort, and money, etc., to learn how to “understand” it. The rules of traditional business—where aggression, negotiation, and sheer willpower can force success—do not apply here. The market does not care about your business background or your net worth. It is an indifferent, liquid arena that ruthlessly punishes any form of arrogance.

Toxic Money Management Systems: The Path to Absolute Ruin

In their desperate search to bypass the steep learning curve of technical analysis and emotional discipline, retail traders frequently turn to alternative money management systems. These systems are marketed as logical shortcuts to profitability, but in reality, they are mathematical landmines. The three most common toxic practices are Martingale, loss-holding, and grid averaging. Understanding why these systems fail is crucial for your survival.

1. The Martingale Strategy: A Recipe for Catastrophe

The Martingale strategy originates from the gambling halls of 18th-century France. The premise is simple: double your position size after every losing trade. The theory suggests that when you eventually win, you will recover all previous losses plus a profit equal to the original position size. While this sounds appealing on paper, it is a mathematical certainty that you will experience a margin call.

The core flaw of Martingale is that risk increases exponentially while potential reward remains linear and small. For example, if you start risking $10 and suffer a streak of consecutive losses, your exposure increases dramatically: $10, $20, $40, $80, $160, $320, $640, $1,280, $2,560, and $5,120 by the tenth trade. To win a measly $10, you are forced to risk over $5,000. Financial markets can trend in one direction without pullback for much longer than your capital can sustain. A single extended losing streak will completely liquidate your account.

2. Loss-Holding and “Averaging Down”: Denying Reality

Loss-holding is a psychological defense mechanism where a trader refuses to close a losing position, hoping that the market will reverse and return to the entry price. Amateur traders often compound this mistake by “averaging down”—adding new positions in the same direction at lower prices to reduce the average entry cost.

This approach is built on hope rather than market structure. In highly leveraged environments like forex, holding onto a losing position drains your available margin via swap fees and limits your ability to take profitable setups. More importantly, currency pairs can enter multi-year trends driven by fundamental macroeconomic shifts. Holding a losing position without a stop-loss will eventually exhaust your free margin, causing the broker’s automated risk management systems to liquidate your account at the worst possible price.

3. Grid Averaging: The Illusion of Constant Profit

Grid trading involves placing buy and sell orders at regular intervals above and below a set price, creating a grid of trades. This system performs exceptionally well in range-bound, consolidating markets, as the market moves back and forth, hitting profit targets on both sides. Because of this, grid systems look highly appealing in short-term backtests.

However, grid trading is highly dangerous because it relies on the market staying within a range indefinitely. When a currency pair breaks out into a strong, sustained trend (such as during a geopolitical crisis, central bank rate decision, or black swan event), the grid system accumulates a massive number of open, losing positions. Because grid systems typically do not employ stop-losses on individual trades, a single directional breakout will lead to catastrophic drawdowns and a blown account.

The Professional Risk Management System (The 2% Rule)

Professional traders do not rely on hope or mathematical tricks. They treat trading as a business of probability. To survive and thrive in the long term, you must build a robust, rule-based risk management plan. This system rests on three main pillars: the 2% rule, proper Risk-to-Reward ratios, and volume-verified entries.

1. The 2% Rule: Protecting Your Trading Capital

The foundation of capital preservation is the 2% Rule. This rule dictates that you should never risk more than 1% to 2% of your total account equity on any single trade. If you have a $10,000 trading account, your maximum risk per trade (the dollar distance between your entry price and stop-loss, multiplied by your position size) must never exceed $200.

This rule is designed to protect you from the mathematical reality of drawdown streaks. In trading, even the best technical systems will experience consecutive losses. If you risk 10% per trade, a streak of 5 losses will wipe out 50% of your account, requiring a 100% return just to break even. If you risk 2% per trade, a 5-trade losing streak only reduces your capital by approximately 10%, which requires a minor 11.1% gain to recover. Capital preservation is the key to longevity.

2. Risk-to-Reward (R:R) Ratio: The Profitability Engine

Your Risk-to-Reward ratio determines how much you stand to win compared to what you are risking. Professional traders target a minimum R:R of 1:2, meaning that for every dollar risked, the potential profit is at least two dollars. Ideally, look for setups that offer 1:3 or higher.

A positive R:R ratio completely changes the mathematics of trading. If you maintain a 1:2 R:R, you only need to win 34% of your trades to break even. If you maintain a 1:3 R:R, you can have a low win rate of 26% and still remain profitable. This completely removes the pressure to be “right” on every single trade and shifts your focus to statistical expectancy over a large sample of executions.

3. Volume-Verified Entries and Structured Stop-Losses

To execute your risk plan, you must define your entries and exits based on objective market structure. A stop-loss should never be a random number of pips. It must be placed at a logical level where the market structure invalidates your trade idea—such as behind a major swing high, swing low, or support/resistance level.

Furthermore, entry signals must be verified by volume and price action. Enter trades only when you see key candlestick confirmations (such as pin bars, engulfing patterns, or institutional order blocks) at key zones, backed by volume expansion. This ensures that you are entering the market alongside institutional money, increasing the probability of a swift move toward your profit target.

Ego and madness

You, who are reading these words, could be an experienced longtime trader (2 to 5 years or more). However, you may be still struggling with losses and disappointment. If you’re like that, take a serious look at how you trade, the mistakes you make, and the bad habits I’ve mentioned in many articles. You might know you are having those problems but can’t change them, might not you?

A person with a huge ego and an arrogant personality will not be successful with forex trading. You are never wiser than the market. And the market is always right. The market does not care where you bought, why you bought, or how much you need the money. It simply reflects the aggregate flow of global capital. If you try to argue with price action, the market will break your account without hesitation.

Not knowing what mistakes you make and always struggling to find the “holy grail” as well as a perfect money-making method are the reasons that most participants lose money. Trading is the activity that you conduct while correcting and learning.

Study, study more, study forever. You will have to learn for the rest of your life because you are able to trade up until you enter the afterlife. Pay attention to the mistakes you make repeatedly. Write them down on sticky notes and stick them onto the screen in front of you. It’s one of my secret Forex tips after years of trading experiences. You need to identify them correctly, and gradually change them to get rid of them. Keep a detailed trading journal. Record your entry reasons, your emotional state, the risk-to-reward ratio, and the final outcome of every trade. Reviewing this journal weekly will highlight the exact psychological triggers that lead to your losses.

And I strongly recommend that you reconsider if 4 or 5 years have passed and you are still in constant loss with the forex market. Chances are, you are not “in” with this business. Stop and put money, time, and mind into other work. There is no shame in admitting that trading does not suit your personality. In fact, recognizing this and walking away is a sign of high maturity and self-awareness, saving you from further financial and emotional ruin.

Don’t be fooled by the thought of “big events are going to happen right now”. You will only be disappointed

You know that there are a lot of people who make a lot of money with forex. Yes, it’s true. And maybe you do not notice but I know. There are many more, many times more, people lose a lot of money with forex (90-95% compared to 5-10%). If you are not aware of what you are doing or do not have a reasonable method without capital management skills, then you must be on the endless list of losers.

Be careful, I know you still want to find methods or ways to win, and even win most leisurely (such as buying robots). I assure you that there is not any system or method that will get you rich overnight quickly with forex. Nor will any robot make money for you in the long run without you having to do anything but install it on your computer.

My trading path and method are based on simplicity and logic as well as the ability to read charts correctly. If you can’t read price charts (and thus understand what’s going on in the market), just throw away those obscure methods and knowledge. Because if you are like that, you will never succeed.

Conclusion

I trade with the price action strategy. I use the almost original chart with only Japanese candles, without a bunch of messy indicators, no A-lines or B-lines, or what-looks-great, etc. And I focus on what is the most primitive and basic, the “original document” from the market.

By keeping my trading screen clean, I focus entirely on market structure, support/resistance, and candlestick patterns. This simple approach prevents analysis paralysis and allows me to react dynamically to changing market regimes. Trading is not about predicting the future; it is about managing risk and executing a high-probability strategy consistently over time.

And this blog is where I will share everything I know and my Forex trading experiences with you. Thank you for taking the time to read these articles.

Wish you a good working day.

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About the Author: Tran Hien

Tran Hien is the chief trading strategist at HowToTrade.blog, specializing in Price Action methodology, market structure, and technical analysis. With over a decade of active trading experience across Forex, Gold, and Crypto markets, he teaches retail traders how to develop rule-based trading plans and build professional risk management systems.