Furthermore, data compiled by the National Futures Association reveals that most individual traders (known as retail forex traders) abandon their trading activities within a short period, typically around four months. This suggests that many traders underestimate the risks and difficulties involved in forex trading, leading to significant financial losses and a high dropout rate.

Investors need to understand these risks and approach forex trading with caution, thorough research, and a clear understanding of the markets. Proper education, risk management strategies, and a disciplined approach are crucial to navigating the challenges of forex trading.

To succeed in forex trading, it's essential to manage risks effectively. Traders who make concentrated trades or use excessive leverage are more likely to incur significant losses. On the other hand, traders who diversify their risk and distribute their funds across multiple markets have a higher chance of trading profitably.

While taking calculated risks is necessary to make money in forex trading, it's crucial to mitigate those risks. Here are some best practices to help you manage risk:

1. Start with a practice account: Before trading with real money, practice with a demo account to gain experience and build your skills.

2. Diversify your trades: Instead of making a single large trade, split your funds into smaller trades across multiple markets to minimize risk.

3. Use stop-loss orders: Set a stop-loss order to automatically close a trade if it reaches a certain loss threshold, limiting your potential losses.

4. Use leverage wisely: Avoid using high leverage (like 50:1) until you understand how to use it effectively. Even a small market movement against your trade can result in significant losses.

5. Stay informed and adaptable: Continuously learn about the evolving forex market, test new strategies, and maintain a conservative approach to maximize profits and minimize losses.

6. Employ risk management strategies: Develop a risk management plan to help you make informed trading decisions and avoid impulsive mistakes.

By following these best practices, you can effectively manage risks and increase your chances of success in forex trading.