4 Reasons Why Most Forex Traders Fail

Updated from its original posting on 27-11-2007

It is often said that the odds of being consistently profitable and succeeding in the forex market are very slim, as more than 90% of traders are bound to face failure. Here are some reasons why this usually happens:

1. Not having a proven trading methodology

forex lossesThose who consistently lose don’t know key numbers. They have no understanding of support and resistance. Chart patterns are foreign to them. Their definition of risk management is getting margin called.

With no proven trading method or strategy, you are doomed to fail. You will end up quitting the game after a string of losses. But there is hope. With the right education, a workable method, psychological balance and persistence, it can be done.

2. Not understanding how the market works, key indicators, key numbers, and ideal times to trade.

When you place a trade, you literally go toe-to-toe against some of the biggest nerds in the world. Many professional traders are not only super smart and Ivy League educated, they’re also rich. That doesn’t mean that you, the small guy or gal, can’t win.

It just means that you simply must educate yourself and be prepared to do battle. David can beat Goliath, but only if he’s prepared. Some people might think the cost of a trading education is too high. But the cost of ignorance is way more expensive.

3. Risking too much per trade.

The wannabe trader risks 10% or more of her trading account on a single trade. Real deal traders understand risk and manage it FIRST before thinking about profit. They don’t take trades if it forces them to risk too much. Pros keep their risk below 2% of their account balance. This gives them the staying power to survive multiple losing trades in a row without turning into a worry wart.

4. Not being mentally prepared.

Psychology is a huge part of trading and most people are not mentally prepared. When money is on the line, fear, greed, and other emotions make trading very hard. Make sure you understand the emotional aspects of trading and be prepared to deal with them before you put your money on the line.

These are some of our favorite trading books, and BabyPips.com receives a small credit from any purchases through the Amazon links above to help support the free content and features of our site…enjoy!