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 five common reasons why this usually happens:
They don’t understand key indicators, key numbers, ideal times to trade, and how the market works.
Would you enter a battle without knowing how to use weapons or who your opponent is? When you place a trade, you literally go toe-to-toe against some of the biggest nerds in the industry. 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.
They don’t have a tried-and-tested trading methodology
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.
Start by experimenting on different currency pairs, trading sessions, time frames, and indicators and pinpoint which ones work for you. Work on creating your own trading system and back and forward test if it’s profitable. Focus on the numbers and fine-tune your method to maximize profitability. This may take time, but using a trading method that you trust can go a long way at reducing stress while trading.
They risk too much per trade.
A wannabe trader risks 10% or more of her trading account on a single trade. This is problematic because when you’re worried about making money, you won’t focus on your trading process. You’ll end up focusing on your profits/losses.
Consistently profitable traders understand the trade’s risks and manage them first BEFORE thinking about profits. They don’t take trades if it forces them to risk too much. This gives them the staying power to keep their heads and make rational decisions even if they end up with multiple losing trades in a row.
They’re not mentally prepared.
Trading 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 control them before you risk your hard-earned money.
They’re having a bad day.
Sometimes, there are just factors outside of your control. You could spend bajillions of hours preparing for a trade and a surprise currency intervention, flash crash, glitch in your platform, or a natural disaster could turn the tides against your favor. It’s okay. It’s all part of the business. If you’ve managed your risk, you can chalk up the losses to a bad day and start again tomorrow.
That’s it for today’s list! Did I miss anything? What’s the usual reason for you losing your trades?