Like many high-performance endeavor, success in forex trading takes time, patience, and a lot of practice. This is why not many newbies successfully trade currencies on their first try. In fact, popular trading discussions estimate that only 2% of newbie traders eventually make money. Yikes!
So what makes it hard for traders to stick to forex trading anyway? I’ve learned of countless reasons after talking with fellow forex traders in my blogs and in the forums, but I think we can narrow them down into five:
1. They blew their trading account.
What’s the point of trading if there’s no account to trade? One of the more common mistakes newbie traders make is that they wade deep into the trading pool without bothering to learn how they can avoid drowning in losses.
They take the first trade ideas they see and hope for the best. And, because they lack the basic knowledge on economic correlations and risk management, they lose more often than they win. Heck, some even bet the farm on one trade in the hopes of getting back in the green! Obviously, this practice is unsustainable and is one of the surest ways to get a margin call. This is why risk management is important, people!
2. Forex trading is not what they expected.
Blame the snake oil salesmen on this one. Newbies who are lured by the prospect of easy money are often overwhelmed by what they actually have to do to earn the profits that they were tempted with.
And then there are those who are willing to do the work, but were unfortunate enough to buy EAs and systems that just didn’t live up to their promises. The absence of promised profits push newbies into giving up and maybe even brand forex trading as a scam (some shady brokers are, the industry isn’t).
One way to prevent this is to practice due diligence when choosing your broker. You’re risking real money, after all, and a quick peek at major broker lists and trading forums would give you an idea of your potential broker’s rep.
3. They’re discouraged by their losses.
To be a successful trader, you have to recognize that losing is as much part of trading as winning. There’s no holy grail in forex trading, so you’ll have to deal will losses from time to time.
But not everyone is cut out for risk-taking. Some aren’t comfortable admitting that they were wrong, while others simply don’t like to see losses on their ledgers. Unfortunately, traders usually deal with A LOT of losses before they become consistently profitable trading forex.
4. They can’t get back in the zone.
Those who have traded long enough have likely experienced being “in the zone.” They are in tune with the current market themes, they seem to hit the best trading opportunities, and they have a good handle on their emotions while trading.
Inevitably, the lucky streak would end. They would take a vacation, deal with personal issues, or take a bad trade (losses are inevitable, remember?). Seasoned traders know that getting back in the zone is possible if they work hard for it. But not all traders are motivated enough to get back on the horse. Some don’t get over their losses, while other part-time traders would just lose interest after a while.
5. Forex trading isn’t for them.
The best and simplest explanation for traders giving up is that forex trading is not for them. Again, this doesn’t count against the person or the industry. You wouldn’t force someone to swim or play the piano if they’re not interested or cut out for them, would you?
It could be that a trader just isn’t into risking money on volatile assets like currencies. Or maybe he/she can’t fit forex trading into his/her current lifestyle. Or maybe he/she just isn’t interested in trading currencies.
Remember that forex trading is a business. It’s not a get-rich-quick program that only needs a couple of hours a day and it’s not gambling. Trading can be fulfilling AND profitable, but, like any other high-performance endeavor, it takes work to become good at it.
So, do you think you have what it takes to be a forex trader?