Forex traders, here are 10 reasons why 95% of you fail
The foreign exchange market, also known as forex or FX, has changed dramatically in the last decade. What was once dominated by banks and trading houses is now home to millions of retail traders around the world. However, despite this influx of new traders, 95% of new traders fail in their quest to trade forex consistently and profitably over the long term. In fact, most forex brokers report that only 5% of their accounts are profitable after one year. Why do so many people fail at forex trading? Here are 10 reasons why 95% of forex traders fail.
1) Lack of Patience
2) Overly Emotional
I’m not talking about a little anxiety every now and then—I’m talking about an obsession with being right. One of the most prominent reasons many forex traders fail is that they get overly emotional. It’s important to recognize that trading is a game where there are both winners and losers. And since human beings naturally try to avoid failure, when things go wrong it’s easy for them to panic and make bad decisions (e.g., making unnecessary trades). The first step in overcoming your emotions is realizing that success requires patience and preparation; if you haven’t done your homework, get ready for trouble. To prevent mistakes caused by letting emotion get ahead of reason, put together a sound game plan before executing any strategy.
3) Not Doing the Research
Forex trading is one of those markets that seems open to everyone – but it isn’t. And it really comes down to research. If you don’t do your homework and learn how forex trading works (and what pitfalls to avoid), chances are high that your new venture will fail before it even gets off the ground. To avoid such a fate, take time to research forex trading thoroughly and see if it’s something you feel comfortable diving into headfirst. Doing so could save you thousands of dollars and years of frustration later on! In short: Forex trading requires a lot of homework and dedication—it’s not for everyone! Have patience with yourself as well as market trends; both have been around for centuries because they work!
4) Not Setting Goals
Without a goal or plan for your currency trading, it’s impossible to say whether or not your investment strategy is paying off. Sure, it might seem like forex investing is easy. All you have to do is buy low and sell high—right? The only problem with that advice is that most people don’t even know where to start when setting their goals. Even if they do have some idea of what they want to achieve with their investment plans and strategies, many still fall short in meeting their objectives because they lack a clear picture of how they want to get there. Forex trading takes planning; without any financial goals in place—no matter how small—you simply won’t be able to succeed at currency trading.
5) Being Too Disciplined
The forex market is not an easy place to get into, and with good reason. If you’re in it for just a quick profit or only to speculate, then it’s going to be very hard for you to achieve any level of success at all. In order to make big profits from trading currency pairs, you need patience and dedication. The keyword is patience because it will take time for your system to prove itself out over many trades in order for your account size to grow large enough that substantial profits can be made.
6) Trading All Markets
Traders new to forex often think it’s a high-risk game. While volatility and losses may be higher than in other asset classes, they don’t have to be. First off, trading is a zero-sum game. For every winner, there must be a loser. If two people trade in opposite directions at equal prices—with equal amounts of money—the market wins and both parties lose out on gains or limit their losses.
Forex Trading Is a Zero Sum Game
One of my favorite sayings is The market can stay irrational longer than you can stay solvent. This means if you lose money trading, so does everyone else. It’s like a poker game where everyone folds and only one person takes home all of the chips. In Forex trading it’s even worse because there are no restrictions on who can trade which makes it an environment that attracts more losers than winners. So while 95% of people will fail at Forex, there will always be 5% that win.
7) Being Swayed by Trends
A trader needs to be able to ignore what other investors are doing. If a currency is surging in popularity but doesn’t have any fundamental merit (like an increase in demand for that country’s goods), then it’s probably not worth buying.
FOMO (fear of missing out) can lead to some bad investment decisions if you aren’t careful. No one wants to see their portfolio drop from 50% up one day to 50% down a week later and miss out on profits just because they didn’t do enough research or take action quickly enough when necessary.
8) Too Much Trading
Trading too much and over-trading is a big reason most forex traders fail. Excessive trading will drain your bankroll, leaving you with little or no money to trade with at all. It’s better to have some sort of a plan on how and when to enter a trade rather than taking every single possible opportunity that comes your way; otherwise, your profits will quickly start dwindling down while costs add up.
Yes, watching trades unfold in real-time can be thrilling—but there’s also more money to be made from waiting for favourable conditions and then executing a few high-probability trades than from dashing between several hundred spread positions each day.
9) Not Knowing When to Quit
One of the most important parts of trading is knowing when to stop. When something isn’t working, we can’t stick with it and expect different results. You need to be able to take your losses as well as your wins and adapt in a new way. If you can’t do that when it comes to forex trading, then get out now and don’t look back.
The market will keep going on without you so work on your next move rather than getting burned by bad trade after a bad trade. Think about how much more successful you could be if you could just learn from your mistakes instead of repeating them again and again.
10) Ignoring Rules and Logical Strategies
Most forex traders will overlook logical and profitable trade setups just because they don’t conform to a trading rule that may not be based on actual evidence. If an average trader ignores a high probability entry signal because it doesn’t align with his or her predetermined strategy, he or she is almost guaranteed to lose money in that particular trade.
It’s important to understand that there is a reason most forex systems don’t take small pullbacks into account—they simply have no statistical significance. This can lead some people to ignore large-magnitude trends in favour of conservative entries that won’t make them any money over time. The easiest way to avoid pulling profits out of your own pocket is by using rules that make sense for currency trading.
Conclusion
If you’re looking to try your hand at forex trading, don’t be fooled into thinking it’s easy. It’s not. Investing in Forex isn’t for everyone—in fact, a staggering 95% of new traders fail within their first year. The risks involved with trading currencies can be high and they’re complicated. If that sounds scary or confusing to you, no worries! If Forex seems too intimidating or frustrating to get started with right now (or ever), there are plenty of other ways to make money online or in traditional careers that could prove more lucrative than simply betting on money movements—or not!
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