If you want to win at forex trading and enter the elite 5% who make big gains you need to understand and avoid the reasons 95% of traders lose. Let's look at them...
1. Following Experts
Anyone can claim their an expert and they do. These vendors peddle sure fire systems with meaningless simulated back tests which they present as evidence they can make money (odd, as they know all the closing prices when they make the track record up!) the greedy trader believes them, gets spanked in the market and wonders why.
A simulation back on paper is not the same as trading not knowing the closing price! You don't get rich without effort in forex trading and you need to take responsibility for your actions.
2. Bad Methodology
Here come the myths! Traders believe the ones below and they all show a complete lack of understanding of how and why forex prices move. Here are just a few:
- Markets move to a mathematical formula and can be predicted
- You can trade breaking news
- You can win if you work hard
- You can win if you're clever
- Complicated forex trading strategies beat simple ones
- Buy low sell high is the way to make money
- You can day trade and win
The list goes on and on but all the above believes are wrong and won't give you success.
3. Lack Of Confidence
Most traders lack confidence and as we have seen earlier follow others or simply shoot from the hip when they trade, without knowing the basics and therefore lack confidence. If you want to win, you need to have rock solid confidence, as without it, you will never have the next trait which is critical to forex trading success.
4. Lack of Discipline
Of course you need a sound logical forex trading system however you also need the discipline to apply it. If you don't have the discipline to execute your trading signals in line with the rules of your system - you will lose.
Discipline is needed because you are going to face a period of losses ( all systems do) and you are going to have to keep going, when the market makes you look a fool and hands you losses. You must have the discipline to stay on course until you hit a home run otherwise you may as well not have a system at all.
Discipline is under estimated by traders, because they don't think they will have a period of losses (dream on!) but all traders do and staying on course is hard. Anyone who says it's easy hasn't traded! Sure you can win - but you must cheerfully trade through these periods.
5. Over Leverage and Poor Money Management
Most traders stand no chance from the start as they over leverage. 200:1 is standard and I have even seen 700:1 but this should not all be used 10:1 is plenty for most traders. Most traders however use as much as they can and blow their accounts out the water. Over leverage wipes out more traders than any other reason.
On the other hand there are a group of traders who try so hard to restrict risk they create it. They can place initial stops but they have a tendency to move stops too quickly and try and lock in profits to soon. Stops go within areas of random volatility and they get stopped out. They could have had a big profit but they didn't do what is necessary to take it.
Final Words
Forex trading looks easy but of course its not and why would it be when the rewards are so big? If you accept you have to have the willingness to learn and apply yourself with discipline, your efforts will be well rewarded.
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