The forex market is not new to most folks across the globe. In fact, it’s arguably one of the largest markets with over $5 trillion in transactions per daily.
Given its easy access, most individuals are giving it a shot looking to make huge gains.
Unfortunately, almost 90% of traders who test the forex waters never live to swim. So, what really happens to these folks merely a few months of getting into the market?
One thing for sure, occasional losses are inevitable in the forex market, and market crashes do happen.
Still, those scenarios only account for a small number of individuals who run away.
In general, most traders fail to make it in the forex market. To help you not to fall into the same trap as most beginners, here are the top reasons why traders fail in forex trading:
Lack of a Trading Plan
Without planning, they say it is planning to fail, and that’s what literally happens to most novice traders.
They get into the market without a trading plan. A well-established plan is the first step to success in forex.
A plan includes risk management tips and the expected returns for the trades made. Therefore, it reduces mistakes a trader can make that may lead to failure.
Trading without Discipline
You should never try to better the market. Forex trading can be tricky, and in the process, a lot of emotions are generated.
The problem comes when emotions such as fear, greed, and temptation take control.
A loss in forex trading is part of the game, and a trader should understand that small loss can be incurred before a considerable gain.
Never allow negative emotions to take control but have a proper trading plan and stick to the plan, no matter what happens.
Trial and Error Method
Most traders don’t have all the understanding required to trade forex. Forex trading is not as secure; it can be said, it requires patience and learning.
However, the mistake novice traders do is to try to learn from their mistakes instead of taking mentorship from experienced traders.
Learning from professionals is easier when supported with a sufficient number of trading practices in real-time.
Risking Too Much
Most traders also fail because they use a negative R/R ratio. What it means is that they risk more in a trade than what they expect to earn.
Setting the stop loss far away as well as setting the profit target very close puts pressure on the strategy win rate of turning a profit.
Setting Unrealistic Expectations
Believe it, to consistently make profits in forex takes a lot of time as well as ego-crushing losses.
However, a lot of things can be done to ensure a trader can speed the learning curve, but not eliminating it.
Unfortunately, most traders try to force the market to provide abnormal returns, which mostly end up in a fiasco.
Therefore, traders should understand the market well and learn the process slowly rather than expecting too much in a flash.
Not Adapting to the Market Conditions
Although they are usually overlooked, the market conditions play a significant role in determining whether the strategies will be successful or not.
When the market conditions change, it’s advisable that the traders also change their strategy.
Poor Money and Risk Management
As much as you would put much focus on your strategy, the same has to be done with risk management. Always ensure that you trade with protection using the stop losses.
Also, know precisely the amount of your capital to be risked. Some traders start small and risk everything at once, leaving their account with nothing to trade.
The Bottom Line
Like any other job, there’s nothing like free lunch in forex trading. Therefore, traders must understand that forex requires work and proper learning from experienced traders.
Moreover, it involves trading with a plan, setting realistic expectations, and managing the risks properly.