According to a recent survey by forex brokers, about 70 to 75 percent of forex traders that use their platforms don’t succeed in their trades.
This implies that in a total of 100 percent of traders that trade in the forex market, only 20 percent to 25 percent make profits before profits annually.
The forex market is a volatile one, and it takes some tips for forex traders to follow if they want to succeed. Hence, here are the essential reasons why forex traders fail.
- Lack of a trading plan
Most traders trade without a plan – especially new traders. They think that making money in forex trading is easy and straightforward; that they will never encounter losses in their journey as a forex trader.
A trading plan is the first thing every trader should have before making any trade.
Although you might make lots of profits at the beginning of the year, you will inevitably create more losses and become a losing trader at the end of the day, and this is due to the fact there was no trading plan.
It is essential to know that trading with a plan will make you disciplined and not make irrational decisions.
- Not using the trading plan
A forex trading plan is useful when you use it to perfection. Most traders create a trading plan before making trades but do not follow it, thus, making emotional decisions at the end of the day.
Most traders also ignore their trades when they start making a few profits and start being over-confident on their own.
Worst of it all, some traders become greedy and fail to close losing trades at the pre-determined stop-loss level, thus, making small losses become big ones. This is due to a lack of discipline.
- Lack of risk management skills
Lots of forex traders have inadequate risk management skills. Risk management skills involve taking calculated risks that won’t make come to a loss at the end of the day.
Experienced forex traders recommend risking just 2 percent of your trading money on every trade. Risking only 2 percent of your trading money will always make you stay put and not run at a loss.
One of the mistakes most forex traders make is not paying attention to the maintenance of their trading money, which is very necessary when having a significant trading account.
However, successful traders also set their risk per trade as part of their risk management skills.
- Lack of adapting to market conditions
Most unsuccessful traders don’t adjust to their market plans to make sure they are in line with the present market conditions. Lots of successful traders know that they will be situations where there may be a dip in the price below the support level.
In cases like these, a successful trader always adjusts his/her trading plan to search for a selling opportunity instead of making long-trade setups.
- Learning through trial and error methods
Lots of traders fail on their trades due to the fact that they follow trial and error methods.
Learning through trial and error methods, and not from successful traders will make you lose more money. Learning through an experienced trader will help you note the difficulties in forex trading and how to avert them.
There is a long list of why traders fail in the forex market, but this article points out some of them. Hence, every trader needs to follow the tips given in this article to lose your trading funds.