Why do most forex traders fail?
Forex trading can seem attractive to many people because of its high returns. Most beginners see trading as an easy job, which does not require any office hours or anything else than a laptop or a smartphone. But in reality, trading requires a lot more than that. Below we will list the top 5 reasons we think why most traders lose:
- Poor Risk Management: Not having the right trading strategy and risk management can end up in a negative balance so quickly that the trader will not even understand how it happened. For it not to happen, the traders need to be patient with their time, determine their risk capital (how much money they can afford to lose), and find the right risk: return ratio for themselves.
- Not using Stop-Loss or Take-Profit features: Such great features are offered to traders on their platform, but sometimes they can be forgotten. These features are helpful in a way that even at night when a trader is sleeping, or when at work etc., their capital is secured by stop-loss minimizing their risks. Also, in order not to lose the chance to benefit from short-term fluctuations, the take-profit feature is a must use.
- Lack of Industry Knowledge: To succeed in forex, it is essential for a trader to have an understanding of how the overall economy in the world works. Not everyone has to have a diploma from Economic Faculty, but thankfully now we have the internet, where by spending enough time on research everything can be found easily. Therefore, following the economic news/ economic calendar, adapting to the changing market conditions, etc. are one of the most necessary tasks traders need to always keep on their minds in order to be successful.
- Over Confidence: We have seen traders, who after winning a few traders become overconfident, and continue their trading with numerous currencies and huge lots, without sticking to their plan. It is a one-way road: to Fail. Traders need to understand one thing, forex is never predictable. Winning one trade does not mean you will win other trades also. So being smart in this situation is being calm, patient, and if one strategy seems as working well for you, go with that strategy, do not get more than you can afford.
- Having unrealistic expectations: No matter what anyone says, trading forex is not a get-rich-quick scheme. Like any other work, Forex requires considerable time to become successful in it. So having abnormal numbers on their minds can make the traders risking more capital than they should have, often leading to a negative balance.