Why Forex Traders Fail

Forex trading is risky business and it’s no wonder why many fail at it. However, besides the risk involved, there are more factors that should be considered in determining why forex traders fail. Read on and see what 4 common reasons why forex traders fail.

1. Not Having a Plan

If you call trading and hoping you win an order a plan, then you are in for a downward spiral in trading. The market is already confusing and chaotic as it is and more so if you are a neophyte trader testing the waters for the first time. Having a trading plan automatically makes you a better trader by being able to anticipate market conditions of instead of just reacting to market events. For beginners, creating a trading plan may be a little bit more difficult compared to veterans who can get information based on experience. However, with ample research and unwavering determination, whatever kind of trader you are, you’ll be able to create a trading plan that works specifically for you.

2. Lack of Capital Preservation

Being able to preserve capital is essential to keep your trading business going. Some of the things that most traders commonly do are improper account sizing, putting too much at risk in every trade, and mismanagement of capital. Capital preservation is important because trading is not about getting rich quick. It’s about enduring and getting rich by staying in the game. If you drain your money early on without other assets to catch you, it’s the end of your trading career.

3. Emotional Investment

One of the top reasons why traders failed at their career is because they were simply too emotional. Involving emotions in business, especially in decision-making can spell disaster. Any book about the psychology of trading will tell you to turn down emotions and turn up discipline. For example, if you lose a trade and you act upon your emotions to get your profit back, it is more likely that you will lose more because instead of stepping back and analyzing what happened and planning what your next step would be, you would just making rash and irrational decisions. Likewise, if you win a trade and get overwhelmed by the feeling of success and continue to trade, you will likely lose your advantage.

4. Overtrading

Being a trader doesn’t necessarily mean that you have to trade all time. Besides doing extensive research, anticipating market conditions, and analyzing previous trades, trading is also about finding and recognizing the right opportunity to trade. It is not about making the most trades in a day, it is about making the right and smart trades.
Trading is already one of the most complex careers out there. Don’t make it more complicated by committing these common mistakes. Have a good trading plan, regulate and preserve your capital, invest less emotion and practice more discipline, and find the right trades. Research and hone your skills. You’ll get the hang of it.