6 Reasons and solution why Traders Fail in forex trading.
We will explain to you why traders are failing at every day trading.
Table of Contents
Introduction.
Emotional Trading.
Failing to have a proper trading plan.
Unable to accept losses or loosing a trade.
Poor risk management.
Failing to look at the overall Picture.
Being Scared & Missing trades.
Conclusion.
Introduction
To master trading you must master yourself.
Trading the financial markets as a retail trader is one of the hardest mind games you will ever experience. Most people just don’t have what it takes to conquer their own emotions. This doesn’t matter as you have come to the right place to conquer these emotions and instill strong mental disciplines. Often one of the hardest things you will find in your journey is that you have no one accountable for your decisions and actions you make except for yourself which is what makes the mental approach to trading harder then needed.
Over these 6 steps we will make no attempt to sugar coat the truth about Forex and the mindset required with trading. You’re going to be taken down the never ending rabbit hole and learn some of the most sophisticated aspects of Forex often over looked by many. While these are only some of the steps required to overcome your mind, there is a lot more to learn which can be done through here for free.
Emotional Trading
Understanding emotions are against you!
Nobody can properly prepare a new trader for the emotional aspect of what’s to come with trading. The ease of trading from a professional stand point comes with the ability to not have any emotions attached to trading and focusing on what they see not what they feel with a little “Sixth Sense” added in.
Professional Traders don’t necessarily repress their emotions but learn to channel them. When you feel emotions while trading, there is a physical, chemical reaction that is happening inside of you which comes from previous experiences in life such as child hood that in habit your fear and greed responses. These responses affect and alter your perception on the market. These responses are what triggers a fight or flight response.
You might be sitting there consciously saying that this isn’t me, but deep in your subconscious mind/emotion brain is where the real drama happens which plays you like a puppet. We have found from many years trading and mentoring students through to success, that the biggest reaction that new traders experience is the flight response. The flight response causes you to fear the market, run from systems that cause discomfort as it causes draw down and Flight from success because it’s too good to be true or they are scared to lose once they are in profit.
You will have to understand yourself and how you react to situations to even be able to being trading with control over your emotions.
Failing to have a Proper Trade Plan
Why it is vital to have one?
When you first start out trading you are not aware of what is required of you. You think that you open your charts and get ready to enter the market and start buying and selling off what you have learned and start your way to becoming the next best thing since a slice a bread. What you don’t realize though is your completely unbound and undisciplined in what you’re doing. Your opponent on the opposite end of your trades are sitting there far more discipline and more honed.
Then you following a set trade plan with rules and guidelines as to why he is entering and exiting and controlling his capital like it’s his last breath of oxygen. Just like opening a business or going for capital to start up a business you need a plan! Without a plan, you will be chewed up and spat out and made to look like a fool. So, before you decide to trade next time you must have a well thought out trade plan that defines every aspect of your trading and yourself emotionally and mentally.
Unable to accept losses or loosing a trade!
Its all about acceptance.
New traders often become overly discouraged with losing trades or not even wanting to lose money thinking that Forex is all about 100% gains and zero losses.
When you as a trader enter the markets, you need to enter accepting your risk and remember that losses are part of trading and if you can’t accept a loss you
can’t move forward as a trader. You need to enter knowing you already lost that money and focus on protecting what you have as opposed to what you can have. If you’re not willing to put 100,000 of your 200,000 account in one trade don’t do it.
As a seasoned trader or just beginning, you need to drop the EGO and open the mind. If you believe that professional traders are 100% all the time you still embarking on your fruitful journey. Professional traders can have losing streaks weeks on end and are closer to 50/50! So, stop being a looser and start being a winner and taking control of your losses!
Poor Risk Management
Its about Capital Preservation
New traders often make one or two mistakes when it comes to determining risk. They will either define the reward first, which is a mistake born of greed, or they just simply ignore the money management rules all together and fly high when entering the markets with no concept of managing risk. These traders are ones that are simply in it for the attention and fly off the rails. When learning to trade, we need to determine risk through systems that determine the risk to reward ratio and how much we are willing to lay on the line in regards to overall capital risk.
It is necessary to calculate the risk on a trade setup first as this is the first step to a professional trader’s entry analysis. If you place a trade and your happy to risk 50% of your account on 1 trade you will never see yourself through to trading in the big leagues. You will struggle for a long time until you understand the concepts of risk management. If you love trading and got no money to trade with after 3 trades you will never be able to trade and this will start to cause you to emotional trade. So, you must keep yourself in the game as long as possible while your systems experience draw downs.
Failing to overlook the big picture
There is more than meets the eye.
Repeatedly we watch many traders starting out not using multiple time frames and not using all the tools of the trade to acquire the relevant information that the
market is printing for you as the user to see. We have notice many traders that don’t know how to incorporate a multi timeframe approach into their trading or haven’t
learned to incorporate it into their strategy which leads to focusing on one time frame.
When you are channelled and focus on one period you miss the overall
story the markets printing for you as the trader and become too emotionally attached and susceptible to a higher failure rate. When a big picture is over looked
you end up causing common trading mistakes which is you at fault! You start trading against the trend, missing a better opportunities or simply not placing a
trade at all because it’s not a “VALID” set up for you.
Being Scared or missing trades
A missed setup leaves room for another opportunity
Repeatedly we watch traders looking at charts questioning, “Should I enter now?”, “I will wait a little longer” “It is does not look perfect enough” (Even though it
still was a “Maybe this is a reversal” These are some traits that you will see in hesitant scared traders and traders the either see it or miss out
and then A missed setup leaves room for another opportunity enter late and end up losing valid signal),. If you see your set up, you enter.
There is no ifs buts or maybes. You work out your proper risk management, you stick to your plan and you execute you will have no problems. If it does not work, you have your plan to leave in effect and you exit the market. Remember, FOREX HAS NO EMOTIONS, only you create the emotion and turmoil you feel when looking at the charts. If you
happen to miss a trade or you happen to come in to late then there is always another opportunity and you do not have to chase your tail!
Conclusion
When trading the Foreign Exchange you will find as a beginner and leading into an intermediate trader who’s been trading for a couple of years. You will start to realise that these are the main common reasons as why most traders fail when trading the exchange. This should come as no surprise to you as this is what happens to
everyone. Your most likely encountering this problem now and had no idea until reading this guide.
The Foreign exchange is readily available to everyone and has many opportunities for you to make a vast amount of money. However unlocking the door to
consistently make money seemingly flow into your account is the next best challenge. Its easy to learn strategies but developing a mindset and sticking to plans
will be a challenge for you as you master all the key aspects of your strategy.
Remember when trading the exchange to have a strong trading plan, control your risk and control your emotions when trading as letting your emotions win will
cause a turmoil in trading.
Thank you very much for reading!
“Don’t chase the markets let the markets come to you”
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