In forex trading, failure is very high, estimating in more than 95% of the new traders giving up from their first few years of trading and getting back on their 9-5 jobs.
Most forex traders become too complacent after a few months of trading and gaining in their demo accounts. This can lead aspiring traders to become too over-confident in themselves and think that the market is always moving in their favor. However, this is not the case.
The market does not move in any trader sentiments, and oftentimes, the traders who don’t consider this before placing their trades will find out sooner or later that their trades are starting to go against them.
In the book One Good Trade by Mike Bellafiore, based on his trading experiences, he indicates the main reasons why most traders don’t succeed in their first few years.
Here we’ll state some of the reasons why and how to avoid these common mistakes.
Most traders don’t listen to the market.
Although learning skills and strategies are necessary, your skills alone will not generate you the profits you desire. At the end of each trading day, it is still the market that will dictate the price action, and if traders disregard the sentiments of the market, they will find themselves losing instead of gaining, then end up losing their confidence in trading.
Let’s put this into a simple example; you are setting a buying position on AUD/CAD even when new fundamental factors are coming out, and you see that the price has hit a considerable level good for long positions, before hitting the buy button, you should always reassess the market before doing so and make sure that you are following your risk management correctly.
Take into consideration any additional information that may affect the currency that you are planning to trade. Gather any information available supporting your trade and see if it fits with your strategies and your trading plan. Thinking logically instead of emotionally is always the best way to go.
“The market has rules,” Mike Bellafiore writes. “When one disobeys the rules, Mother Market reaches into your pocket and takes what is hers. And she doesn’t give it back.”
Traders don’t enjoy what they are doing.
Most traders get into trading for the sole purpose of “getting rich quick”. It is possible to get rich in the forex market, only if you give in more time to understand the market and learn to love what you are doing.
Being a trader is not an easy job. You have to give in more hours to learn, study the market, learn new strategies, and more. If you are only thinking of making a huge profit but don’t have the patience or motivation to learn about the forex market and what moves it, you will most likely fail in this field.
Forex trading could feel like a chore by putting in some hours of the day plotting support and resistance, doing different kinds of market analysis, and developing your skills. Forex trading could be a lifestyle and could benefit you only if you are willing to put in the hours needed to learn and making a habit out of it.
Taking losses too seriously.
Before one can become a consistent trader, it will take a lot of time to adjust their trading plans and discipline based on what they learned from their losses.
The problem is, some traders are taking their losses too seriously, and instead of learning from their mistakes, they sulk and get frustrated. They make the mistake of thinking that they should never incur losses to be a successful trader. This mindset then leads them further into pressuring themselves too much and taking it hard on themselves every time their trades are going against them.
Whether you like it or not, you too will experience losses, may it be big or small. Always remember that this is okay. Every successful trader has been through those losses, and instead of sulking and contemplating their losses, they worked themselves harder by finding out what went wrong then ultimately using what they learned from their losses to their advantage in their future trades.
Could you not accept that they are wrong.
There are so many traders out there who think their trading decision is always right even though their ongoing trades are already experiencing substantial floating losses.
Most traders don’t accept their mistakes, and instead of following their trading plan and risk management, they stick to their trades and refuse to exit their losing positions. We cannot stress enough how risky this position is. By refusing to exit your losing positions, you might blow out your account in just a day or two.
To be profitable, you should be ready to accept that you cannot control results in the forex market. However, having a detailed trading plan and proper risk management, you can keep your losses at a minimum while maximizing your gains with the appropriate strategy, market analysis, and discipline.
Always remember that failure is subject to growth only if you honestly accept it. Always learn from your mistakes and turn these into your advantages in your future trades. Soon enough, you will realize that all of your hard work has been paid off, and you can reap the benefits that the forex market has to offer.
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Information on this page is solely for educational purposes only and is not in any way a recommendation to buy or sell certain assets. You should do your thorough research before investing in any type of asset. Learn to trade does not fully guarantee that this information is free from errors or misstatements. It also does not ensure that the information is completely timely. Investing in the Foreign Exchange Market involves a great deal of risk, resulting in the loss of a portion or your full investment. All risks, losses, and costs associated with investing, including total loss of principal and emotional distress, are your responsibility.