In the forex industry, the failure rate is said to be very high, with over 95% of aspiring traders expected to drop out of the game within their first few years of trading.
You could have a better chance of surviving the Hunger Games at this rate than becoming a successful forex trader!
The main reasons why traders do not succeed are outlined by proprietary trader Mike Bellaire in his book One Good Trade. Although he draws his conclusions from his stock trading experiences, the lessons are also generally applicable to forex trading.
What’s interesting to note is that it’s actually possible to avoid most of these common errors.
Many traders feel that they need to get the most out of the forex market move until the last pip, they want to make money from every trade they start, and they believe that money is made every day on the forex market. This could cause him to hold positions for too long when a trader attempts to grab every last pip before a currency pair, and it will result in losing the profitable trade.
2. INSUFFICIENT CAPITAL
The fact that it takes money to make a return on investment is known by most investors. But, one of the big advantages you would have is the availability of highly leveraged accounts when you enter the forex market. It means that forex traders can still do big trades with insufficient or limited starting capital.
3. TRADING ADDICTION (OVERTRADING)
One of the worse things forex traders have is trading addiction, which is another great reason why most forex traders fail here. Traders with trade addiction, chasing the price, do something that institutional traders never like. This is because it can bring a lot of excitement to forex trading, but that does not mean you overdo it.
4. They don’t enjoy trading.
Expertise is a process that is driven by the genuine desire to learn and do better, as I discussed in my article entitled The Importance of Enjoying What You Do. Traders would hardly be motivated to pursue intentional practice and skill development without curiosity and enjoyment of the craft.
When traders don’t have any love for the game, it will certainly seem like a task to conduct market analysis and put in the necessary hours needed to master the markets. This explains why the majority of aspiring traders simply decide to give up and completely pursue something else.
Another important aspect of the currency market is implementation or execution. Planning is an important factor, but it would not give you any results without the implementation of the plan. All successful forex traders have a plan or strategy on their minds, do not randomly enter any trade, and this allows them to make huge profits, more than the average trader.
6. LACK OF KNOWLEDGE
Making mistakes and learning is human nature, but what if, in a particular field, you consistently make mistakes? This only happens when you don’t really have a clear idea about that field. Similarly, due to lack of sufficient knowledge, traders fail in the currency market. Digest these and make sure that you do not fall into this category, make sure that you are ready and have PURPOSE on the market.