Why Are Most Forex Traders Unprofitable?
Index 1. Forex Traders Unprofitable 2. 4 Most Forex Traders Unprofitable
1. Greed 2. Overleveraging 3. Insufficient Testing 4. Lack of Discipline
Forex Traders Unprofitable Despite what you may have heard of how easy it is to make
money in the Forex market, the truth is that most Forex traders are unprofitable or fail. It is true that you will probably fail at trading, but you don’t
have to. Below is a few reasons why most forex traders unprofitable.
4 Most Forex Traders Unprofitable
1. Greed Most of the new Forex traders have unrealistic profit
expectations. Trader thinks it will be possible to make 25% – 50% or more
month. They have dreams of turning the small account into a huge
account in the few years.
ď‚— This is completely unrealistic. Most successful traders make a
much lower average monthly profit. ď‚— If you have averaged 10% or better for more than a year, you
become master in the trading world.
Take This Consideration: If you sustain a 10% average monthly gain, you would more than triple account each year. By averaging 6%, you would more than double account every
year. Starting with 5,000$, and averaging 3% per month, your
account grows over 170,000$ in 10 years.
2. Overleveraging Poor money management is the worst account killers for the
new traders. Goes back to greed because traders overleverage while
shooting for the unrealistic profit targets. You should be risking a small percentage of account on each
trade, and you should be risking the same amount on each trade.
We recommend never risking more than 2% per trade. Many successful Forex traders risk 1% or less per trade, and
some successful and experienced traders risk 3%. Risking more than a small amount per trade is a wrong
decision for a trading account because all trading systems go through periods of drawdown.
ď‚— If you are risking too much during one of these periods, you
will, at least, wipe out much of your progress, if not completely wipe out your account.
3. Insufficient Testing Testing is a backbone of a successful trading program. Most of the new traders are too undisciplined and impatient
to test the new strategies thoroughly. It again goes back to greed because we all want to the fire
our bosses as soon as possible. You want to get that account snowballing fast, but this is a
costly, rookie mistake.
ď‚— Without proper testing of your trading system or any trading
setup, you are not going to know how it will hold up during the changing market conditions. ď‚— You require to know if the trading system can stay profitable
through the impactful news events, increasing/decreasing volatility, and growing/shrinking average daily range etc.
ď‚— Knowing exactly what system is capable of and proving to
yourself that trading system is profitable over months or years worth of different market conditions will go a long way in helping you to mechanically trade the edge that system gives you when you are experiencing a losing streak.
4. Lack of Discipline Discipline is an import factor in profitable trading. It’s another psychological aspect of trading that can either
break you or make you. Most of the new traders have discipline in every aspect of
their trading.
It takes discipline, as well as patience, to
test new trading strategy. Most traders don’t have the discipline to do any manual
backtesting at all. They learn a new trading method, and demo trade it for a
week or month, or worse, and they go straight to live to trade.
It takes discipline to keep trading when you are losing. If you have done your due diligence, then you already know
for sure that you are trading a consistently profitable trading system. With discipline, you will able to keep pulling the trigger on
your next trade and let your edge play out over time. Sometimes you have a bad feeling about a trade, although it
meets your rules. It takes discipline to trade every setup that comes along mechanically but it must.
ď‚— Lack of discipline can also lead you to catastrophic
behaviours, such as revenge trading and overleveraging. ď‚— Revenge trading is when you re-enter the market because
you are trying to earn back money that you have not lost because your trading system has provided another quality entry trigger.
ď‚— Successful, disciplined traders trade less because they take
the best trade setups. ď‚— They have the discipline to wait for market and their trading
system to provide them with the quality setups, rather than trying to force bad setups to meet some unrealistic profit target.
Thank You