Reasons Why Most Active Traders Fail
Why Forex traders fail? There is no single answer to this question! A Forex trader may fail despite of having all the qualities needed in order to become successful. In this article, we would like highlight the deadly reasons that gives panic attacks to the Forex trader and as a result it causes complete failure.
Trading the Forex market from the comfort of your home computer chair can offer a lot of freedom, a good source of secondary income, and when he has done wrong – enough voltage to turn your heart inside out. Forex trading is an educational, psychological and personal journey. Everyone is on its own private quest to reach the final “end game” – become a full-time trader.
Why Forex Traders fail
Your journey will be full of sleepless nights, a stomach churning constantly, and not just making a nice person to be around?
Will you even make it as a Forex trader? Or, will you become your own worst enemy, allowing common trading behaviors to amp up your stress to palm sweating levels – killing off any chance you had of fulfilling your Forex dream.
Reason 1: Taking too much risk
Taking too much risk, it is the major catalyst for trade-related stress. This is the prime reason Why forex Traders fail? Whether you’re a novice or an experienced trader with a good trading record – the idea of losing a significant portion of capital through loss will burst with dangerous emotions. This is common knowledge for most traders, however, there are still many people who bite more risk that they can deal with mentally. Why?
- External Financial Pressure
- Lack of Patience
Traders must change their mindset for high-risk game for a quick fix results. Obtaining the willpower to change this behavior is one of the most effective things you can do to improve the success and long-term viability.
Have you ever heard that inner voice that says, “this trade is too good, I could make a fortune!” – So raise the trading risk. Or maybe you think you’re the best market analyst in the worlds and your arrogant attitude that fuels risk more than you should – you really believe that your business decision can not produce a negative result.
Whatever the reason is, your train has derailed in trade, and is trying to move forward without the support of your trading system or risk management plan.
There are a surprising number of traders out there who really do not know how to calculate risk before performing an trade. These are the ‘lot size guestimaters!’
Are you a guestimator of lot size? If so – you really need to learn how to calculate the size of the position to know exactly how much you are risking.
It is your responsibility as a trader to become an expert risk manager. You should focus on becoming an assistant in the calculation of the lot size and thrive to be the best at risk management as can be!
If you find that you are experiencing anxiety when a trade goes wrong (a sick feeling in my stomach, sweating, increased heart rate, panic, etc.) – then that’s probably a giant red flag that says, you should decrease your risk.
Ask yourself, “How much money” is allowed by my plan of risk management, and I did not put in stupid draw-down if trade is lost. You have to be honest with yourself, because you’re in the captain’s chair and with all responsibility, and the responsibility falls on you and you alone.
As I mentioned earlier – Forex trading is not just about making as much money as possible in the shortest period of time, it is a path of personal improvement. Some people can handle large amounts of risk, but not others, but learning results in more trading experience.
If you are getting panic attacks in trading, which is a warning sign that you’re doing something wrong. The first way to deal with stress is to recognize that, isolate the cause and get remedy of the situation!
Traders who are at the top of their risk management, it’s easy for them to sleep at night.
Reason 2: Over Trading Tendency
Over trading has to be one of the most common reasons behind Why forex Traders fail. Traders will overexpose their account by getting caught up in the excitement of open markets and trading severals at once. On trade, usually it comes out very quick without control – “another position will not hurt… right?”
Some traders also could be found in too many positions as they build a fear of ‘missing’ – it’s a way of thinking poisonous. If this is you – write in a paper about your trading reasons in your own words that the market is always, and will always be another (and probably better) trading opportunity around the corner. Paste it somewhere near your trading table and look at it whenever you feel you have to take a trade because it feels like some sort of opportunity that will not come again.
A lot of traders like to hang out in the lower time frames, which exposes them to greater temptation to trade more. Signal candles that are the basis for most trading decisions, have much less weight in the lower time frames due to “noise” and the general fluctuations. Think of a very noisy phone line – you can sort of hear what comes through, but it is difficult to get the clarity you need.
Many traders brain washed to believe very low time frames are the main hunting areas ” for high quality signals, and are ready to pull the trigger … a machine gun execution of the operation, instead of the deadly shooting a precision rifle. Even after entering a trade, most traders continuously monitors of the movements of the prices, impulsive conditioning to speculation and neglect putting stop loss.
To be honest, I think they have more than two open trades are excessive. Think of all the times he has opened 3 or more trading and walked around like a winner – the truth is that it is not that often is a stressful decision!
Profitable trading requires constantly identifying and take advantage of only the best trading opportunities discipline. If you open several positions is all the time – try to add this rule to your trading plan …
This rule means that if you have an open trade, and stop loss has not been adjusted to at least break even, then you are not allowed to open more positions. That does not mean you should start moving your stop to break even the first chance you get, just so you can open more positions. I just move my stop if my trade has spread to good profit, and feel that can survive a trend correction without being held out.
If you can actually apply yourself and stick to a rule such as this – which is always looking for the “best business opportunity”; I think that focuses on trade at the same time help the trade less, but do more. When you have multiple trades running at the same time, you are not only likely to be risking too much, but there are more things can go wrong.
Traders should always think of the worst. What if the risk of 2% each of the five trades that are simultaneously running, and then you have four losers and only one winner? You just lost 8% in those 4 trades. This is a very common scenario because open trades at the same time are generally highly correlated – when someone plunges the rest usually do too.
Are you thinking about worst? Do you have too much exposure to the risk that you feel you need to maintain to control your account and the situation “micro manage”. It is not wise, think about the big picture – trade less frequently, the objective of the objectives of increased risk reward and do more.
Reason 3: Trading with other’s money
When traders discover Forex and are pumped with the ‘unlimited profit potential’ marketing out there, they want to start trading ASAP. Urgency and desperation kick in and they start looking for solutions to get their accounts funded up quickly.
Desperate traders usually get supply of quick cash
- Personal Loans
- Credit Cards
- Mortgage Extensions
- Money Needed for Living Costs
- Loan Sharks
- Borrowing Money Off Other People
Looking over this list should send chills down your spine when you think about the risks here. Obviously get in debt currency trading is highly inadvisable. Trade with money that does not completely administered first, and be put in a situation of added stress.
When friends and the whole family that is in Forex trading and even make some money out of it, that might be willing to invest in you.
It may be tempting to take your money and trade with it, but my advice here – it’s a bad idea for two reasons. Years ago I accepted $ 40,000 savings from my friend to invest in Forex. His business was wrong and wanted to put their money somewhere where he could get good yields.
I felt sorry for him, wanted to help. I thought I could handle it – but boy was I wrong!
To take responsibility for their life savings, my Forex trading experience changed completely. I thought I was doing things normally, but was super stressful. I could not erase from my mind when I open market trading, suffering from anxiety during the day, and had trouble getting a good night’s sleep. I was not doing anything reckless – it was my good friends and if something went wrong and I lost it I would not be able to live with myself.
Imagine if I had a CHF trade open with his life savings on the line, and the SNB pulled their move at that point in time. I would have ruined my relationship with him, which is my second reason not to accept borrowed money to trade with.
People who give you money, and don’t really understand Forex trading will have very very very high expectations of you – if you don’t perform to their expectations things can get nasty.
I returned the money to him without loss or incident and left it at that. Moral of the story, only trade with their own money – no matter how good you think you are. Trading the money from another who does not understand FOREX is a hard lesson not want to learn.
Reason 4: Too much screening time
I know many traders, especially novices, have a tendency to spend too much time looking at market platform and seeing their trades. Do not look at the charts, this leads to be likely to react “at the time” based on the emotions you are feeling and not the validity of the trading in the first place.
If you find yourself feeling stressed about your trading, certainly shake your screen (preferably go to a place where there is no access to the trading terminal).
This includes business applications for your phone! It is necessary to resist temptation and take a break from trading entirety. Therefore, if you find that your mobile application is not helping and enticing to make poor choices, it may be better for you to just remove it. Personally I do not see the value in many mobile applications currency. It is difficult to get adequate clarity from a mobile screen.
A change of scenery is often useful to eliminate stress from trading. Whether you go for a run or read a book; focus on something else for a while it may be useful to put back in the proper mental state. Try an activity that will put you in a positive mood, like watching a good movie or hang out with friends. Try to surround yourself with positive people.
Whatever you do, do not drive your operations. If you are sitting there looking at the graphs, you’ll feel compelled to “do something.” I believe in a “joint approach, forget, and collect ‘. Analyze your opportunities, choose one, choose the input, output and stops, then walks away and let it play out without interference.
Reason 5: Unhealthy lifestyle of trader
The nature of trading has one sitting in the same place all day, doing very little aside from using your brains. So, it is really important to counterbalance that with some physical activity.
It is not good for your body to be constantly swinging around your sleep schedule and not enough sleep in general. If you are trading in a lack of sleep, you’ll make more mistakes and bad decisions. And, of course, try to eat as healthy as possible.
Your body is like a machine, and will work best when the best fuel is fed, get enough rest, and does not survive off energy drinks. If you have these three things in mind, your trade and your body will thank you.
Reason 6: Using a stressful trading system
Forex trading stress can easily come from traders who do not understand the nature of his own trading system. Generally they have picked it up at a Forex forum where some trader has mashed a bunch of exotic indicators together and explain the price must be taken when indicators A, B, C cross each other, while being confirmed by indicators X , AND Z.
This type of system is very “flash”, but really does not make sense when you look at them. This can be very confusing and really emphasizes that the trader away, because ultimately they have no idea what’s going on.
The more complex trading system is the most complicated decisions you make while you are in stress. I firmly believe that traders do better to keep things simple. That’s why we use strategies price action, focusing on the important points of markets as support / resistance, mean value analysis and actual signals candles.
You can not get much simpler than that!
Living under the constant burden of stress can literally stop us in our tracks. Some people resort to avoiding or abandoning their responsibilities altogether or engaging in self-destructive behaviors if it becomes too overwhelming, so it is important to nail down our stress triggers and find solutions that we can realistically work in to our lives.
The Bottom line: Why forex Traders fail?
If you are looking for a Forex trading system that is simple, provides clarity in market analysis and just downright simple and effective – what will probably be very interesting in trading strategies stock price. Feel free to stop by forexing24.com at any time, our site contains all of the most comprehensive trading articles!
I hope this article has been an eye opener, or a kick in the ass at least, and encourages you to go ahead with an experience of more productive and satisfying trade.
If you need any further reading, consider this article of babypips.
Remember! stress in trade is mainly driven by our behaviors and being unable to control the market. We can not control the market, but we can control our behavior and our reactions to it!