More than ninety percent and up to ninety-five percent of forex traders will liquidate their first account within months and often weeks of starting trading. This is not an exaggerated statement or a generalization. These are the cold, hard facts about Forex trading. I have seen and experienced it personally. More people lose money in this industry than almost any other. Let’s explore the reasons why and how you can avoid it.
the forex market
In recent years, the Forex market has received a lot of attention from both experienced investors and individuals. People from all walks of life are increasingly looking for a way to earn money and start their own business. Many would love nothing better than an online business that can be done at their convenience, in the comfort of their home, and during their spare time. Enter the Forex market.
Forex trading offers exciting possibilities for people:
- Owning your own online business
- be your own boss
- Unlimited income potential
- Flexibility to work on your business at any time of the day.
- Little investment required
These are just a few of the many aspects of the Forex business that attract people.
The allure of potentially unlimited earnings along with what seems Being an “easy ticket” has led many people to try their hand at forex trading.
People are bombarded with ads from service providers every day telling them how they can earn six figure income trading Forex. Furthermore, they are told that they can start trading for as little as $50. The prospect of easy money is so compelling that new traders jump on board immediately. They open a brokerage account, deposit their money and start trading. Weeks later, their account is depleted, usually after a margin call, and they are done with the Forex industry.
Why do traders lose constantly?
In reality, the Forex industry is not much different from other trading endeavors. In order to be successful in any business, there are always several key success factors that need to be implemented. No one would open a restaurant, for example, without first thinking about an appetizing menu, creating an attractive design, securing a good location, implementing a solid marketing plan, hiring and properly training staff, furnishing the business, and advertising, to name just a few of the obvious first steps. However, people think that they can open a Forex account, fund it with a few hundred dollars, and start making millions.
Key success factors for trading currencies
Despite the low success rate mentioned above, there are only a few key success factors in trading forex. We have categorized them into 10 different factors. Once you put all this in place, your success will come. There are simply no other variables.
These success factors are listed below. In the right column is our take on how the average merchant scores on that particular factor, with 1 being the lowest and 10 being the highest.
factor
1. Knowledge of the Forex Market
You must have a basic understanding of how forex trading works. This covers everything from how currencies are traded to industry terminology. Most beginner traders have a basic understanding of the Forex market.
Rating: 8
2. Knowledge of both Technical Analysis and Fundamental Analysis
The most complicated and time consuming component of forex trading is learning how to trade. Obviously, if you don’t develop a certain level of expertise in selecting when to enter and when to exit a trade, it is impossible for you to be successful in forex trading. Technical and fundamental analysis are the tools of trading and it is essential that you have a solid understanding of these concepts. Unfortunately, most Forex traders are woefully ill-prepared to trade using sound trading techniques.
Rating: 5
3. Discipline and Patience
Successful forex trading requires great discipline and patience. Trading opportunities do not present themselves every minute of every trading day. There is no way of knowing when a good trade will occur. One of the most difficult things new traders face is the prospect of waiting for a good trade to come along. The most common mistake of losing traders is over-trading.
Rating: 4
4. Money Management and Proper Trading Psychology
Even if you are the most astute trader in identifying trading opportunities, you are bound to fail if you do not implement proper money management techniques. The winners take their winnings. Your average Forex trader just doesn’t know how to take their profits when they’re on the table. It is a tremendous shame, as this one aspect of your business practice will determine your own destiny. In fact, it is quite possible to have a history of losing and still make a lot of money if you implement proper money management.
Rating: 4
5. Tutoring
Learning to trade properly is a challenging and time consuming process. Few traders have done it on their own. It is very important to be able to learn from an experienced trader. Unfortunately, few if any merchants will benefit from the help of others.
Rating: 1
6. Sufficient capital
While it is true that you can open a trading account with as little as $50, it will be extremely difficult to start a successful Forex business with such a modest amount. A trader must be able to absorb a losing streak, as this happens frequently in this business.
Rating: 6
7. Brokerage account
It is essential for a trader to sign up with a broker in order to trade Forex. Runners come in all shapes and sizes. It is essential to find a broker who is trustworthy and honest and offers efficient execution and customer service. The commissions and spreads charged are also critical to your results.
Rating: 7
8. Chart service and other trading tools
Charts are the weapon of the Forex trader. His forex charts will give him most of the information he needs to make sound trading decisions. A trader must find a charting solution that allows him to use all the indicators and tools he needs to analyze the price. Charting services range from basic free services to extremely expensive monthly packages that offer elaborate analysis tools and techniques. It is important for the forex trader to learn how to use their charting services fully and efficiently. Additionally, a variety of other tools are available that can greatly shorten the learning curve to becoming a successful trader, such as FX simulators.
Rating: 7
9. Reliable news service
News affects currency prices more than any other market. It is important for a trader to identify a reliable and timely source of news.
Rating: 6
10. Time
Successful forex trading takes time. A trader must be able to perform a deep analysis of the currency prices every day. Keep up with the news, chart and read currency charts, monitor trades, etc. everything takes time. Some traders mistakenly think that they can earn money in this game while they sleep.
Rating: 5
average trader key failures
Having identified the above 10 key components to successful Forex trading, we will revisit the question of why 95% of traders fail. As you can see from the score above, the most prominent reasons are, in order of importance,
- Lack of knowledge of technical analysis and fundamental analysis
- little discipline and patience
- Mismanagement of money and
- Inadequate trading psychology Lack of mentoring
Until a trader can address all the required components, it is bound to fail. Fortunately, there are a variety of different tools, resources, and services that a committed Forex trader can use to develop their skills. Services range from simple free tools and resources to more complex and expensive training programs and tools. Before one can really begin to enjoy successful forex trading, it is imperative to do some self-analysis to see where your trading strategy is lacking. The above list will serve as a checklist of items to address in your business endeavors.