Why Forex Traders Lose: 3 Reasons

Here's why 90% of Forex traders lose.

What are the requirements for professional status and ongoing success in any endeavour?  Many people are aware of the reasons they are poor at something, but they do nothing to improve. Forex trading is no different in this regard. This article discusses reasons why Forex traders lose money as well as ways to prevent getting caught in the 90/90/90 trap. 

90% of Forex traders (90/90/90) lose 90% of their equity within 90 days.

False Education

The growth of the internet has expanded information flow in both positive and negative ways. More information is now available to retail traders than it was to any dealer fifty years ago. You have no idea what trading entails. You can find the solution with a short search on a smartphone or other gadget. 

Even while there is more information available now, not all of it is necessarily valuable for traders. There are more fake educators, signals, and pieces of information online than ever before. Even Donald Trump calls media organisations "false news". Is it bad that most people in the forex market learn how to trade from the first link they come across in a google search? If the information the source gives you is inaccurate, it is. Most instructors and businesses duplicate material from fake education as well as information that is publicly available from trustworthy sources.

What is the meaning of technical analysis? Wrong: Technical analysis is the process through which a retail trader examines the price changes of a securities or asset. Technical analysis combines quantitative analysis with numerous technical considerations. This comprises: 

• Technical indicators (EMAs)
• Purchasing Power Parity
• Accumulation and Distribution Zones
• Tick Volume
• Candlestick pattern analysis
• Stochastic Processes
• Oscillator Divergence
• Support & Resistance 
• and much more.. 

Yet retail traders are instructed to forecast future prices by merely observing patterns? If it were that simple, hedge funds and investment banks wouldn't require top economists or college grads, nor would they require quantitative AI systems. To get wealthy, they would only need to wait for a pattern! When you step back and consider what you are taught objectively, how absurd does it sound? 

Even basic analysis has been corrupted by erroneous interpretation. What is the meaning of basic analysis? The majority of individuals are misinformed that fundamental analysis involves trading on the news, not only by instructors but also by brokers. It employs a mathematical system to study each economy utilising data, news, and economic releases to assess a nation's strength or weakness and, consequently, the value of its currency. Once news is out, only monkeys look to trade highly volatile news to speculate on the outcome.

You are only trained to trade on news if there is an IB agreement conflict of interest with the educator or broker, or if the broker wishes to increase your commission. They profit more when you trade more; they profit less when you deal less. They therefore have an incentive to encourage you, the retail trader, to engage in as much trading as you can. 

Tip 1

Find reliable education source

Tip 2

Always give what you are taught a second thought, don't be gullible.

Tip 3

Understand that there are conflict of interests in brokers and educators that try make you trade more.

Psychology

The question of whether psychology matters in trading is always a lively one. In the event that you played professional football, would your mindset matter? If you want to be a student that gets the top scores, would your thinking be important? Of course, the response is in the affirmative. One important element that traders often overlook in their trading plans is psychology. Most people forget that your thoughts can affect important decisions that could result in suffering since they are so focused on how to join and exit the market. The two main psychological emotions that traders go through are fear and greed.

Several different kinds of dread might arise when trading:

• Fear of failure
• Fear of leaving money on the table
• Fear of missing out (FOMO)

When someone is afraid of losing money in trading, they frequently take smaller rewards. This is a common error made by retail traders; they make a deal and eventually abandon it out of fear that it would fail. By doing this, your brokers receive commission and the cycle of fear is maintained. 

Greed is another typical concern in trading; when you start to cling onto a deal out of fear that it might go further than you anticipate, you get afraid. Even worse, because you don't want to lose that much money, you believe that a trade will reverse itself after a loss. Additional to this Gluttony may be a significant factor in excessive trading, which again results in commission payments to your broker. Trading lengthier time frames while applying economic research is one method of limiting your transactions so that you only enter high probability trades.

Through trustworthy instruction and comprehensive system testing—algorithms are superior at this because they remove human biases and reveal the genuine system potential—fear can be significantly reduced. On our automate your strategy page, you may automate your plan and obtain results. Utilising economic analysis to back your judgements, such as employing the logic strategy, which assesses over 500 pieces of economic data, is another action a user may do to lessen fear of failure. 

Top 5 tips:

1. Anything is possible.
2. Making money doesn't need you to predict what will happen next.
3. Any particular set of factors that define an edge has a random distribution of wins and losses.
4. An edge is just a sign that something is more likely to happen than anything else.
5. In the market, each moment is special.

"When the internal struggle ends, everything becomes easy."

- Mark Douglas

Risk Management

There are still many traders in the retail trading industry that don't use basic risk management strategies. Simple take gains and stop losses is one of them. Your account could be lost in one trade if you don't have a stop loss. 

Set your stop loss before you ever enter a transaction.

When a trader doesn't set stop losses, what happens in their minds is that they believe that tiny losses can be reduced if they wait patiently for the market to turn around and ride it out. What happens if it keeps moving in the opposite direction? You falter. You should always establish your stop loss prior to making a trade, taking into account your strategy, time frame, and analysis. This means that once it crosses that line, you are aware that your analysis was flawed or that the deal itself failed. Losses are inevitable in trading; not even the biggest funds are successful in every transaction.

Forex traders also lose because they lack sufficient funds when they enter the market. If you don't put in enough money, even if they are using a profitable strategy, you won't be able to go through the losses before you start making money. When traders begin to overleverage their positions, this problem worsens. Trading on a demo account is an excellent method to start because you will lose a lot of money learning, so why waste it? Save your cash till you have enough to start realising some gains.

Goals that traders establish for themselves are typically financial ones. "In one week, I want to double my account." Unrealistic targets and goals may lead one to trade more frequently or at higher risk levels, which inevitably raises transaction costs and increases the probability of failure. Setting objectives for self-improvement is much more practical than setting higher than you believe you can reach goals. For instance, I want to continue trading profitably for the next year, the next two years, and forever. 

Tip 1

Before making a transaction, you should always establish your stop loss.

Tip 2

Set attainable objectives.

Tip 3

For better trading mindset, read literature on trading psychology.

(Mark Douglas, the disciplined trader)