Hey traders, welcome to the first post of this entire website. Before we begin, let me start by apologizing that I have to start the website with such a gloomy topic, like why Forex traders fail.
But that is the principle of Forex Seriously. I tell you the hard truth for free. You will not find any false hope here, I promise.
As you probably already know… Researches showed that 90% of new traders fail in this business; therefore by writing on this topic first, I will be able to help more people!
Let me touch on a few points, and I’ll add more as we go along.
Why Forex traders fail due to Over-trading and Over-leveraging
This is the number one killer for new and impatient traders! Many new traders have an attitude that success is a given, and that it must appear quickly and without much effort. As they become more impatient, they will increase the frequency of entering trades, or even start to trade bigger size than their accounts can handle, hoping to see results quicker.
Unfortunately, they could be on an express train to go out of business very soon. A trading plan exists for a reason. Trading rules and trade size come hand in hand with a trading plan. By changing trading rules and trade size, you most likely changed your trading plan and along with it the profitability ratio. Yes, in other words, you could have altered a winning strategy into a losing one.
I have not even touched on the psychological effect of over-leveraging yet. If you wish to advance to the next level of the learning curve, you need to learn to be patient and be in full control of your own emotions. That is one of the main reason why Forex traders fail.
The Next Shiny Object Syndrome
This is one of the most common problems I’ve encountered in this business over the years. And believe me; more than 70% of struggling traders are stuck at this stage of their learning curve, always chasing the next big thing or the next hottest trading idea. They don’t realize that the problem most often lies within themselves and not with the particular system.
Of course, many of the strategies posted online just plain don’t work. But most of the time it is because these traders don’t take their trading business seriously, to find out enough about the system. The next point will explain why Forex traders fail due to insufficient information.
Insufficient testing leads to lack of confidence in chosen strategy
Have you ever come across a strategy posted on one of those famous Forex forums and think to yourself “hmm, this makes perfect sense!” The next thing you realize you’re trading this “presentable and logical” strategy on your live account, after staring at your chart for 20 minutes.
Chances are that you’re not going to make any money, or else everyone who read the same strategy would have become millionaire. I bet every one of you were guilty of doing this, myself included.
If you plan to take trading as a serious business, you need to start to be really picky when choosing your trading strategies. Many of the so-called strategies posted online only looked as if they would work. But when you back-test it over a span of 10 year, you realize that it actually loses 10% of your capital every year!
The problem is, none of the traders I came across ever back-tested their strategies enough. And if you did, you wouldn’t be reading this by now, I promise.
Back-testing not only filters out bad strategies, but it also gives you the ultimate confidence when trading your chosen strategy. You need to do yourself a favor and start back-testing your strategy over years of data. I just cannot stress this enough.
You can use any back-testing software in the market. If you are interested to know how I became a profitable trader, I recommend reading my review on the Forex Tester 2. I have been using this software for many years and it is the market leader in this field and I cannot find a close substitute yet.
No matter what tool you use, just make sure you test your strategy enough and study the win-rate, optimal time-frame, maximum draw-down, annual returns, etc. Don’t be lazy and start cracking. Good luck and work hard!