3 reasons why forex traders fail
Forex trading takes place in one of the most volatile financial markets in the world. It’s a market with a trillion-dollar daily trading volume where financial institutions, top-tier banks and retail traders make transactions and speculate on the rates of more than 70,000 tradeable assets. With so much money moving around and plenty volatility, opportunities are available almost around the clock. In fact, it’s so easy to find a profitable entry that most traders are overcome by greed sooner rather than later and throw caution to the wind – ignoring their trading plan and losing everything in a couple of great reward and even higher risk trades.
In order to avoid blowing out your next trading account, you can learn how to avoid these common pitfalls and minimize your exposure to the downside while discovering new ways to secure any potential profits before the market starts moving against you.
Trading without a plan
The most effective approach to trading the markets is, of course, by following a refined trading strategy. Trading forex without a plan is more akin to gambling your money away. In order to formulate a meaningful and consistent trading strategy and discover what best works for your individual trading style, you also need to consider trying out multiple currency pairs or even different assets such as commodities like gold and oil or equities like Netflix, Apple and Amazon. This is the great advantage trading forex affords; the potential to diversify into different tradable assets – all available within the same platform.
You can trade stocks, forex, commodities and even cryptocurrencies without heading to a different broker or downloading any additional software. Your MT4 trading platform can be utilized to trade almost all financial markets, as long as the underlying securities are included in your broker’s offering.
As such, with a little effort on your part, you are guaranteed to find an asset or multiple different ones that respond best to your strategy. If your entry rules and confirmations isn’t working on a specific currency pair or other financial instrument – it may best suited for another. Try to branch out to different markets while also paying close attention to the different trading sessions and how they affect volatility and trading volume of the various currency pairs.
Overtrading – trading impulsively
While trial and error is arguably a great approach in learning how the market works but if you aren’t currently trading on a demo account – it’s prudent to take it slow. Beginners in forex trading usually make the mistake of chasing the big wins and try to compensate any losses with additional investments in order to at least be somewhat profitable before the end of the day. These poorly planned trades, however, mostly end in disappointment. If you find that your strategy isn’t working, try to change the way you trade and not how much you trade.
Emotions can get the best of even the most experienced traders, but emotions have no place in business and make no mistake, if you want to succeed in trading forex; you need to consider it as a business.
Greed and fear of missing out are the worst offenders and you always need to be self-conscious about falling victim to your emotions. Education, logic and patience should be the three pillars that drive your trading decisions and not your daily profit targets and objectives. It’s good to have daily goals but if you find yourself overtrading in order to achieve them – they can provide to be detrimental to your strategy and it would behoove you to set more realistic ones for yourself.
Going against the trend
The forex trading market is unpredictably volatile almost at all times. However, there is an overall trend forming usually and if you try to go against it, you are probably going to get stopped out before you see a reversal. You always need to follow the trend even if everything points to the contrary. Price action is determined by the market sentiment, supply and demand, the sellers and the buyers. If the market is buying and there is a strong bullish bias, you can’t just go against it and expect to come out unscathed.
The trend is your friend, if you move away from the low-timeframe charts and see the big picture, you can better assess the overall trend of the market. This will make it easier for you to identify where the market is headed and make the appropriate decision.
Conclusion
Online trading in general provides countless opportunities for traders and investors across the world but sometimes the risk can outweigh the reward. A forex trader needs to understand there are certain rules that need to be followed at all times in order to protect his investment and help him achieve consistent growth without risking his entire account on a single trade.
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