The Forex market can be hugely profitable for some, and yet result in a devastating loss of money for others. Many people treat the Forex market as they would a casino; they think in terms of ‘placing bets’ rather than trading. Unlike a casino, where they odds are stacked against you and you have absolutely no chance of winning in the long term, with Forex you can, with proper knowledge and proven strategies, tip the odds solidly in your favor. This will allow you to profit consistently.
If you know anything about forex at all, you will know that around 95% of people who begin trading the forex market fail. They lose every cent they invested. They lose money they could not afford to lose: rent money, food money. Some even lose their shirt.
95%. That is an extremely daunting statistic. I know what you’re thinking; you have no intention of being part of the 95% of losers, you’re going to be one of the winning 5% minority who rake in tens of thousands, even millions, in forex profits each year – and with apparent ease! But before you go off and put your hard-earned cash on the line, take a look at some of the most obvious reasons why so many traders fail:
If you do not have a trading strategy, you will fail in forex.
First of all, you’re going to need a solid trading strategy. This should incorporate the conditions required before entering the market, and a clear exit strategy that will tell you when to exit the market when a trade goes south. This strategy should be followed religiously and objectively. Know when to get in, and know when to get out.
If you don’t keep your emotions in check, you will fail in forex.
Anyone who has traded forex for any period of time will tell you that it can be a terrifying rollercoaster of emotions. Here are some of them:
Adrenalin Rush: You place your trade and your heart starts to beat in your throat because, now, you are no longer using the ‘play’ money of a demo account, you are now risking your own hard-earned cash. Will you profit, or will you lose money?
Euphoria: You feel crazy with joy because the trade turned out the way you wanted it to and you’ve made a handsome, bankable profit. This trading business isn’t so hard, right?
Fake confidence: On the back of the last win, you stupidly jump in and quickly place another trade without justification.
Heart-stopping terror: the trade has gone against you and you watch as the market rips into your trade and devours your money like a ravenous Pac Man on steroids.
Remorse: The last trade just about wiped you out. You should have got out while you still had the chance, but you didn’t. You sat in there staring at your screen, willing the market to turn in your favor – but of course it didn’t. What made you think that you could bend the market to your will?
Guilt: Why, oh why did you lose so much money? Money that you could not afford to lose? How are you going to pay the rent now? What will you use to buy food? And what will happen when the utilities aren’t paid?
At the end of the day you are emotionally drained and exhausted. You barely have the will, the strength, or the available funds, to trade another day. You see, emotions have no place in trading forex. You need to be cold, logical and objective if you want to succeed as a trader in this unforgiving, brutal market.
If you don’t educate yourself in Forex, you will fail
Forex is not just simply ‘placing a bet’ on currency markets that go up and down like a yo-yo. There is far more to the market than meets the eye. Learn as much as you can and as quickly as you can – before you lose your shirt!
These are just some of the basic issues why so many people fail in Forex; there are many, many more. For example, money management, and risk-reward ratios – and dozens of other factors you need to learn before you can begin to profit consistently.