Every time you lose, should you simply quit trading? To some traders, it is devastating to see your profits drip and your account gets losses from time to time. They may think that trading is always full of bliss. However, according to statistics, 70% to 80% of newbie traders lose and quit. They fail to realize the fact that losses and failure are common in trading. It is not about the number of small losses you acquired but the number of big wins that you achieved.
Reasons Why Traders Fail
Traders fail for the same reason. Knowing these things will help avoid such big mistakes.
This is a very common misconception among new traders. They think that the Forex market is a get-rich-quick scheme. Until they are hit with huge losses. The best and the only way to become a successful trader and to achieve longevity in trading is to be consistent and patient. It is impossible to make money instantly in the Forex market. You need consistent profits to obtain your goals. For newbies, the best option is to make small, smart trades every day. You must also accept the fact that losses will always be possible. It won’t be always a sunny day. Even the best Forex traders cannot achieve this. Just make sure that you minimize your losses by using a risk management strategy and trading tools from MyFXBook.
Poor Risk Management Strategy
As mentioned above, to mitigate the risks, you need a risk management strategy. But a poor risk management strategy or no risk management at all is the recipe for disaster. It can wipe out your account. To survive in the market, you need a good risk management strategy that will protect your profit. You also need to follow the risk management strategy that you employed so it can work accordingly.
Nowadays, trading platforms are mostly equipped with risk management tools like take-profit and stop-loss orders. Make sure to all use them before entering a trade.
It is too tempting to overtrade especially if the price movements in the market are all going to your plans. But overtrading mostly results in losses because you are not following your original plan. You created a trading plan to avoid overtrading or trading out of emotions. You must always follow it no matter the situation in the market.
Taking Too Much Risk
Don’t trade like you’re gambling. Gambling is when you solely rely on luck to win. Trading is when you plan your actions, take necessary precautionary measures to avoid losses, use trading tools from MyFXBook and take as little risk as possible.
For new traders, it is advisable to invest more than 2% of your total capital. By doing so, although you will still encounter losses, it will be minimal and your profits will overpower your losses. Instead of putting all your eggs in one basket, you should diversify and spread your investments in different instruments. Avoid trading based on your emotions. Separate your trading life from your personal life. That’s one of the ways to avoid making unnecessary decisions.