If you’re trading Forex, you must have read this report that 95% of retail traders fail and only 5% can be successful. According to DailyFX, most beginner traders face difficulties to sustain and make profits.
But have you ever wondered why most forex traders fail to become successful. Let’s find out the top 5 reasons behind it.
5 Reasons Why Most Forex Traders Fail
1. Lack of Trading Discipline
The main foundation of a successful Forex trader is discipline. Most successful forex traders achieve their trading goals by remaining disciplined.
Traders tend to feel anxious after losing. Sometimes It’s tempting for them when they start making money and they invest more in the market. Discipline traders do not get distracted by these. They are not impatient, nervous or get overwhelmed
It takes a lot of time and practice to stick to your trading plan & strategy to become successful. The skill of discipline will enable you to put your trading skills to good use.
2. Poor Trading Plan
Most of the traders expect to make money from Forex with basic knowledge and skill. If you want to ensure long term returns from Forex, you need to have a vast knowledge on Forex market and trading strategies. Lack of proper trading strategy, reduces the chances of yours to become successful in trading.
That is why before getting started with Forex, you must learn about the market and learn about different profitable trading strategies. Later start practicing different strategies on your demo account. After testing different trading strategies, you can learn and find the most suitable strategy that suits your training style.
Overtrading is one of the biggest enemies for Forex traders. In simple terms, overtrading in Forex is when you’re trading currencies frequently. It is one of the most harmful habits of traders.
The most serious problem is that many traders are completely unaware that they are now overtrading. After a major loss or a small profit, traders tend to over-trade. They attempt harder to make up profits wherever they can, usually by increasing the size and volume of their trades, to cover their losses or seek “revenge” on the market.
As a result, they make additional losses unfortunately and eventually blow their account. One of the key reasons why most forex traders fail is because of this.
4. Unrealistic Expectations
Most traders fail because they enter the market with unreal expectations. They think that it is a get-rich-quick scheme. You become successful in Forex by investing your efforts and trading skills. There is no shortcut to success. Having unrealistic expectations make most of the traders demotivated which is why it is necessary to have a balanced trading strategy and goal.
5. Poor Risk and Money Management
You must know how to manage your risks and money if you’re willing to make impressive returns in Forex. You can be a very skilled trader but your poor risk and money management skills can blow your account. The lack of knowledge of risk and money management is why most forex traders fail.
Use proper lot size and put stop loss when you’re entering the market. If you still don’t have any strategy to manage your risks and money, start making one.