Why People Fail at Currency Trading
When people look at currency trading they may be put off by some of the horror stories that they hear about. These horror stories commonly have a trader who loses everything when they trade. These traders generally do everything right and cannot profit no matter what they do. Many of these stories are exaggerations of what really happened. There are a number of reasons why traders fail at currency trading and you should know what these are.
Expecting Too Much
A lot of new traders go into currency trading to make a lot of money. These trader will have heard of the George Soros’ of the world who making millions on a single trade. The problem is that these great traders are the exception to trading and that is why there are not more of them. Setting your expectations too high is the easiest way to set yourself up for failure on the forex market.
Before you start trading, you have to be realistic in what you are going to get. You cannot expect to make thousands or even hundreds in your first month of trading. During this month you are more likely to make a loss on your trading than a profit.
Live Trial and Error
There are many new traders who do not heed the advice of using a demo account. There are many reasons why these traders do this from believing that they do not need this to feeling that they learn better trading live. When you do not use a demo account you are going to fail because you are not prepared for the market. You have not tested your strategy and you do not know if it will work. You also have not tested your trading skills.
The use of trial and error is something that many traders from different financial markets attempt. You should never do this and always use a demo account first. Demo accounts are free to open so you do not have to worry about the cost.
Rigid Currency Trading
There are a lot of people who are unable to adapt to change. When these people trade on the forex market they are very rigid in their currency trading. While they follow their trading strategy to the letter they are unable to adapt to changing market conditions. There are two market conditions of ranging and trending. It is important that you are able to adapt to the condition of the market because range trading does not work in trend markets. The inability to change is the biggest reason why some traders are not successful.
Having No Plan
Many new traders have a trading strategy and nothing else. These traders think that having a strategy is enough to keep them from failing, but this is not the case. It is important that you also have a risk management plan and a money management plan. These two plans are very similar, but they do cover different topics. When you have both you can limit the risks of your trading and ensure that you have money to trade with.