5 Reasons Forex Traders Fail

Discussion in 'Forex' started by Topstep, Jul 23, 2020.

  1. Topstep

    Topstep Sponsor

    5 Reasons Why Forex Traders Fail - what would you add to the list (or remove)?

    Too Small Account Size

    This is a problem that might be observed in Forex more than any other type of market. This is because many brokers around the world allow a customer to open an account with $250, or even less. In this case, they are making the dream available to anyone, however, it is challenging to learn with an account that size, and it is extremely unlikely that anyone will be able to turn that amount into any kind of cash flow. Trading is all about learning, many times from mistakes. The problem with an account too small is that you only have a few chances before you run out of ammunition.

    Too Much Leverage
    This problem piggybacks off the first one. Take for example, in the United States, the regulatory agency restricts leverage to 50:1. This means it requires $2,000 to control $100,000 worth of currency. However, in other parts of the world, some brokers offer as much as 1000:1, which means it would only take $100 to control $100,000 of currency. While some speculate that the U.S. has too tight a restriction, clients are much better served by this tight regulation than none at all.

    Chances are, if you depend on leverage on steroids to keep trading going, you are not in a position to be trading. With micro-sized lots, there is enough opportunity for many, if not most would-be traders, to be able to get a share of the market without over-leveraging. Just for added perspective, most of the successful, long-term, fulltime traders I know, don’t use more than half of their leverage, in other words, they opt to use no more than 20:1.

    Neglect the Fundamentals
    This is a problem that works both ways as you will see with #4. However, because there are so much technical analysis education and so many technical indicators, many traders believe they can eliminate the fundamental concern of their markets. My thesis is, no matter what timeframe you trade, this is still something to be aware of. There are instances when extremely short term traders can pay less attention to the fundamentals, however, even for micro timeframes, one would still need to be aware of any scheduled economic releases that could cause a quick, and dramatic price fluctuation.

    Neglect the Technicals
    Likewise, because currency markets are theoretically driven on fundamentals, some traders refuse to give much credence to technicals, often at their detriment. Take for example a lady I once knew, probably the smartest person I’ll ever meet when it comes to economics and various fundamental factors of the market. Because of her brilliance and value to the company, her firm gave her money to trade. She was almost always correct on her fundamental view and the broader direction that the market would take. However, she was constantly too early, which in trading means she was wrong. If she has used technicals to compliment her fundamental view, she would have had more precise and responsible entry points.

    Volatility Trading
    Experienced traders are aware that volatility can be a big friend, but we also know that this is a two-edged sword, because friends have been known to stab you in the back. I met a guy one time who had just started trading FX. When I asked him what he was trading, he told me it was the U.S. Dollar and Turkish Lira (USD/TRY). I instantaneous knew why he was trading that market, because it was experiencing an extreme measure of volatility, in a way that only a less liquid pair could.

    I never did ascertain if he was claiming to make money or not on this pair, but my question was why a new trader would do such a thing. Perhaps it was a news headline that intrigued him, or maybe a trader friend of his who was more experienced was working that market. I don’t know the answer, but I know that until a trader has been around the proverbial block for a while, they are asking for a disaster when the experiment in those kinds of markets. There is a reason why volatility is so intriguing because, for everyone who makes money, there are others who are getting crushed and blowing up their accounts.

    These are just 5 of the conditions that cause traders to be unsuccessful at Forex trading. However, there are several more that I may cover in the weeks to come. If you have any additional reasons why it’s hard to succeed in Forex trading or your remedy for these 5 listed above, let me know in the comments section. Stay safe traders!

    Full Article Here
    WS_MJH likes this.
  2. padutrader


    entry cost are least in trading business and more so in financial instruments trading and least in forex trading......this is not a a bad thing and gives opportunity to everyone to succeed.

    Failure to understand a market is one of the main reasons for failure.

    ask traders to explain what exactly a market is and you will get a good demonstration of how few traders know, what sort of animal they are dealing with.

    romantic ideas like a tight stop, which is touted by many experts, are in direct contradiction to market realities: no one can ever consistently buy low[est] and sell high[est]. and yet that is what experts tell you to do.

    it is easy to see why traders fail: expecting to find an idiot who will sell low, so that he can buy low and to expect to find another idiot to buy high, when he wants to sell high, is childish at best and moronic at worst.

    there is no way to avoid drawdown [which i define as unbooked loss].

    and small wonder traders bitch about stop running....!

    Traders fail because they use technicals or fundamentals or a combination of both to decide the right price to buy or sell.

    And there are many books that tell you how to do this: how to find the pot of gold...at end of the beautiful rainbow: that is shown in the book.

    what no one tells you is that there is no right price to enter: no one can buy lowest and sell highest.

    so NO ONE CAN ENTER AT A CORRECT PRICE. this is an unpleasant truth that all 'coaches' hide.

    that is why the saying goes: bulls make money, bears make money, Nobel price winners, geniuses and perfectionists ,get slaughtered.

    this saying, is what most traders, do not understand and it is because of this that traders lose money.
    Last edited: Jul 23, 2020
    Topstep and ffs1001 like this.
  3. Great article. Most of the traders fail in their trade because of lack of knowldge and akills and also lack of passion and discipline. They want to become quick rich in Forex trading but mostly fails an leave the trading.
    Topstep likes this.
  4. El Trado

    El Trado

    1000:1 ?? How is that even possible? You will lose all your money just to the spread? And if you make it thru the spread, you will most likely be wiped within 30 seconds due to natural fluctuation.
  5. BAT31


    In shady places like Greece and the Caymans, 1000:1 is offered. However, there's no guarantee you will be able to sweep out any profits.
  6. padutrader


    the only way to learn is to watch a master trader at work for a few years.

    this is practically very difficult because there are so few of them. i did not know any trader for decades and only found contact with traders when the online forums started.

    the other way is to watch bad traders.......this is also practically difficult because bad traders are secretive-they are shy to show that they are losers.

    so that leaves one way only to learn and i had to resort to that method for years: watch yourself trade.

    i did also read many books but they do not show you the whole picture: if you read about the heart in a book, you know about the heart but nothing about what makes up the whole living organism.

    so you have to read all the books and even then you will not get the whole picture.

    so after reading all the books you have to put the whole picture together .....like solving a jig saw puzzle.
    ffs1001 likes this.
  7. padutrader


    are you talking about leverage?

    oh and in not so shady places....i can give a list......FBS for one.....i think they offer 3000 : 1 what does that mean? if the market goes against your position by 0.03% you lose 100% of your capital if you are using full leverage
  8. padutrader


    traders lose because they do not take time effort to understand the whole market structure...they only know apart of it and that is what makes them say that risk management is everything in trading.

    just like someone knowing how the heart works but not the other things.
  9. JSOP


    5 Reasons Forex Traders Fail:

    1. Their brokers trade against them

    2. Their brokers trade against them

    3. Their brokers trade against them

    4. Their brokers trade against them

    5. Their brokers trade against them

    Good luck!
  10. algoseek

    algoseek Sponsor

    I have seen a leverage as high as 3000:1. Crazy right?
    #10     Jul 24, 2020