Investing in Forex and the statistical risks and advantages involved is reminiscent of Hunger Games. Whenever a beginner trader comes to me and asks for help, I usually like to guide them down the path that will help them as a trader overall. But I’ll always tell them one thing before they go, “May the odds be ever in your favor”. When OVER 80% of investors LOSE in the financial markets, the odds are stacked against you.
But are the odds really stacked against you? I’d have to argue that they aren’t, so long as you know how to minimize your risk. First of all, if you are trading money that you can’t afford to lose, DON’T TRADE! If you’re trading to make a living, make sure you know what you’re doing. Trading in the forex market is highly risky as it is a volatile market. But you know as they say, “volatility is opportunity”. However, an opportunity without proper preparation will be the greatest opportunity to lose. It’s like running into a battlefield with a gun that isn’t loaded with bullets. You’re just going to get yourself killed.
That is the reason why you have to build up your strategy, and please don’t be fooled. There is NO SUCH THING as a HOLY GRAIL 100% GUARANTEED STRATEGY TO FOREX TRADING. Now, if you are new here or fairly new to trading in general, please have a look at our comprehensive guide in our article: Top 10 Trading Techniques – Tips and Tricks to go from being broke to trading like a PRO. This guide will help you familiarize yourself with important basic techniques and skills you will need to tackle trading CFDs on the financial market. For those of you who are experienced and know what you’re doing, I’m sure you’re still wondering and thinking to yourself “where am I going wrong”. I’m about to tell you.
Are you ready?
You’re going to hate this but here is where you are failing entirely and it’s completely natural because we’re all humans. You are failing at trusting your very own analysis. You are letting your emotions, your fear, your greed, your anxiety, get the better of you. You don’t have to admit anything to me, just acknowledge it for yourself. The reason why OVER 80% OF TRADERS FAIL is because their emotions get the best of them.
In a majority of cases, traders have a solid analysis. However, they fail to identify exit points for their trades. Even if they do identify the exit points for their trade, their fail to stick to it. In our comprehensive guide, we outline this. First of all, when you build your analysis you are building a case for entry. Now that you have your entry, you need to know where you will exit in the event of profit or loss. So, you set up your take profits and stop loss.
Then, something happens during the trade. You’re currently in profit. The price is about to reach your Take Profit (TP). What do you do? I’m guilty of this too sometimes. We let greed take over and we move the TP so we can get more pips out of our trade. But before it hits our newly modified TP, the market reverses!
When we are losing, sometimes we can get so stubborn, and suddenly we start imposing our will on the market. We say to ourselves “oh the market will go that way, I’m sure of it”. So, what do we do, move our stop loss to give the price “some breathing room”. “It’ll bounce” we tell ourselves. Then, when we’re close to a margin call and getting stopped out we finally “cut our losses”. How many of you have been in this position? I’m sure a lot of you have been there. I myself have been there.
The reason why OVER 80% OF TRADERS FAIL is because of themselves, not the markets. When we trade on the markets, we are making an educated guess based on our analysis. We are taking a risk to reward ratio that satisfies our risk appetite. If you stick to your analysis, if you stick to your exit points, if you control those emotions, you will be able to see a dramatic change in profitability, regardless of whatever strategy it is that you use.