7 Reasons Why Most New Forex Traders Fail.

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Read that title again, did we just say that most New Forex traders fail to become profitable traders? Well, yes, that’s sadly true.

Most new forex traders fail and even blow their first trading accounts.

But why is it almost certain that a first-time trader will blow his first real account?

Well, that’s perhaps because most newbie traders aren’t well acquainted with the market thus they freak on the first attempt.

But what really are the real reasons why new Forex Traders Fail to become rich trading?

Why Most New Forex Traders Fail to Make it to Professional Trading.

Generally speaking, not being familiar with the dynamics of the markets is a major reason why new traders are likely to fail.

However, there are plenty more reasons why people fail in Forex. Addressing such specific reasons will be of the essence to you as a new trader, who’s looking to start trading professionally.

The main 7 reasons for new Forex traders’ fail;

  1. Lack of Knowledge -Trial and Error trading.
  2. Unrealistic expectations and targets.
  3. Unplanned Trading.
  4. Untamed emotions.
  5. Failure to adapt to market conditions.
  6. Undercapitalized accounts 
  7. Poor Risk and Money Management.

1. Lack of Knowledge.

Forex trading is rich. And the idea of making money trading online is even richer.

But how really does someone who has never traded begin this journey without failing on the first attempt?

Straight off the bats, by acquiring knowledge about Forex trading and practicing on the DEMO account before deciding to invest real cash.

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Like everyone else who came before us in Forex says, learn before you earn.

DO NOT invest your hard-earned money if you are not sure you know how the Forex Market Works.

 Learn. Acquire sufficient knowledge about Forex before investing real cash. Then only start trading when you are confident with the skills learned. Learning will save you the headache of blowing your first account.

2. Unrealistic Expectations and Targets.

Whoever pointed out Forex Trading as a get-rich-quick avenue lied to you.

Go back and get something else to do to get rich quick.

You just deposited a mere $10 into your trading account and now want to transform it into a whole $100 in a single trading session?

What a pity. You will lose those meager funds before they even get to $50.

Let your trading strategy be objective.

Realize you cannot expect overly huge returns overnight. Start with gaining that $1 in a single trading session, graduating to $2, to $3, and so on.

The idea that you will place one huge trade to become as rich as Bill Gates is a fuss. You will only get disappointment in return.

That’s not how things run here.

If you must take anything from this article then take this – Forex Trading is not a lottery.

For consistent profits, be objective and throw away the misleading idea of quick riches.

3. Unplanned Trading.

Do you need a trading plan to succeed in Forex Trading? Of course, you do. You can’t just log into your trading account and begin executing aimless trades randomly expecting to win?

You need a clear and objective trading plan which dictates your behavior and action during a trading session.

Your trading plan must clearly state when you need to begin trading; when you need to end, which strategy you need to use, the conditions which must be met before you enter the market, among other trading conditions to be adhered to.

Maintaining the discipline of strictly adhering to the trading plan has seen many Forex Traders transform their accounts from nothing to huge sums.

Without a trading plan, you are prone to emotional turbulence, overtrading, and finally blowing that account, which is your most sacred thing on earth.

Now that you know how important a trading plan is, start creating one.

Draft your trading plan with such features as implied here.

That way, you will be a much-improved trader and you can be sure to earn on your discipline.

4. Untamed Emotions.

It has been said several times that your ability to tame those emotions while trading is paramount.

The fear, greed, excitement, and overconfidence that come with trading forex may be the cause of your undoing if they go unchecked.

The fear of failure and losing profits will see you placing panic trades that may be unsuccessful.

See what fear has done to your account.

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Further, in fear of blowing your account, you can place many random unplanned trades in the hope of winning. And you lose.

But again, what if you succeed and redeem that account from almost nothing, will you still fear to trade?

No, you may develop a whole new condition, overconfidence – you will be so excited to place more trades because you now believe you can redeem that account no matter how low it sinks.

If you begin thinking that way, you would rather stop trading because soon you and your capital will be parted.

Greed

Greed on the other hand will make you think that you can transform those little amounts into a huge amount (overnight). 

As a greedy trader, you will find yourself trading carelessly with the hope that your account will grow on those careless positions.

It is in such carelessness, random, and unplanned trades that you will meet your shock!

You are most likely to lose a lot of money trading greedily than you will trading with a plan.

What to do to overcome emotions when trading.

Tame those emotions and adhere to your trading plan without heeding fear, greed, overconfidence, and excitement.

When you find yourself heeding to either of these emotions, take a break, walk around, relax your mind, and only resume trading when you are back to your factory settings.

5. Failure to Adapt to Market Conditions.

The Forex market is not one rigid system that behaves in a certain way without changing. Therefore, if you face it with certain rigid ideas, you are most likely to be disappointed.

Market conditions do change and that is a fact. It is upon you to realize this and adapt to the changes that occur to profit from them.

One single trading strategy that you have learned or acquired, may work under certain conditions and not under others.

Once you realize this, you can become a better trader.

Surprisingly though, most new traders try to force that one learned strategy on every other asset, of course with hopes of profiting from it.

They then get disappointed when the strategy goes south on other assets and only works on a select few.

How to go around this issue.

Learn and develop as many strategies as you can and apply each under its specific market conditions.

If you have to stick to that one strategy, then know its limits, the conditions it works best on, and those that it doesn’t.

6. Undercapitalization.

It is okay that your broker offers a micro account where you can begin trading with as low as $10. But do you realize how fast you can lose that $10 given that the minimum investment amount is $1?

Well, I don’t mean to scare you but rather, to awaken you.

These markets are not your playground, they will devour your account in only tex unsuccessful trades.

As much as your broker is OK with you making a $10 deposit, don’t fall for it. 

If you plan to start trading with $1, deposit at least $100 and you will most definitely succeed as a micro trader.

Otherwise, start trading with accounts as large as $1000 or $5000 to make reasonable profits.

7. Poor Risk and Money Management.

Risk management in Forex Trading involves a variety of issues. Stop-loss orders, Take profit orders, loss to profit ratios, and trade size, only to mention a few.

New traders do not understand these dynamics and once they learn how to place a trader, they will place it without stop loss and taking profit orders.

This can see their accounts suffering significant losses if the trades go against them.

They may also be quick to take little profits by closing a trade that would have earned huge profits if it was left to traverse to the lowest or highest heights.

New traders may also not understand the dynamics of conserving the capital by sizing the trade size properly. Most newbies may invest in unnecessarily huge amounts at a go.

This will always lead to losses that would have been prevented if the 5% rule had been applied.

What you need to do as a new trader is to acquire knowledge on risk management tools like stop loss and take profit orders and trade size dynamics.

These will help you to manage the risks involved in trading and the money in your trading account.

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*Risk warning:

The information provided does not constitute a recommendation to carry out transactions. When using this information, you are solely responsible for your decisions and assume all risks associated with the financial result of such transactions.
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Kenn Omollo is an investment writer and a business management consultant at Joon Online Limited. Reach him at - kenn@joon.co.ke

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