Forex market is the biggest market in the world and it is about 5 trillion dollar market a day. Although it is a large market and there are many traders, only a few traders are successful. You will find the same reasons which can be attributed to the failure of many traders.
On the other hand, investors fail in different asset classes. According to the market, it takes a small amount of margin to trade currency but traders expect greater investment return than the market can offer or take greater risk in trading than actually, they should have.
1. Earning quick profits vs. losing money
People tend to earn quick profits. Subconsciously we are very used to getting what we want very quickly but forex takes hard work and also it is externally marketed not so much as used to be.
It so happens that novice might win with high leverage and a person with experience and strategy might lose the game for a while. The novice might think he is good but when he incur a huge loss suddenly he realizes how little control he had and that scares people and they try to move to another avenue.
2. People focus on quick money not on skills
If you have skills money becomes less important but people always reverse it. Of course, we should have the motivation for money. According to Management Guru, Frederick Taylor money is the main motivation but Investors should have less focus on money and more curiosity on learning. An investor should have a curiosity and passion for learning the art of trading.
3. Emotion dominates the traders
90% of traders lose money because they allow their emotions to control their trading. When people start winning money, when they are trading in a live account, they try to manually adjust their target TAKE PROFIT and STOP LOSS then the whole risk to reward ratio becomes imbalanced.
4. People don’t bother about risk management
The reason why most of the traders get killed in the market because they just do not bother to manage their risk. The only difference between trading and gambling is how successfully we can manage the risk.
Gamblers do not bother about analysis, they (Gamblers) just leave it to their fate. On the other hand, Forex traders do a lot of homework before they place their trade in the market. If you manage to gain in the forex market by random gambling, in the long run, it is pretty sure that you are going to run into debt.
So, people who have a real interest in research and have good analytical ability can take forex trading as a part-time or full-time profession.
5. People tend to use a bigger lot size
Often people think if we have a lot of sizes too small it will take us a long time to earn money so they increase their lot size but when the plan goes against them they incur lose then they again increase their lot size so that they can take revenge on the market and try to earn back what they lost which means they are controlled by their emotions. So if you want to become among the top 10 businessmen it is not so much having a good system but to manage your risk.
6. Not having proper skills and Strategy
Most of the time people make their decision after they have lost their money. You will find the worst result because you are making the decision emotionally.
If you have not decided when you will move your stops, how you are going to move your stop before the trade gets placed.
You should not be taking the chance afterward. If you do not have a plan then the answer is simple just get out because when you follow a plan only then it pays off.
7. The tendency of being Investors than traders
Investors put their money in real-estate business, stocks, and currency markets assuming that the value will always increase over the period. So when the value of the investment increases the person brings more money in the business. People who follow other people’s footsteps and bring their precious savings in the market do not have a plan when the value of their investment decreases. They usually keep holding their investment hoping one day the value will reverse automatically. This kind of investor makes a profit in a bull market but fails in bear markets. This kind of investor fears the bear market and they are unable to prepare themselves in their Rainey days.
8. Not Giving enough time
People are always in a hurry they don’t want to give enough time to learn the skills of trade because it is a tricky challenging business, you have to make business over a long period. People lose money again and again and at some point give up which creates a negative impression about Forex Trading. 90 % of people lose money because they follow other people, they believe in gossip and rumors but earning money takes lots of effort, perseverance, and passion. You have to give your time and focus on it. If you cannot do that just find trustworthy trades and put your money there and be a silent partner of the business.
9. People follow other people’s footsteps
People tend to follow other people’s footsteps. Most of the time people do not analyze or triangulate the information they hear. People having little knowledge about the market invest in the currency market with all their savings and when the price fall they cannot survive. To take revenge on the market they take bigger lot size and leverage which is even more dangerous. Without proper strategy investment doesn’t pay off, this simple formula most of the people do not try to understand.
10. The truth about Demo trading: Unrealistic Expectations
No matter what people say, Forex is not a shortcut of getting quick rich. Becoming adroit enough to amass profit is not a quick race, it takes time. Success takes back to back efforts to manage the strategy but in demo trading, people take bigger lot size and also takes high leverage because there is no risk involved but when they go in a real trading huge amount of pressure works. On the other hand, emotion gets involved. Another important thing is in the demo account people use large capital but in real life, their amount is very small which provides them no realistic idea of trade.
So in Forex trading, it is very important to keep all these things in mind. Do not let your emotion to trade. Follow the trends, follow the analysis. Try to do realistic trading in the demo account. What I mean is some people use millions of dollars in demo account but the real account, until you have only a few hundred dollars. If you keep doing this you cannot learn the art of trading. Talk to your mentors. Read and make a lot of research to grow your skills.