Home Analysis Why do Some Forex Traders Fail?

Why do Some Forex Traders Fail?

by Danijel
forex traders

Coping with market volatility can be stressful

The fate of any market is inextricably connected to the fate of forex traders who take part in it. One of the main selling points of forex trading is that there are many forex markets in the world, so the lack of trading opportunities is never an issue. While it is true that success of individual traders contributes to the forex market itself, their losses also have a cumulative effect. There are two sides to every coin, and forex market is the perfect example.

Forex markets provide numerous advantages: a plethora of trading opportunities, a huge amount of leverage, and buying on margin to name a few. However, every single advantage that forex markets have to offer to forex traders can prove to be a huge detriment to the profit margin of an inept one. And they do. For instance, the sheer number of opportunities makes it hard to discern the truly profitable ones from those not worth the risk. Buying on margin can immensely increase the profit, but the losses are also increased. And even if the risk is low, there are only so many mistakes a trader can make before they go under… The profits, even when made, are not always consistent – something many forex traders come to realize all too late. People assume that, because they deal in currencies, forex markets offer a greater yield of constant revenue than other markets and at a far lower risk; the truth is that the potential for profit is greater, and the risk is taken at the individual trader’s discretion and needs to be managed.

Speaking of individual forex traders, every single one of them has their own personality with all the traits that accompany it. The negative ones can impact success greatly. For instance, greedy traders will find it harder to limit the risks they undertake or cut the losses while the fearful ones will face a completely opposite set of difficulties: they will hesitate even with low risk opportunities or even miss them altogether while backing out prematurely by being stopped out and actually increasing losses further as they miss the chance of price recovery. Their confidence, or lack of, also plays a part although whether or not this is a good thing is often unclear until the very end.

Shrewd forex traders will never commit to a trade before assessing the situation properly. He or she knows that markets are a fickle thing and things could change at any moment. Not having a flexible plan that could adapt to the market is the largest mistake forex traders could make. Aside from failing to learn from mistakes, of course. It is crucial that the mistakes in question are someone else’s since Forex markets, like all other, can be quite unforgiving especially to a small or new trader. Experience makes all the difference and the sooner it is acquired, the better.

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