According to statistics, only 20% of traders earn on Forex, while the rest either accept forex losses or ingloriously leave the foreign exchange market. Each trader has his own reasons for failures and major losses. But at the same time, there are the most popular traps that many participants in the foreign exchange market fall into. Knowing the reasons why traders fail, you can significantly increase your chances of success by circumventing the pitfalls of the market.
Reluctance to Plan Your Trade
Regardless of which financial market and assets a trader chooses, without planning, his chances of success are 0.01%. And this micro-percentage is given to banal luck. The first thing a trader must do before opening a trading position is to draw up a trading plan and clearly follow it. In a documented plan, a trader must consider the estimated return on investment, as well as the rules of money management.
Non-observance of Trade Discipline
This is the most common cause of forex trader losses. Most successful traders built up their capital from a series of several large profitable trades and many unsuccessful operations in which they were able to minimize their losses. But trading in this way is very difficult. Such trading requires to be able to withstand emotions. It is enough to start losing hope, and one failure can entail a whole series of transactions, the result of which will be a loss of money. To effectively cope with the pressure of emotions, a trader needs to create a trading plan and follow the rules of money management. After creating a plan, it is recommended to visit the Alpari forex trading broker to start trading conveniently.
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Inability to Adapt to the Conditions Offered by the Market
After creating a plan for each of the transactions, a trader will be able to calculate all possible options for the development of the market situation and reduce the risk of losing a deposit. But even so, some market actions become an unpleasant surprise for traders. Therefore, even the most unlikely scenarios should be considered. Not a single trader has yet been able to predict market behavior with 100% accuracy. The ability to adapt to market requirements allow traders to succeed and find new ways to earn money.
Weak Risk Management
Some traders fundamentally do not use stop orders in their trading. They are afraid that the deal may be closed ahead of schedule. But the problem here is not the stop loss tool itself, but the trader who placed the stop order too close to the price.
A successful trader can immediately say how much of his capital is in danger and always uses stop loss in his work. Professional traders divide their accounts by parameters of profitability and potential risk. They choose the most suitable size of the trading position and also use various trading strategies, which avoids uncontrolled losses.
In most cases, new traders want to invest their funds in high-risk assets. But experienced traders are pickier and allocate only a small part of their funds to such assets, preferring stability and constant income.