• Posh English Trader

Top 5 Reasons New Traders Fail

Updated: Apr 18, 2019

Fx Trading is a lair of traps and pitfalls that would have Indiana Jones thinking twice about going for the shiny object at the end! It is a well bandied about quote that 96% of Forex Traders end up losing money and quitting within the first two years or so.

The question is: why is this the case?

We wanted to bring you a shortlist of the top five reasons why beginner traders fail and help you avoid those traps and pitfalls to become one of those elusive 4%! We've also recommended the best books that we have read, to conquer each problem.

Who knows, you might end up starring in your own Indiana Jones and the Forex Market of Doom spin off movie - just please make sure you leave us out of the credits!

So, without further ado, let's dive in.....

1. Poor Risk And/Or Money Management

Risk management should go hand-in-hand with your Fx Trading, meaning you should never even think about placing a trade without managing your risk!

So, how do you do this?

Two words - stop loss - a stop loss is a way for you to set a point where your broker will automatically take you out of your trade. This means, that when you are thinking clearly and logically when you place your trade (side note: always be thinking clearly and logically when you place your trade!) you can set a sensible point at which you will accept that the trade is not going the way you thought it would, and get out with a minimal loss.

Needless to say, you should never be placing a trade without a stop loss! To do so, is to risk more money than you have in your account, due to the fact that Fx trading is leveraged!

We always make sure our target is set at twice the amount that we have set our stop loss at - so a 2:1 ratio. However, this takes skill, garnered from experience and knowledge, because you need to be able to set realistic and sensible targets in order to work out where you should then set your stop loss (Note: assuming that the pound is going to the moon so you can set your stop loss absolutely anywhere, is not risk management!).

Risk and money management is a large subject in itself and one that you must fully understand to have any hope of being successful in Fx Trading.

The best books we have found for you to read to understand this critical area are:

Forex Trading: The Basics Explained In Simple Terms - Talks extensively about the risk management and the mandatory use of a stop loss, as well as the most effective strategy for implementing them

Buy this book now!

USA: https://amzn.to/2D66R5p

UK: https://amzn.to/2vfCCEB

Read our review first! http://tinyurl.com/y2njoy39

Forex Trading for Beginners: What You Need To Know To Get Started - Anna Coulling cites risk management as one of the fundamental practices to achieve Fx Trading success and covers the subject in detail, supported by excellent strategies!

Buy this book now!

USA: https://amzn.to/2DgQ0x1

UK: https://amzn.to/2v9hcZM

Read our review first! http://tinyurl.com/y5p38w8w

2. Having Unrealistic Expectations, Targets Or Goals

So you've read some tips on the internet, you've got your trading platform set up, a load of money that you've managed to hide from the other half neatly stashed in your account, and you can already picture becoming a millionaire by Christmas!

Stop, Stop Stop! Whilst Fx Trading is certainly a way to improve your financial situation, earn extra money on the side or indeed become very wealthy, there is no easy means by which to get there. Like any pursuit, success in the Forex Market will come from dedication and hard work!

It is, and we cannot reiterate this enough, NOT a get rich quick scheme! Anyone who advises otherwise is almost certainly selling something!

The best advice we can give you is to invest in your education first and foremost. The most effective ways we found to do this are books, joining forums to ask questions and learn from other traders and asking questions on blogs (i.e. like this one!). once you have done this, you can utilise a recommended strategy and begin to try it on a demo account - this will give you an idea of how much upside the strategy can potentially yield, through testing it out. We're sorry to dash your dreams, but diving head first into the markets and turning $100 into $1,000,000 overnight, just isn't realistic!

With that said, success can come in Fx Trading surprisingly quickly with the correct approach!

One of the best books we have read for helping you with this area is:

How To Start A Trading Business With $500 - Will help you to get started in the markets quickly, with a good solid strategy, whilst not needing a huge amount of capital

Buy this book now!

USA: https://amzn.to/2VDWVqS

UK: https://amzn.to/2V7C5Df

Read our review first! http://tinyurl.com/y3n9esco

3. Failing To Accept What The Market is Telling You

As, a trader you will have to accept that the market will do exactly what it wants!

You might have done all the research, have the perfect strategy and have timed the entry perfectly, yet the market still decides to go in completely the opposite direction to the way you thought.

You must learn that there is absolutely nothing wrong with this - it doesn't make you any less of a person!

What is wrong, however, is not accepting the fact that that the market is going in the opposite direction and doing the cardinal sin in trading, which is - moving your stop loss!

You should NEVER, we repeat NEVER, move your stop loss in a losing trade! it may well be that market conditions have changed since you entered the trade, a new piece of news has come out, or a data report was better than expected, causing traders to become more positively or negatively positioned on the currency - this is not as important as your ability, as a trader, to adapt!

You must be a market chameleon - able to adapt to any conditions. This is why your fundamental knowledge is crucial, as, in order to adapt to those conditions, you must first understand how they are created.

The best traders are constantly changing their positioning and strategy based on the ever changing market conditions and always have a plan B for unforeseen circumstances. This will also require you to have more than one strategy, or understand how to adapt your strategy to a different type of market - hence you can really see why becoming proficient in Fx Trading is not an overnight gig!

The books we recommend if you want to improve this area are:

How To Make A Living Trading Foreign Exchange - Covers, in-depth, six Fx Trading Strategies to allow you to adapt to differing market conditions as well as covering risk management techniques.

Buy this book now!

USA: https://amzn.to/2IcvmC4

UK: https://amzn.to/2DjNHcv

Read our review first! http://tinyurl.com/yyp6hvbm

Forex Trading: The Basics Explained In Simple Terms - Delving into the importance of discipline, avoiding revenge trading and news awareness - this book is a tailor made solution!

Buy this book now!

USA: https://amzn.to/2D66R5p

UK: https://amzn.to/2vfCCEB

Read our review first! http://tinyurl.com/y2njoy39

4. Trading Without A Plan

We're just going to go ahead and say it - to be successful in Fx Trading you need a plan (or as we like to to call it, a strategy!) You then need to be able to stick to that strategy and not deviate because your trade is not going the way you thought.

Any business needs a business plan to be successful and Trading is no different. Jumping in head first with no idea of how the markets work, or the basics of trading, is a sure fire way to give all your money back to mother market very quickly!

Successful Forex Traders know that they must begin with a plan that includes: options for different market conditions, risk management rules, and allows them have a good idea of the possible returns from placing a trade.

Don't forget, in order to put together a successful strategy/plan you must first build up your base knowledge of the market. Only then can you hope to put together a plan which will see you through to Trading Success.

The best book for building up a solid base knowledge is:

Currency Trading For Dummies - Simplifies the complex subject of Fx Trading and is your plain English guide, with a hands-on and user friendly approach, that explains exactly and precisely how the market works.

Buy my copy now!

USA: https://amzn.to/2D3O2je

UK: https://amzn.to/2Dm3B5W

Read our review first! http://tinyurl.com/y2u8z7hv

The best books that we have read which cover both fundamental knowledge and provide strategies are:

Forex Trading for Beginners: What You Need To Know To Get Started - covers in detail how the Foreign Exchange Market works and puts forward a simple strategy which is easy to follow.

Buy my copy now!

USA: https://amzn.to/2DgQ0x1

UK: https://amzn.to/2v9hcZM

Read our review first! http://tinyurl.com/y5p38w8w

The Candlestick Trading Bible - More for the four Fx Strategies that have been cleverly integrated with the T.L.S system than the knowledge it will provide. Nevertheless, reading will give you one of the best plans around!

Buy my copy now! http://tinyurl.com/y4j8zblx

Read our review first! http://tinyurl.com/y3o87est

5. Not Maintaining Discipline

Or, to put it another way, trading based on emotions. You must ensure that you are not giving in to emotional trading. For, if you do, your trading has become more of a gambling addiction than a business and, as we all know, the house always wins!

The two biggest emotions experienced when trading are fear and greed - both are as damaging to your trading capital as each other, but are just experienced at different times.

Fear - This can be; the fear of losing what you have gained - thus you get out of a winning position too early when you should have let it run and gained more pips; the fear of missing out - so you get into a bad position that looks like it is going to jump in a particular direction and earn your millions there and then! Only to discover, that it was false and the market turns straight against you.

Greed - This can manifest itself as; staying in a winning position when a strategy would have already taken you out - thus sometimes running a winning position into a losing position; getting in and out of lots of trades often and snatching at profits, only to discover you have fallen fowl of trading costs and bigger losses than wins - both sure fire ways to exhaust your capital.

Another factor you have to learn to accept, as an Fx Trader, is that you will lose! Yes, I said it, you will lose! The trick with trading is not to try and never lose - it's to make sure that, when you win, you win big - when you lose, you lose small - in reality, trading is a game of averages. One of the things that new traders struggle with is the emotional anxiety that comes with losing - as humans we just don't like it!

That's why, the more small losses you can rack up as a newbie trader in the first few months of trading the better, as you will get used to that emotion!

The main and best way to overcome emotions though, is to use a strategy! Then, and this is the most important part, don't allow your emotions to cause you to deviate from that strategy!

Trust us, your emotions are like the Sirens that plagued the Greek mythological heroes - so do yourself a favour - tie yourself to the mast of your strategy and do not allow yourself to be taken off course! (well, we had to get one last little analogy in there!)

Trading Psychology is a huge subject within Trading and there are many great books that will help you to overcome this fundamental problem.

We recommend:

How To Make a Living Trading Foreign Exchange - covers, in great detail, Trading Psychology as well as providing six strategies that can be used to overcome it

Buy this book now!

USA: https://amzn.to/2IcvmC4

UK: https://amzn.to/2DjNHcv

Read our review first! http://tinyurl.com/yyp6hvbm

Forex Trading: The Basics Explained In Simple Terms - contains a chapter dedicated to Trading Psychology, as well as providing easy to follow strategies, supported with templates and helpful online resources.

Buy this book now!

USA: https://amzn.to/2D66R5p

UK: https://amzn.to/2vfCCEB

Read our review first! http://tinyurl.com/y2njoy39

Phew! Well that's all we have time for in this blog post. If you have any questions or comments please feel free to use the comments section - we would love to hear from you!

You can also simply "like" the post to let us know what you thought!

Until next time........

33 views0 comments