The Reasons Why Most Financial Forex Traders Fail

Why


don’t more online fx traders succeed?

If you look for


information about successful fx


traders online, they typically say that upwards of Ninety percent of fx traders fail.


Though this might not be correct, the truth is that many of fx traders fail to


make a consistent profits from forex trading. Following


are the most significant reasons why they fail.

Expecting quick money

Many brokers across a


variety of markets publicise how


straightforward it is to start


trading, which causes new fx traders to think that trading


is asimple way to quickly make a considerable


amount of money. Yes, it is easy to trade with online trading platforms accessible from your smart phone handset, it's simple to open up and shut trades with a single click.

It is also not


difficult to make money everyone can


profit from a little luck and make a


successful fx trade without understanding how the


market functions. However, it is much more difficult make money regularly, and


it can be just as easy to lose money as it is to turn a


profit if you aren't equipped.

Not having a forex trading plan

Your trading plan


should cover both your goals, and what you'll do when


unexpected events occur.

What would you like to get out of trading? If it is something you


want to try once just to have a go, then go


ahead. But if you want to make


consistent profits in your trading then you have got to


have a plan that covers what you want to achieve,


whether or not that is an additional


$1,000 spending money in the bank a month, or a


nest egg for your children's


education. Knowing what you want to


earn from your trading also helps you plan what to put


aside , as well as what to reinvest.

Also, what will you


do when things go wrong? The market may turn against


you, or a power blackout could


prevent you from closing a fx trade. If you know how to


react to these things in advance then you will be less likely to


desperately bet away your capital attempting to quickly win your money back.

Not having a trading


method

If you don't


use a trading program then you will not know what works and what does not because you will be constantly changing your methods.


Being consistent is the best way to find out whether a trading


program works and, if it does, being consistent will


end in consistent profits.

Your trading


program should address your indicators for


entering, adding to and closing positions, the


percentage of your capital you are able


to risk, how to set orders for


when the market opens, and the tools you may use to


educate yourself about the market ( like charts, market


updates, business news, and so on ).

Once you have a system in effect keep notes of your


trades to monitor your success and change your


method.

Not handling trading risk

Most forex


traders just focus on possible profits, ignoring


possible risks . Even the best trading systems aren't right


100 pc of the time, meaning


that even the best forex traders will make losses.

So how much should


you risk? A common guideline is never risking


more than 2 percent of your capital per fx


trade. If you only risk 2 percent per trade, 5 straight


losses only equate to 10% of your capital gone,


and it is far easier to make back 10% of


your capital than it is to make back 50% or even


90%.

Other


favored forms of risk handling, made


easy with the advent of


online trading software, are stop and limit orders. Stop losses


order your fx trade to close if the market moves against you


to a certain amount. So if you have invested in


share CFDs and you place a stop loss at $0.50 below the share price when you


opened the trade, even if the shares lost $1 or $2 in


value your fx trade would be


automatically closed when the shares lost


$0.50, reducing your possible losses.

Trailing stops are


another kind of stop order, but they follow the market if it moves


in your favor. So if you set a $0.50 trailing stop on your


share CFDs, your opening stop would be $0.50 below the


value of the shares. If the shares went up by $1, your trailing stop


would also rise by that amount, staying $0.50 below the current share


price, so sealing in your profits in case the


price falls suddenly.

Limit orders work


like stop losses instead of reducing your


losses, they work to guard your profits. A stop loss closes an fx


trade when the market moves against you to a certain


extent. A limit closes a trade when the market moves in your


favor to a degree. So if you


invested in share CFDs that were worth $1.50, you could


place a limit order at $3. This would cause your trade to close


immediately when the shares rose to $3, meaning


that you would have taken your profits before a possible price


drop.

Not being disciplined

Of the reasons why forex traders fail, discipline is the most


important. Discipline is needed to make


regular trading profits. It takes discipline to


form a method, discipline to follow that


method, discipline to keep recent


with market movements, discipline to trade frequently, and


discipline to conserve your profits and to recover


from your losses.

Discipline is also


needed in circumstances where you shouldn't act


, such as pushing out your stop-losses when the market


turns against you, and then putting more money into a


poor fx trade in hopes that things


will turn around.

Unfortunately, the


human mind appears naturally inclined to break trading rules -


don't! If you have realistic expectations, put a trading plan and


method in effect manage your risk,


protect your profits and remain disciplined, you are on the


right path to being a successful trader.     



Remember that CFDs and forex are leveraged products and can result in losses that exceed your first deposit. CFD trading may not be appropriate for everybody, so please make sure you understand the risks concerned.