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Why Some Traders Fail In the Forex Market

Why Some Traders Fail In the Forex Market

The great majority of entrants into the FX market end up a miserable lot. This should be a good enough reason to make new traders careful but the many success stories are enough vindication of the power of the FX market to make great incomes and create millionaires. What then do the failing traders get wrong and how could a new trader avoid falling into the same pit?

Understand the pitfalls

Most new traders are under the illusion that there is easy money to be made in the FX market. Such traders are generally misled by advertisements put out by brokers who are out to recruit as many new traders as possible. Promises of huge returns for little investment entice such traders but the reality soon sets in when losses are made. The truth is that while profits are made in the FX market, it takes years of patiently learning the trade to turn up a tidy profit. Any trader who turns to FX trading for short time excitement will most probably be frustrated and will be quitting after a short period of loss making.

Failure to invest in education

While most new entrants into the FX market will have invested years of education in other areas, they fail to realize that the same kind of dedication they have shown in their professional fields needs to be applied to the FX market. Education in FX trading should be pursued thoroughly and each trading opportunity presents a wonderful opportunity to learn something new. Given that new technologies and ever-more sophisticated trading software is being developed every day, the need to keep learning cannot be emphasized enough for the trader who hopes to succeed.

Lack of long term goals

One of the greatest risks that new traders face is the inability to draw a long term plan. Such traders reason that all they need to do is enter into trading, make some profit and then move on from there. When a trader cannot visualize where he or she wants to be in a month, two months, a year or five years, he or she is unable to exercise the disciplined kind of money management that is necessary for successful FX trading. A disciplined money manager who has set long term goals will know how much risk to take and when to enter and quit trading. For such a trader, profits might come in trickles but since such profits are earned consistently, he or she will be in trade for the long term.

Failure to control emotions

Most traders fail because they fail to stick to their set strategies by allowing emotions such as greed and fear to rule them. When such emotions are in control, the trader completely abandons any strategic plans he or she could have made and also goes against all the education learned from FX trading. Yet it should be easy to control emotions especially when you remember that all other traders are faced by the same dilemmas and only those who stick to their plans succeed.