Why do the majority of Forex Traders experience failure?
Many Forex traders experience failure in trading, this is influenced by many factors. Forex trading is like any other trading that has a lot to do with psychology. Do you know the emotional trap that is most commonly experienced by forex traders? Unfortunately not many forex traders can overcome this problem because indeed everyone has a different mindset and strategy. For those who successfully overcome it does not mean they will become successful traders because there are many things you need to become a successful forex trader. But at least, being able to overcome the problems that make your trading fail means you are already one step ahead of other forex traders. The following is a full review of the reasons why the majority of forex traders fail.
After experiencing difficulties in developing and implementing a trading plan.Why has a forex trader ever violated his own rules? Of course every trader has their answers. But unfortunately a lot of novice traders prefer to violate the rules they made at the wrong time. But whatever the cause, losing discipline with its own rules often makes trading fail. The fact is there are some emotions that are closely related to forex trading, namely fear, greed and hope.
In general, fear arises because of the threat and developed as a natural defense mechanism in most animals. Meanwhile for humans to lose money is one of the obvious causes for the emergence of fear, namely fear of poverty. This fear of poverty is a deep fear for society because it has been embedded in his mind for a long time.
FEAR RESPONSE OF A FOREX TRADER
Some types of sensation often appear in the trading process either consciously or not. And the following is the accompanying emotional response:
- Fear of failure
- Afraid of losing profit potential
- Afraid of losing everything
Every trader has a fear, but the difference lies in how to manage it. If managed properly, fear will not destroy you and vice versa. Many professional traders admit that fearful behavior gives them an indication of the right time to exit trading.This applies to situations where traders take profits or reduce short-term losses.
Having a great trading system and all the analytical and technical tools for success in trading will not be enough to be successful because traders must have the right mindset. This can only be achieved by learning to control emotional responses when trading. Emotional responses can affect a forex trader including being an obstacle when making decisions or actions.
A trader can experience losses, lose profits and lose opportunities just because of fear.
When faced with fear, you must remember that fear is related to future events.The best way to overcome this is to use fear to replace expectations that can harm a trader. This substitution of thinking technique is also appropriate to illustrate the dilemma of a forex trader who experiences a loss.
Basically if you can be disciplined and able to trade soundly and have a good financial management system, then fear and other emotions can be easily controlled. As long as you keep running according to the trading plan that has been made then fear will usually remain stuck in the minimum ratio in your forex trading. Understand also about the personality of a forex trader so that you can increase the winning ratio.
There are 3 emotions that are closely attached to forex trading, namely fear, greed and hope
Just like fear, greed is also common in the forex market. Basically greedy is an excessive desire for what you really need. In many cases, greed can be realized in trading problems such as excessive trading and damaging trading to become losers.
Greed can also cause a trader to be in a losing position when an objective trading strategy should require him to go out. Obviously this makes a bigger loss and ends with a drastically reduced capital. Most traders don’t realize how much greed they are until trading starts. Having a clear profit taking component of a trading plan can help you to overcome this emotional problem.
Hope can be one of the market’s emotions that is most damaging to the success of forex traders. This is because the hope can spoil traders when they experience losses and continue to hope that the market will improve again.
You must remember that the market has proven that traders are wrong, but hope makes them stick to the strategy that makes them lose. This can end in disaster because in reality a trader who is full of hope is far more reasonable in fear of losing more money. But apart from that, hope can be useful constructively when they win trading and hope to make more money.
Allowing fear, greed and hope to dictate your trading activities is the main reason forex traders fail. But there is more that can make you fail in trading that is excitement and lack of discipline.
Excitement can come to anyone, including forex traders. When their trading wins, an adrenaline explosion can appear. At this point traders need to remember that long-term success in their trading is determined entirely by how disciplined they are in following the trading plan that has been made.
Lack of discipline can lead to emotional trading and is another reason a forex trader has failed. Losing discipline during trading can occur every day and there are many reasons traders use to justify their mistakes. But unfortunately forex traders who lose discipline often end up losing money.
Basically having and implementing a trading plan can minimize emotional reactions while trading. Besides that with the right trading plan, traders can also avoid defeat. But as a forex trader, you also have to enter every trading scenario that might occur for anticipation.
In addition to some of the emotions mentioned above, there are still several other factors that cause forex traders to fail, namely:
- Do not enter stop-loss orders after entering a position or trading without a stop-loss order
- Lack of capital when entering the forex market which provides a loss guarantee
- Unrealistic targets and goals
- Reluctance to take high risks can make the chance of winning limited
- Forex broker choices are not right
- Lack of knowledge in the forex market
The main solution to overcome various factors that can make you fail in the forex market is with education, confidence and a good trading plan. Come on, self evaluation and also your trading plan …