Top 15 Reason Why Forex Trader Fail
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Traders fail by risking too much per trade
Traders fail by not adapting to market conditions
Traders fail by using a negative Risk:Reward ratio
Many people from all walks of life give Forex a shot, but most people that attempt it lose money. Have you ever wondered why that is? At DailyFX, it is our job to assist people in reaching their goals and make them the best traders they can be. So in today's article, we are going to look at some of the top reasons why most Forex traders fail, and how we can improve our chances of profitability. Not Adapting to Market Conditions
Often overlooked, market conditions play a huge role as to whether or not our strategies will be successful. Many traders might find a strategy that makes money some of the time but then loses money the rest of the time. A lot of times these changes in our "luck" has to do with how the market conditions has changed.
It's important for us to Change Strategies When Market Conditions Change. So during times of low volatility when a currency pair is moving sideways, it would make sense to trade a range strategy. If we tried to apply a trend based strategy during that same low-volatility period of time, it'd probably produce poor results. But if we used that same trend strategy when volatility was higher and a currency pair was consistently moving upward or downward, our results would likely be much better. Trading Too BigOne of the major selling points of the Forex market is the large amount of leverage that is available. In the United States, traders can trade up to 50:1 leverage. In the UK, traders can trade up to 200:1 leverage. And in some parts of the world, traders can use as high as 400:1 leverage! Talk about risky... But many traders cannot help themselves and want to trade big. The problem is using high amounts of leverage reduces the chance that we will be profitable in the long run. Risking More Than We Can Earn Per Trade
The 3rd reason why many Forex traders fail is that they use a negative Risk:Reward ratio. Meaning, they (on average) risk more money per trade than they attempt to earn. This point is actually one of my potential tweaks that can Improve Your Trading Strategy in Two Minutes or Less.
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