Why
Do Many Forex Traders Always Lose Their Money? Part 2
13. Not learning to trade the
daily charts first
Be a huge proponent of focusing
one’s market analysis efforts on the daily charts. I believe lower time frames
have a lot of random price “noise” and give a much more difficult to interpret
picture of the overall market structure than the daily charts do. I see no
problem in trading the 4hr or 1hr charts, but I recommend all traders learn to
master the daily charts first.
14. Thinking the Market is
"Wrong"
The market, however, is never
right or wrong – it simply is. If a trader is losing money trading a particular
currency or stock, then that trader is wrong, not the market.
15. Expecting to get rich quick
This point sort of encompasses
the others in that if you are over-trading, risking too much, or doing any of
the other things discussed here, you are simply being greedy and trying to make
as much money as fast as you can. Well, the fact of trading is that the
“harder” you try to make money and the more you feel a need to make money in
the markets, the worse you are probably going to do. FOREX Trading successfully
requires a clear and relaxed mindset, one that does not care whether you win,
lose or draw, because you know that over a given period of time you will make
money if you trade in a discipline and controlled manner.
16. Incorrectly managing trades
Most traders mess up AFTER they enter their
trades by meddling with their targets and stops or adding to positions
unnecessarily. One of my core trading philosophies is to just “set and forget”
your trades, because you are always going to be the most objective and
clear-minded BEFORE you enter a trade rather than when the trade is live.
17. Gambling instead of trading
By gambling I mean trading without a proven high-probability
trading edge. Many traders complain of losing money and yet they don’t even
really have a definable trading strategy. Simply put, if you don’t know EXACTLY
what you are looking for in the market you are never going to make money
consistently, or at all.
18.
Random Decisions/No Consistency
The market is either going to
move up and down, so if you take an educated guess you should be able to make
money. Well for those who have tried this will have no doubt discovered that
lack of consistency in trading is not lucrative. Sure the market can only move
in one direction, but for how long before it reverses. You get plenty of days
where the market will move up, down, back up then down again. How many times
would your stop have been triggered chasing price around like this? It would be
super frustrating. Most people find Forex trading very attractive because it
give a person complete control, breaking free of all the rules from their day
to day life. Unfortunately the Forex market requires rules, structure and
consistency at an even more intense level than your daily life does. So if
you’re looking to operate “rule free”, then trading is probably not for you.
19.
Trading Under Emotion
We already spoke about trading being the
ultimate psychological challenge of life. A lot of the market participants are
human aside from all the trading algorithms, so the market is one giant
psychological machine. If you display emotional weakness, the market will
exploit your emotions and use them against you, taking your hard earned money.
A lot of traders take on Forex trading because they want to use it to fix some
underlying financial problem in their life, or just want to generate fast
money. Trading for the wrong reasons will make you vulnerable to emotional
fueled mistakes because you’ve got “too much at stake”.
20.
No Experience
Like any other profession, Forex is
something that takes time. You can’t expect to walk into a job, inexperienced,
and expect to be promoted to the manager the next day. Forex trading requires a
learning phase essential to conditioning yourself, and to build a compatible
mind-set for the markets. Trading is probably unlike anything you’ve ever
experienced. Your day to day life does not prepare you for it. The logic
learned from the outside world can’t be applied successfully to the markets,
the two just don’t mix. Before throwing in large amounts of your savings into
the markets, make sure you’ve had a good dose of experience first.
21.
Trying to Understand too Many Things/Over Complication
If you make your trading complicated then
you will end up becoming a vegetable. There is a huge amount of trading systems
out there, and most of them are just too intense. Too many of these systems
bring in all these extra external variables onto the charts. Things like
indicators, expert advisors, economic figures or other “magic” trading tools.
All the extra data on your chart makes the system confusing, overwhelming and
frustrating. Multiple variables often conflicting with one another, so the more
you bring in, the harder chart analysis becomes.
22. Not accepting that losing is part of winning
Many traders seem to have an innate ability to not want to
accept that losing is part of the game of trading. They tend to place blame on
the market, on their broker, on not having enough money in their accounts, or
any number of other reasons. The simple fact of the matter is that you are
going to lose trades no matter what you do. So, you better learn to accept this
early on, embrace it, and figure out a way to incorporate losing into your
trading plan. You can lose “successfully” by learning to take small losses
relative to your rewards, never move your stop further from your entry, and
always trade with a stop loss. There is usually no need to meddle with your
trades. If you have pre-defined your risk then you should be OK with losing
that amount of money, let the trade play out to either hit your pre-defined
stop loss or move into profit. You need to do your work before you enter the
market, not after.
Conclusions
Sadly, this list covers only a
fraction of the multitude of mistakes made by forex traders. We hope this list
is useful to you, and we look forward to working with you for a long time to
come.
