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Warning: Top 5 Mistakes That Ensures Forex Traders to Fail - Forex Function

Warning: Top 5 Mistakes That Ensures Forex Traders to Fail

Last Update: 17 December,2016
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Solution for The Top 5 Mistakes By Which Many Forex Traders Are Subjected To Failure

I am very happy that you are reading this post as I can assure you that if you will understand these 5 key points and work on them, you will surely be successful in your forex trading career.

No matter, if you are a beginner, novice trader or you’ve been trading for a while, but things are not working out in the way you had wanted, it’s okay, you have reached the correct place, from now you will start being successful. Before you start your forex trading, you should very carefully understand all the key points mentioned below as these are the foundation of a forex trading career. No need to fear of anything, every forex trader, has come across these points and has become successful after working on it. In the list below I have mentioned all the mistakes and the solution for the same.

First of all let me clear one thing and be 100% honest with you. Forex trading is not a business that you start trading if you are unemployed, feeling bored, want to overcome your low income thinking that forex trading is a “Get Rich Quick Scheme” or start trading forex with your credit card limit or any borrowed money which you cannot afford to lose.

Forex trading business is a professional business and in order to be successful it requires proper mindset, discipline, education, money management, risk management and proper capitalization. Forex trading is an art, and in order to master it, it requires time, dedication, experience, hard work and lots & lots of practice. Make yourself very clear that there is neither shortcut nor any Holy Grail by which you will earn millions and/or achieve success overnight.

Be honest to yourself, have proper dedication, you will surely be successful.

Solution for The Top 5 Mistakes By Which Many Forex Traders Are Subjected To Failure

Mistake No 1: Psychological Issues

Many forex traders think that they will and they can achieve 100% profitable trades and/or never admit when they are wrong. At the time of losing trade, they say to themselves; this is the bottom, and from now the market will start moving towards my favorable direction, and in hopes they lose more money, which they cannot afford to lose, and many situations like these where the trader is not practically under control of himself and trades with hope.

Solution –

The True Fact, All Forex Traders, which means all forex traders, lose money on trades at some point or the other. Losing a trade or booking a loss in trade does not mean that we are wrong, or we have failed, it is just that the trade did not result in the way we speculated, and we have taken a protective measure to save our capital by booking a small loss before it becomes a disaster, whether it would be by closing a trade or by a stop loss order. The market is open to all and the price moves as per the demand and supply in the market. By losing a trade, we are not wrong, but after being aware that we need to exit at a certain pre-decided price level or a stop loss, but instead of exiting our trade, our trade remains open, then it would mean that we are wrong, and we need some help.

Remember –

More than 90% of the forex traders lose money and end up forex trading due to the lack of education, discipline, planning, trading strategy, risk management and poor money management. If you are not comfortable with this fact or if you believe that you are a perfectionist then you might have a hard time in adjusting with the forex trading market.

Mistake No. 2: Lack of Trading System

Many of the new forex traders start trading forex without any trading strategy. Trading forex market without any trading strategy and money management mean that we have not accepted forex trading as a business, and we are just gambling with a hope that odds will be in our favor.

Solution –

Inorder order to be successful, we should create a trading strategy and follow it honestly. The main intention of building a trading strategy is to find low risk opportunities and profit from them. By creating a trading strategy, we are increasing the winning ratio of our trades by properly estimating the risks and rewards prior of entering the trade.

Remember –

Only building a trading strategy is not enough, we need to follow all the pre-defined rules, which we have set in our trading strategy, and be disciplined.

Mistake No. 3: Lack of Risk and Money Management

Trading forex with a random approach, over trading and risking more money in order to cover the previous loss are the common symptoms of an uneducated forex trader, which only leads to disaster of the capital in the forex trading account.

Solution –

The purpose of creating a proper risk and money management plan is to avoid the risk of ruin and boost our profits in a compounding way. When we are following the risk and money management, we are protecting ourselves from the worst case scenario if, in case, our speculation goes wrong and also to multiply our profits with every successful trade.

Remember –

If we trade without any risk and money management, there is a possibility that we can empty our entire trading account capital within a couple of losing trades in a row.

Mistake No. 4: Unreasonable Expectations

The very first thing, which you should understand, and accept the fact that forex trading in not a get rich quick scheme nor any automated machine or strategy which will make you a millionaire very soon. The second thing is the lack of proper risk reward system i.e. a trader does not know his risks and potential profit before entering a trade.

Solution –

Forex trading is all about calculated risks and rewards. We need to understand the risk reward concept and apply it into our forex trading strategy. Risk reward means that we know our risks and rewards exactly before entering a trade i.e. how much risk I am taking and how much potential profit I will make in this trade, for e.g. if we are following a risk reward ratio of 1:2 (risking $1 for a potential profit of $2) in our forex trading strategy then it means our trades should be at least 50% correct in order to break even, and we will only earn if we have a winning ratio of above 50%.

Mistake No. 5: Excessive Leverage

Forex trading market offers the maximum leverage in the entire speculation industry. We can trade by using leverage as much as 500:1. This means if we have $1,000 then we can trade 5 Standard lots i.e $500,000 and every pip in our favorable direction will profit us with $50. It is correct that we earn $50 for every pip, but it is also true that we lose $50 for every pip, and only 20 pips are required to empty our account. This greed is the main reason for the failure of many forex traders and because of this greed of getting rich quickly many forex traders have lost their life savings in a couple of minutes.

Solution –

The benefit of leverage can be used for good, but first, it requires a proper understanding as how leverage works. Leverage can help us in achieving huge profits but at the same time huge losses. A trader should use high leverage only after he has gained experience and has a proper forex trading strategy, risk management and money management.

Remember –

It is best and advisable that we should trade only with the money which we can afford to lose; further using a leverage of 50:1 is more than sufficient. We should not risk more than 2% of our trading capital in any single trade.

Conclusion –

Yes, we will make some mistakes in future (to err is human) and its okay. The key is to have a proper understanding and using the knowledge which we learn from every trial and error, with proper dedication and practice, we master the skill and become successful. We can practically analyze all these points and create a powerful trading strategy to reap consistent profits.


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