The foreign currency exchange is the world’s largest financial market. The high liquidity of the market makes it easier to trade, but this does not guarantee that you will make money. There are a lot of traders who are just breaking even. There are also a lot of traders who fail to make a profit. To avoid being one of the traders who fail you need to know why some traders fail.
Trading Without a Plan
One of the best assets that you can have when you are trading is a plan. A trading plan covers the strategy that you are going to use, the risk management plan you have and the money management plan as well. Of course, to be a successful trader you also need to constantly revise your plan. You need to take time each week or month to look over the plan and see if it is still working correctly. If it is not then you should revise the weak parts so you can continue to trade successfully.
No Foreign Currency Exchange Discipline
When you trade forex you have to be disciplined not only in following your trading strategy, but also in controlling you emotions and when you trade. The biggest mistake that any forex trader can make is thinking it is okay to veer from their plan. Trading plans are put in place to stop you from making emotional trades and completing trades that are not based on facts. If you are not disciplined you will complete trades that have no factual base and allow your emotions to get the best of you.
Trading With Trial and Error
In most things we learn through trial and error. However, when trading forex trial and error is not the best way to learn the market, but it is the most expensive. When you use trial and error you will lose money and many new traders find they lose their entire account balance. It is best that you take the time to learn the market through forex training courses and use a demo account before trading live. If you do not want to go through a training course you should use a demo account to learn the market. Demo accounts work in the same was as live trading accounts making them the best way for new traders to get used to the market.
Being Unable to Adapt
One of the characteristics of the forex market is that it is constantly changing. To be successful you have to be able to adapt to these changes. There is no trading system that you can use at all times which will make you money. There are times when the market will trend and times when it will range. How well you adapt to these changes measures how well you will do when trading. Most traders who are able to adapt do so through constantly learning about the market and having different strategies for different times.
Have Unrealistic Expectations
The mistake that causes most forex traders to fail is having unrealistic expectations. Most new traders expect to be able to make millions off the market with limit capital investment and time. This is not the case as forex is not a get rich quick option. When you set trading goals you have to be realistic in what you are doing and consider how much you can actually make from your capital contributions.