IS FOREX A LOSING GAME? THE TRUTH BEHIND FOREX TRADING
Forex trading is not a losing game. I know this is contrary to what you would expect or have probably believed because of your experience or someone else’s, but Forex is not a losing game.
This negative perspective on Forex trading has been promoted by the bad experiences of inexperienced traders and fertilised by different analytical studies of the same inexperienced traders to calculate the rate of failures.
It is no surprise thus that there are numerous statistics of high rates of trader failures compared to successes on Forex.
However, the truth remains that Forex trading is very profitable of course only when done with adequate education and self-control.
WHY DO PEOPLE THINK FOREX IS A LOSING GAME?
The reason why most people think Forex trading is a losing game is either that everything they trade they lose or they have heard numerous stories from people who have lost while trading. Below are reasons why most people lose:
1) INDISCIPLINE: The number one reason why most people lose when Forex trading is major is because they aren’t disciplined when it comes to trading.
They allow their emotions to rule them when trading, when they lose a trade which is inevitable, they tend to fight it, making riskier and riskier trade as they persist.
Soon they fall victim to greed, fear of missing out and overtrading.
To be a profitable trader, you must learn how to govern your emotions.
2) LACKING OR NOT STICKING TO A TRADING PLAN: Most amateur traders who account for 99.9% of the losers do not have a trading plan. Some that do don’t keep to it.
A great trading plan should consist of the criteria for entry and exit, the risk involved in the trade and the potential return on investment.
Most traders don’t have this and then they complain their trades always end in losses. Some others who do fail to adhere to it because they can’t control their emotions. Emotions such as fear of missing out, greed etc.
3) UNREALISTIC EXPECTATIONS: Another factor that kills a lot of traders is the huge unrealistic expectations that they bring to Forex trading.
They come expecting to amass billions in days or weeks at most. And this is a very bad expectation to bring to Forex trading. Remember greed?
Forex trading is not a get-rich-quick scheme, and to amass wealth through Forex trading, one must accumulate a lot of consistently profitable trades, keeping both the unprofitable ones and their losses to the minimum.
It is a marathon, a sprint, and you must be ready to give it time, as it can take years sometimes.
4) NO RISK MANAGEMENT: This is one of the silliest reasons why people lose when trading. Yes, it is understood that some people have a higher risk tolerance than others, but that is why the stop loss and take profit markers are adjustable.
They are there to prevent unpleasant surprises and aren’t there just for fun.
However, for some reasons or the other, some traders ignore or outrightly refuse to use them. It is no surprise that these traders make the a high percentage of losing traders.
No matter how very good your trading strategy is, you must manage your risk and protect your capital.
5) LEVERAGE: While leverage on its own isn’t a bad thing, it is one of the reasons why most Forex traders lose their trades.
Leverage is money borrowed from the platform to the trader to place trade, giving the trader the ability to place trades way higher than the amount he/she has in his/her account.
If the trade it is used for is successful and profitable, it can bring in amazing ROI, however, if the reverse is the case, it burns a deep hole into the account.
Just like risk, it should be used moderately, but most traders throw caution to the wind. This leverage makes them reckless especially those traders with little cash in their account. Simply because they want to make huge profits.
IMPROVE YOUR ODDS OF SUCCESS IN FOREX TRADING
With the factors listed above, you can answer this question for yourself. If you haven’t, then the answer is no.
Forex trading is not a guaranteed loss. You can become very profitable with Forex trading but only if you take some precautions.
- INCREASE YOUR LEVEL OF KNOWLEDGE: There is a wealth of knowledge out there on Forex trading, for free or paid. All you have to do is tap into it. Learn, unlearn and relearn.
A profitable trader is an educated one. You either learn from your own mistakes or others.
2) CREATE YOUR TRADING PLAN: The next role of action is to create a trading plan. This plan based on a few trading strategies would contain, criteria for entry and exit of trade, potential ROI and potential loss.
3) STUDY TECHNICAL ANALYSIS: To fully comprehend the market and confidently take trades, you must learn how to read the market.
Build your expertise and skill by training and refining your technical analysis and also keeping a book of all the trades taken the decisions why, and the results of those decisions.
4) RISK MANAGEMENT: Every successful and profitable trader knows how to manage their risk and emotions. This can make or break a trader, and there are invaluable habits to acquire.
Learn how to only risk the amount you can afford to lose, use stop loss and take profits for each trade, and don’t overtrade or allow your emotions to get the better of you after a negative trade.
Only when you have taken such precautions, have you boosted your chances for a profitable trade.
