It is about the reasons why so many people fail in Forex trading.
95% fail and isn't it just too high...
Can we still make it in forex trading..
here is what Russ had to say about it
You have heard the stats, 95% of traders are going to either fail (or quit), but why is this the case?
There are some wildly successful traders, but they are the few. Traders that have failed have been people we would have thought could have been some of the most successful traders.
Doctors
Mathematicians
Scientists
Lawyers
Police officers
Business owners
Physicists
But all these individuals have failed horribly as traders.
Why is that?
In a short sentence, trading is counter intuitive.
It will seem like choosing to become a trader is like choosing to challenge your understanding of the world around you.
The reason successful traders are so few and far between is because as a trader, you will have to change your approach to what seems like straight forward and common sense thinking.
Here are five things we will need to change in order to become successful:
1. Hurry up and wait
As in almost any job you can imagine, when you get to the office, the job site or to your computer, there is work to be done and you can dive right in and start earning your paycheck. With trading, this isn't the case. It's almost never a possibility that when you sit down to trade that you will find an ideal trading opportunity.
As a trader, 99% of our time will be waiting. We will be waiting for a trade setup, we will be waiting for an opportunity to manage our trade, we will be waiting for a way to exit the trade and then we'll do it all over again.
Sitting down to trade but not immediately taking a trade will seem like a huge waste of time to almost every new trader. It will seem like you are not working, but in truth, this part of trading is indeed work, and as most of you have come to realize, sitting on your hands is the hardest work you'll do.
2. Profits aren't guaranteed
Virtually every nine to five, every commissioned project, and every job you do will promise you a paycheck for the effort you put in. You go to work, you do your job and you get paid. Simple.
Trading is not this way. There will be days, and hopefully most days are like this, where your trading day pays off and you earn an income. However, there will be days when you will spend an entire trading session and not find a single trade. This will seem like a huge waste of time, and many traders will wonder what they are doing.
What's even worse is there will be days where you actually lose money. You can expect this to be once a week and in some cases even more. You will have losing trades, losing days, losing weeks and even the odd losing month.
You put your time in, you do the analysis, you place your well thought out trade and you end up giving back a portion of your hard earned winnings to the market. This seems like you are going backwards. At the end of the month, or year, you will be ahead, but along the way your account will get chopped about. Your equity will bounce up and down.
Trading isn't a "show up and get paid" kind of career. There is no guarantee that you will make money every day, let alone ever.
3. What worked today might not work tomorrow
Once you are trained to do a job, there is a fairly rigid structure to how your job is performed. Whether you are an accountant, a construction worker or a cashier, there aren't many surprises from day to day.
As a trader, you will experience changes in market conditions that will potentially make your account suffer. A trend trader will often try to apply their system to a choppy sideways market and lose trade after trade. A counter trend trader will be looking to take a trade against the current market direction, even though it's in an established trend, and often get beat up for your efforts.
The market doesn't play nice all the time and it can change on a dime, often for apparent reason. A trend will turn choppy, and in the conversion phase of the market, eat up a trend traders account. A range-bound market will blast out of its consolidation taking a counter trend traders capital with it.
The method of trading that worked so well today may have you either sitting on the sidelines, or losing money, tomorrow.
4. A variety of ways to do the same thing
I have always said that if traders would be limited to one trading system, with one set of trading rules, that they would become wildly successful. This is how other jobs work, you have a way to do the job and that's how it gets done.
As far as trading really goes, there are thousands of indicators and millions of established trading systems. Once a new trader gets their hands on a variety of indicators, they will try to improve, alter or create an entirely new system. If the system doesn't prove itself right away, the trader will rearrange the settings, add new indicators and compose a new system.
There are thousands of trading systems for sale, and many of them are quite different from one another. There are thousands of free trading system, they are also different form one another. There are several ways to accomplish essentially the same thing, making money. This variety can shake a lot of traders confidence, they think a better system is possibly the next one, so they are in a constant state of uncertainty. They will jump form system to system looking for the proverbial Holy Grail that wins everything, is referred to as system hopping.
Traders have to eventually settle with a system and allow it to make money for them.
5. Cut losses short, let profits run
On the surface, this one makes a lot of sense. If you are going to lose, just lose a little bit. If you are going to win, why not win as much as possible.
In reality though, the wins are small and the losses are huge. It's your common sense that makes this happen the way it does. Let me explain:
First off, we understand that the market goes up and down, and it will do it fairly unpredictably. When we are in a winning trade, the trader will not allow the trade to go as far as their profit target has been placed. They know that at any moment the market can turn around and take back any little earnings that were given to the trader. To prevent this from happening, the trader cuts the winning trade short just so they can put some money in the account.
When it comes to losses, no trader wants to make any loss official. When you are in a losing trade, it's not official until the trade is closed. If you are down 20 pips, as long as you don't close that position, that trade could come back and end up turning into a positive trade and you would actually make money. If you are down 20 pips and close the position, that loss becomes real and your trading account will reflect the loss. A losing trade means that you have to make that back with another trade. It means you have less money to lose on the next trade. It means that you might not have the skills as a trader. It means that you might never realize your dreams... there is a lot hinging on those trades!
What makes rational sense to a new trader is the very thing that will kill an account faster than anything. This is where trading discipline wins the day. A trader that isn't disciplined is a trader that won't be profitable.
The five elements are the reasons why traders fail (or quit). The things that we have learned that works in our day to day life don't work while you are trading. You have to completely turn off your "common sensibilities" and trade. according to the rules that we know will make us successful.
To sum them up:
1. Be very patient.
2. Be ready to lose.
3. Adapt to changing market conditions.
4. Pick a system and stick with it.
5. Discipline is key.
happy trading,
Yours sincerely,
Check Out my other posts here- My Justinnation
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