Realistically, there are more reasons than you could count.
Here are the top 5 Most Common Reasons why almost 95% of traders fail in forex trading:
Lack of Discipline (Especially With New Traders)
The lack of discipline and inability to stick with a trading plan is one of the top reasons traders fail. They never find a successful strategy that works for them because they don’t properly back-test a strategy. Developing a successful strategy requires lots of backtesting and journaling, and the having the ability to manage your emotions when trading.
Inability to Handle Losses Mentally & Emotionally
Trading is 20% skill and 80% psychology. How you handle losses will very likely determine if you’ll be successful in trading. Losses are naturally a part of trading, but the fear of loss cripples many traders mentally and emotionally. If you experience a loss, it is best to treat it as a lesson learned. Not even the best trader in the world can predict the markets 100% of the time.
Not Deploying Good Risk Management
Trading is a game of probabilities and nothing is ever guaranteed. You could have the most perfect trade set up in the world, where everything points to it going up (or down), but there is still a chance it may defy all logic of technical analysis and go the other way.
This is why you must deploy good risk management. A good rule of thumb is to only risk up to 2% of your entire trading account, and never risk more than you can afford to lose in the markets. Over-leveraging is the number one reason for blown accounts. Traders who don’t learn good risk management early simply ensures they will lose.
Traders Come with Unrealistic Expectations
Many new aspiring traders come into the markets with overly ambitious goals and very unrealistic expectations. They come in expecting they will turn $1000 to $10,000 overnight. Unfortunately this type of approach will not get you past the first year of trading.
80% of traders QUIT within their First 2 Years of trading.
Yes, the most mind-boggling statistic of all. 80% of new traders make up of the vast majority of failed traders. Trading is a skill that requires a lot of patience and discipline to learn and years to master. One must be determined to stick with the process, and develop a strong understanding of the markets through failure. Yet, traders come in and expect to make millions overnight.
Being a successful forex trader is just like any profession. A rookie player in pro sports does not become a superstar overnight. A lawyer who just passed their LSATs do not become a hotshot lawyer overnight. Experience is key in all these professions, and it’s the same for forex trading.
Greed and poor risk management will kill trading accounts. Lack of trading psychology may damage your morale.
But quitting.. Quitting kills trading careers before they have even started.
Do you remember that guy that quit? Neither does anyone else.
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