The likelihood of failure in the forex industry is staggeringly high, with over 95% of budding traders expected to step away from trading within their initial years. At this rate, one might wonder if they’d fare better surviving the challenges of the Hunger Games than mastering the forex market!
In “One Good Trade,” Mike Bellafiore, a seasoned proprietary trader, highlights several key reasons why traders often fall short. Although his insights originate from stock trading, they are highly relevant to forex as well. What’s fascinating is that many of these missteps can be prevented.
### 1. They Don’t Listen to the Market
Learning the required trading skills might be straightforward, but applying them effectively is another story. Regardless of your skillset, it’s the market that ultimately guides price movements. Traders who ignore the market’s signals frequently find themselves on the losing side.
Consider this: if you’re set on buying EUR/USD even as new fundamental factors emerge and the pair’s value plummets, it’s time to pause and reassess. Ask yourself if there’s additional significant information affecting the current price action instead of stubbornly holding or even increasing your position.
As Bellafiore puts it, “The market has rules. When one disobeys the rules, Mother Market reaches into your pocket and takes what is hers. And she doesn’t give it back.”
### 2. They Don’t Enjoy Trading
I’ve explored this topic in my piece, “Mastery of Forex Trading Begins with Enjoyment.” True expertise thrives on a desire to learn and improve. Without curiosity and a genuine passion, traders may struggle to engage in the deliberate practice necessary for skill development.
For those who find no joy in trading, market analysis and the required dedication to understand trading can feel like an overwhelming task. This lack of enthusiasm often leads many would-be traders to abandon the pursuit altogether.
### 3. They Set Unrealistic Expectations
Becoming a consistently profitable trader demands time and resilience through challenging periods. While there are strategies to accelerate learning, skipping this phase entirely isn’t an option.
Some novice traders mistakenly believe that success means avoiding all losses. This mindset puts immense pressure on them and causes them to take failures too personally.
To steer clear of this mentality, it’s vital to accept that losses will happen. You will encounter losing streaks and experience setbacks that can be demoralizing. But remember—it’s okay. Even the top forex traders go through similar experiences. I’ve emphasized this many times because respecting this process is crucial.
While not everyone is destined for enormous success, the opportunity to work hard, train thoroughly, and reach your full potential as a trader is there for anyone willing to seize it.
### 4. They’d Rather Be Right Than Make Money
No one enjoys being wrong. This aversion often makes it difficult for traders to admit mistakes and move forward. In forex, traders frequently develop a bias towards specific currencies. While not inherently wrong, this can lead to issues when trades don’t go as planned. Traders might stubbornly hold onto a losing position, prioritizing their need to be right rather than opting to cut their losses.
I’m all for commitment in personal and professional realms, but in trading, emotional attachment to a trade is a hindrance. Seasoned traders know when to exit a failing position swiftly.
Consistency in profitability comes from focusing on making sound trades and recognizing that market outcomes are beyond one’s control. Understanding these common pitfalls can help monitor and adjust your trading habits before hitting the wall of failure. By addressing these behavioral and mindset issues early, you pave the way for a more successful trading journey.
