Most of traders eventually failed in long term and they blame market be it commodity traders, forex or stock market traders. Usually newbies traders are not dumb peoples, they are doctors , engineers and big shots but most of them end up loosing their capital or most of their trading capital. So what is reason they fail despite above average IQ and deep pockets? Lets list the main reasons.
1- Emotions
Biggest reason of failure in forex or stock markets are emotions, Many times new traders feel so exhausted when they start loosing or they get an adrenaline push when they win. This is a deadly sign that you need to work on your psychology. If you end up in a bad trade then better forget about it and move on and if you got a good trade then again same strategy. Forget it and move on should be first rule of trading.
2- Stoploss
Second biggest reason of trader’s failure is stoploss, they always think market would come to their prices at least once so they could exit despite hitting stops. They forgets even if 80% time market may come to your price but those 20% would cost you more than 80%. That is why I recommend always put a strict stoploss in your position.
3- Discipline
Forex/Stock/Commodities trading requires a military grade discipline. You need to stick with your plan no matter what and always do whatever your proven strategy is, dont try to experiment between an open trade. If you wish to experiment then better do paper trade.
4- Profit/Loss ratio
Many new traders do not focus in this aspect of trading that your stoploss should not be greater than your target. It would be wise to make targets bigger than stoploss. If not bigger than at least make it equal so even if you have 51% winning traders you wont end up loosing your capital.
5- Greed
Forex/Commodity/Stock trading markets are not casinos where you would want to multiply your capital overnight. You have to treat it like a business where you may grow with moderate % monthly. Average trading a/c should be paying 10-12% per month, if you expect more than that then you are in wrong business.
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