Why Retail Traders Fail? – ForexLive

Retail
traders enter the financial markets for one thing: money. Who doesn’t like
money, right? Unfortunately, they get sucked into false promises and lots of
scams. Most of them in the end actually lose money and a very little percentage
becomes successful. That’s natural selection right there.

I want to
list the main causes that in my opinion are the reasons why retail traders lose
in the long run and some things you can do to exit that vicious cycle:

· Illusions: the first thing is
they want to become rich quick. They get bombarded with ads of a housewife
making $4K per month trading forex comfortably from her bedroom. That’s
obviously a lie. First, you need money to make money and stories of people
hitting the jackpot with lucky trades are very rare. You can buy a lottery
ticket and you may have the same probabilities. You need to know that the best
traders in the world make on average 30% per YEAR in the long run. How can you
trust a random social media influencer making 200% per MONTH? If you expect to
make such unreasonably high returns and you inevitably can’t achieve them, you
will feel pain and you will lose money trying to overleverage or revenge
trading just to get there. Get your expectations down to realistic numbers and
you’ll start to suffer less. Moreover, you shouldn’t expect to become good
overnight as it takes years of experience as any other skill.

· Technical Analysis: I’d say this is the
main reason, but some may argue that you can make money using only technical
analysis without any regard to what’s happening in the real world. Jim Rogers
once said “I haven’t met a rich technician, excluding, of course, technicians
who sell their technical services and make a lot of money.” Technical analysis
can be a good risk management tool, but I hope no one believes that prices move
because of some lines on a chart with historic data. A chart shows you where
the market is and where it has been NOT where it’s going. Start to use charts
to manage your risk instead, for stop loss placements, entries and exits. If
you think that the market has gone too far too fast pricing some fundamental
development and you notice that the price action is stalling or printing some
kind of a reversal pattern, then take some profit off the table or just close
your trade. You can even cut your losers if you expect the price to break one
side because of some fundamental catalyst but the market actually breaks out to
the other side and the momentum just keeps going. Just get out. You can always
get back in later or you can see if there’s something going on that invalidates
your original reasons and so on.

· Wrong Education: As they say “an
investment in knowledge pays the best interest” and that’s true as long as the
knowledge you get is not wrong. If you want to buy books or courses on trading
education that’s fine BUT do your due diligence before spending your money on
something that may be just a waste of time. Wrong education can set you up for
failure and it’s really dangerous for beginners. Before making such an
investment surf the net for reviews, ask people that already went through the
course or book you want to buy and then make your own conclusions. If you think
it’s worth it ok, if not, then move on.

This article
was written by Giuseppe Dellamotta.

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