Why do many traders succeed while other fails??

[tykad09]

Do you know? At least 98% of new Forex traders lose all their money within their first 3 months of trading. This means that they have no idea what the heck they are doing! They just jump into the market blindly with only hopes and dreams and rely on the flip of a coin to determine their success. 98% of Forex traders are uneducated and lack the basic knowledge of how the Forex really works. They rely solely on luck without LEARNING ANY OF THE BASICS AT ALL! And reliable sources suggest that up to 10% of these under- informed Forex traders end up losing their entire trading account!

So do we assume that most losing traders are just ignorant? Of course not. Most losing traders are quite intelligent. In fact, most people who inquire about Forex trading have above average IQ's. So why do they FAIL...? They simply lack the discipline required to learn about how the Forex actually works. They are initially overconfident and consider their quick 5 minute market analysis to be 100% correct. More often than not they are 100% WRONG!

[Pipconvert]

Hi,

It is quite impressive indeed to see how many people fail, if those are the exact figures of course.

Now, could you elaborate on what, a newbie with a good IQ but too eager to win vs. a newbie with the same level of intelligence but cautious, should know as a good base to start off with in order to have a fair chance to stand the first few months in the forex trenches?

Thanks

[phil838]

The number one biggest reason new traders fail is because of EMOTIONS!! I see it all the time!

I have one particular system that I've shared on Babypips that has a very low win rate (around 20%), but is still very profitable because the wins are so much bigger than the losses. This system absolutely depends on the trader letting the winning trades run to completion, yet people panic during retraces and close their trades out early because they don't want to have a losing trade.

Even though I have evidence that the system is profitable (in the form of a spreadsheet with 5 years of backtesting and 7 months of live trading results), people still panic and close out trades early because they don't want to lose any money. The problem is that closing the trades early will cause them to lose money in the long run!! They are letting their emotions control their trading, and that will be their downfall.

You need to approach your forex trading like you would a business. Losing trades are a business expense, and winning trades are your income. As long as the income is more than the epenses you'll make money, but you can't panic and cut out all your expenses. Spending $900 to make $1000 is profitable, but if you get scared and refuse to pay the $900 you'll never see the $1000.

If you owned a grocery store would you turn off your freezers and let the food spoil because you "don't want to lose money on the electric bill?" Of course not!! You might save money on your electricity charges, but it will kill your business in the long run. Learning to put emotions aside and be okay with losing is the same thing. You have to do it or you will fail!

[Pipconvert]

Hey Phil,

Thank you SO much for your time in replying to my post here! I really appreciate it tremendously!

You are totally right about the whole emotions and getting to close the trade before it runs out. Do you still face these tedious emotions?

The only question that remains in my mind is the following:

How do you know if the trade has really FULLY ended going your way?

Thanks again for your time and effort!

[phil838]

Originally Posted by Pipconvert

Hey Phil,

Thank you SO much for your time in replying to my post here! I really appreciate it tremendously!

You are totally right about the whole emotions and getting to close the trade before it runs out. Do you still face these tedious emotions?

The only question that remains in my mind is the following:

How do you know if the trade has really FULLY ended going your way?

Thanks again for your time and effort!

I absolutely still face these emotions! Less than an hour ago I had a trade end at breakeven for $0, when just 24 hours ago that trade was up hundreds of dollars!! Things like that effect the best of us, but if you have confidence in your method you should be able to overcome it. And if it's not your own method your trading then just demo trade or backtest it until you are confident!

The way you know your trade has fully ended is also by backtesting and demo trading. You don't have to squeeze every single pip out of your trade, but if your trading results are based on closing your trade out at 100 pips (or any other criteria) and you panic on a retrace and exit before 100 pretty often then you might be losing money in the long run. If your evidence for trading a system is based on 100 pips, then exit at 100 pips or do some more testing based on lower levels.

[Pipconvert]

Hey Phil,

Thanks again for your detailed reply. This helps a LOT, believe me!

I did have a 'maybe' odd question for you. Now, I am not a US citizen but I am thinking, if you are a full -time trader, how do you get taxed? Did you have to fill in tax related papers when you signed up for your account because up here in Canada, we don't need to.

So if one does become a full-time trader, how do you get to either not or at least pay a very LITTLE amount of tax on what you win in forex?

Might be a dumb question but it's a question lol.

[tymen1]

Originally Posted by phil838

..................................
You need to approach your forex trading like you would a business. Losing trades are a business expense, and winning trades are your income.
...................................

If you owned a grocery store would you turn off your freezers and let the food spoil because you "don't want to lose money on the electric bill?" Of course not!!

A very nice way of saying it Phil!!

You don't have to squeeze every single pip out of your trade, ............

This is very true.
Greed for a few extra pips can destroy your trade!!

[cas]

Originally Posted by tymen1

Greed for a few extra pips can destroy your trade!!

True words spoken, tymen.
Greed got to me with a position in Crude Oil, yesterday.
The outcome was...
it did not only destroy my trade..
it destroyed 1% of my capital on top of the profits my trade did have. Because of greed I didn't cash out and within minutes the whole thing turned on me because of NY open.