The exact stats on how many Forex traders fail will vary by who you talk to. But the fact is that the vast majority of retail traders will blow out their account.
If you are wondering why this happens, there are basically only two reasons. In this video, I'll go over the reasons, so you know exactly what to focus on.
I hope that you use this information to avoid losing your entire account, like most retail traders do.
Hey there, there's a common question that I get on my blog and that is:
Why do 95% of Forex traders lose money?
There are different opinions on this and obviously, there are a lot of small things that contribute to why traders lose money.
But I just want to address the two things that I feel are most important, when it comes to losing money in Forex trading.
Reason #1: Not Matching Your Trading System to Your Personality
The first thing to look at is your personality.
You need to match your trading system to your personality. The biggest mistake that a lot of people make is that they try to go out and find a trading course or system that makes a ton of money.
…and that's great.
The system needs to be proven and whoever trades it needs to be making money. However, if it doesn't match your personality first, then there's a very, very low probability that you are going to make money trading that system.
This results in the trading silodrome. A silodrome is a circus act where people ride a motorcycle or a car around the inside of a silo.
They stick to the walls because they are going so fast, and that is how I kind of see the trading experience, sometimes.
You hop from system to system, on the same cycle, until you lose all of your money, or you give up out of frustration.
…and that's not fun.
So the trading method you use needs to be proven, but it doesn't need to be the most profitable system in the world. In fact, you might actually do better if you trade a system that is not as profitable, just because of your personality.
There has to be a good match. It's like your relationship with your husband or wife. It has to be a good fit, or it won't work.
That's the first reason people lose money.
Reason #2: Mindset
The second primary reason people lose money trading is because of mindset. What do I mean by that?
Your mindset is the result of everything you have been taught in the past. All of your traumatic experiences and all of your positive experiences contribute to your mindset.
This ties into your personality, but mindset goes beyond that. For example:
- How do you feel about money?
- How do you feel about rich people?
- How do you feel about success?
- Are you afraid of success?
- Do you think success will bring bad things to you?
- Do you think that it will be too much work to be successful?
These things are not necessarily conscious. They are usually in the back of your mind and you have to dig into your subconscious to figure out what you are really thinking.
There are some exercises for this and they is not the point of this video. But if you want some exercises on how to figure this out, read through the blog and there are a lot of posts on mindset.
But it's enough to say that the major reason that people lose money is because of mindset and the way that they think about money, the way they think about wealth and the way that they think about success.
So those are the two reasons why most traders lose money. I know that this was a very broad overview, but I think it will help you really think about the smaller things under those two categories, that are tripping you up.
I hope that you realize that these smaller issues “roll up” to these two primary things. Once you can learn to get these two big things under control, learning to trade should become much smoother.
It's obviously not easy and everyone knows that. But it is a skill and just like any other skill…it can be learned.