Why many forex traders fail.
This topic explores how uninformed expectations often lead to failure in forex trading.
The internet is littered with people explaining how they lost money in forex trading or how forex is a scam. In your circle of friends and family, should you make the mistake of mentioning forex trading, you are likely to get salty looks. For many, forex trading equals failure and heartbreak.
To further emphasize the magnitude of failure in this industry, forex brokers issue disclaimers on their websites indicating failure rates ranging from 75-90%. To put it into perspective, out of 1000 individuals who venture into forex trading, up to 900 inevitably will fail and lose their entire capital outlay. A sad statistic indeed. I must admit, in my 10-year trading career, I have formed part of that painful statistic. Read my story here
Why do we fail? I wonder?
Presently, I seem to gravitate towards the belief that fundamentally, our failure is primarily driven by divergence between understanding and expectations. I posit further when we place a premium on expectations over understanding, we should prepare for rather painful results. From experience, many enter the forex trading space driven by expectations, not understanding.
By definition, understanding is awareness. Expectation is defined as the belief that something will happen. Let me illustrate how the divergence between understanding and expectation causes failure.
Recall your childhood years watching your favorite superhero, say, superman. Watching the indestructible Superman flying around fighting bad guys was quite a motivator. Children are impressionable, therefore, it wasn’t hard to find young boys mimicking Superman’s behavior to the degree we thought we could fly. It was common to find boys leaping off tables and high surfaces believing and expecting they could fly. At this point, gravity, or the understanding of the effects of gravity was a foreign concept. Later on, of course, gravity was introduced to us painfully, sometimes with an accompanying injury and or beating from our mothers. I believe this reminder illustrates the outcomes when understanding and expectations are not aligned.
Back to forex trading. If we are honest, we lose not because we seek understanding and mastery, we lose because we seek to fulfil our expectations. The promise of a lavish lifestyle, and the allure of making X % per month without struggling appeals to many. Ultimately, this leads to disastrous decisions that end in heartbreak.
How do you bridge the gap between understanding and expectations?
Education and continuous learning
I am in my fourth profitable year in forex trading. What is different, my desire to consistently improve my knowledge is constant. I am always learning new things that improve my skills and edge. I am not the same trader I was six months ago. See my performance
Set realistic goals.
Early in my trading career, I would set goals out of desire and ignorance. Consequently, I would trade aggressively and force the markets to meet my expectations. The outcome was always disastrous. Presently, I target a 20% return annually based on experience. This target is achievable and less risky, allowing me to outlast seasons.
In conclusion, mastery is only achieved through understanding. I leave you with a verse from the Bible to reinforce the above statement, Proverbs 4: 5-9
This is soo interesting Mr Gitau ,true its not a walk in the park but a journey of 1000 miles.Thanks for sharing.