Learn Why Most of the Traders Fail

OANDA:EURUSD   Euro / U.S. Dollar

The evidence suggests that only a very small proportion of day traders makes money year over year.

There are certain patterns which may separate profitable traders from those who ultimately lose money. And indeed, there is one particular mistake that in our experience gets repeated time and time again. What is the single most important mistake that led to traders losing money?

Here is a hint – it has to do with how we as humans relate to winning and losing.

Our own human psychology makes it difficult to navigate financial markets, which are filled with uncertainty and risk, and as a result the most common mistakes traders make have to do with poor risk management strategies.

Traders are often correct on the direction of a market, but where the problem lies is in how much profit is made when they are right versus how much they lose when wrong.

Bottom line, traders tend to make less on winning trades than they lose on losing trades.

Humans aren’t machines, and working against our natural biases requires effort. Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading.

That will help you to be a consistently profitable trader.


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