The Hustler's Digest StaffDo you think forex trading is a great way to get rich quick, or make money while sipping mojitos by the pool in Cancun? Think again. It may appear this way when you’re constantly bombarded with these types of ads on Facebook, YouTube, and Instagram, however the lifestyle that is portrayed about trading is simply not realistic. Little do most people know that only 10% of forex traders actually make money – yes, just 10%…
So if so few succeed, why do so many people lose? Well, today we ask none other than expert Forex coach and trader Austin Silver, founder of ASFX, as he shares the 4 reasons why traders lose.
- Over Trading
The most common losing mistake new traders make is overtrading. You’re never going to be impermeable to overtrading – it will always try to creep up on you. I can tell that on a daily basis that’s what happens to me. You have to be disciplined, in control, and put your business plan at the focus. As humans who want to make money from the markets, our DNA is programmed to think, “trading = making money”. However, in reality the traders who make the most money are often the traders who trade the least, with the best setups and the biggest size. Do it less, do it better, do it bigger – a lack of sticking to this simple saying is the theme of all 4 of these issues which cause traders to lose.
- Tight Stop Losses
Over my trading career, I’ve had many situations where I’ve waited for my trigger signal – my A1 or D1 entry – I take the trade and manage it properly, I move my stop loss into profit, only to get pinned out and then watch the trade move in the direction I anticipated for 4-5 days. It happened a couple of weeks ago on GBP/AUD, and it really is a common theme amongst traders, moving your stop loss too early and getting tagged out. So what can you do to course correct and stop this? Well for me, it’s having a consistent management system. Sometimes you’re going to get tagged out early, but with a consistent system you can adjust the management plan to keep you in the majority of the trades for the move you’re looking for. You have to accept you’ll never be able to catch ALL of every single trade you take. Don’t be scared of your trading decisions – if you read the trend, do your analysis and have your system in place, then trust your stop loss. Don’t move it too quickly. I’ve seen a lot of guys doing this and getting tagged out and the trade move continues without them.
- Over Leveraging
This is one thing killing new traders because it is so easy to get sucked into. You see all these ads from these sketchy brokers offering crazy leverage…it’s just not realistic. There’s no real, successful, consistent top traders or firms using that and having true success. It’s just not realistic, so what makes people think that it makes sense to use that in the forex market? I truthfully think you don’t need leverage at all, it’s going to kill you more times than not. I use less than 1:30 leverage, I don’t even give myself the option to be tempted by the higher leverage options. Ultimately what over leveraging leads to is the 4th point.
- Big Losses
If you take a couple of losses on trades of around 5%, you’re going to be near wiped out completely. Especially since you will be down nearly 15-20% after these trades, meaning you are going to need some enormous wins just to get you back to even – which is incredibly tough to come back from. Traders who lose 40% or more of their account will likely not make it back. If you’re over leveraging or over-trading, you’re going to end up potentially taking bigger losses that you didn’t need to take, and they are going to potentially wipe you out and set you back way further than you needed to be.
Before you sit down and start trading, ask yourself: are these trades selective enough for me? Am i going through my checklist? Finding the highest probability trading setup is vital if you want any kind of forex success. By bringing awareness to these mistakes, hopefully you can avoid them in your trading.
If you don’t know the answers to these questions, then you need help – and there are very few as qualified as Austin Silver and the team at ASFX. If you are looking for tips and advice, or simply need somewhere to start, check out Austin on Instagram @austinsilverfx or visit the ASFX website here. For high value video content, check out Austin’s YouTube Channel.
