Why do 98% of traders lose money and finally quit the trading market? Here is the most comprehensive collection of failures, and wealth belongs to you if you understand it. Due to the length of the article, I will make it into a series of three chapters. Please forgive me for any inconvenience.
There are various reasons for the failure of foreign exchange transactions, but they can be summed up in three main reasons: the first is technology, the second is psychology, and the third is external factors. Next, I will introduce them separately.
Technical reasons
1. Insufficient transaction-related knowledge reserves
Many traders who enter the financial market "enter the market on an empty stomach". Just imagine soldiers who have not received military training and let them fight with a well-trained army. What do you think is the probability of success? So I personally think that traders should at least learn the basics before entering the trading market. It includes fundamentals, technical aspects, psychological aspects, etc. We will not fight an unprepared battle, regardless of whether the battle is won or not.
2. Not enough training
Before we actually start real trading, we should conduct at least half a year of simulation training. The first is to feel the market; the second is to obtain a relatively sufficient test sample. Secondly, when conducting firm trading, it is best for traders to use the minimum deposit amount for trading and the position should be the smallest. This period is mainly for learning, not for making money, so it is necessary to clearly position.
3. Trade with "money you can't afford to lose"
Many brokerage websites or brochures specifically state that investment is risky and not suitable for all investors. Because many traders have very little principal and other reasons, many people are basically eliminated during the learning period. The blow made most investors lack the courage and capital to stand up.
4. Poor money management
When we trade, we should comprehensively allocate tradable funds based on factors such as our principal, leverage level, market conditions, and our own technical level, so as to ensure that it is at a reasonable level of risk.
5. Use high leverage trading
Most brokers provide high leverage of up to 400 times, and even up to 2000 times. If a novice or an unskilled trader chooses such a high leverage to trade, it will undoubtedly be fatal. So why do many traders like high leverage? The first is because the principal is too small; the second is because higher returns can be obtained, but high risks are ignored. We know that if you lose $50 in one transaction, if you want to make $50, you need to make $100 in your next transaction.
6. Lack of a complete trading system
There is a widely circulated classic sentence that everyone must be very familiar with: plan your transaction, trade your plan. A complete trading plan must include market fundamental analysis and technical analysis, such as entry and exit rules, fund management plan, and trading time frame, whether it is five minutes or 30 or greater. The second is mental analysis. For example, before trading, ask yourself whether you are prepared for any unfavorable situation in the future?
7. Overtrading
Many traders and friends who have been trading for a long time have this problem. They always shuttle back and forth between the markets all day, for fear of missing every opportunity. As a result, they lost a lot of money after a busy day and made wedding dresses for others. .
8. Trading at the wrong time
Friends who have done trading should know that the US market is the most active time of the day, and its liquidity is very good. Even so, many traders friends will start trading early in the morning or trade in the European market. Most of the Asian market is organized by yesterday's market, oscillating back and forth, the fluctuation is disorderly, and the liquidity is low, so it is easy to lose money. Although the liquidity of the European market is better than that of the Asian market, it often faces a large backtest, so the risk is not easy to control, and there are many times when the European market is about to cross when the market reverses, so the best time should be US market.
9. Consider only individual currencies instead of entire currency pairs
A currency pair is composed of a base currency and a quote currency. When trading, you should not only consider the base currency, but not the quote currency. Only when you consider it comprehensively can you roughly know how far the market can go. For example, EURUSD, if there is European data tonight, when you trade this currency pair, you should also look at the situation in the United States. If the United States is bad and Europe is strong, then today’s trading will be very profitable, and vice versa reason.
10. Strategies that have not been fully internalized and externally inspected
Many trader friends use a strategy and give up the strategy when they find it fails several times, instead of thinking about the reason for the failure of the strategy. So how does a trader test whether his strategy is qualified? That is internal push and external inspection, so backtesting and forward testing are essential (internal push and external inspection, backtesting and forward testing involve professional issues, so the expansion is relatively large, and interested friends can check it out by themselves. Of course, I will give a special explanation later).
11. Choose more currency pairs
Everyone's energy is limited, we should focus on the currency pairs that we like to trade, I personally think it is best not to exceed two, and the two currency pairs should preferably have a large negative correlation coefficient, so as to This is to hedge the risk. Don't listen to the ideas of some all-round trading kings. Is there such a person? There must be, but they are a minority after all.
12. Choosing the wrong time frame
If you do short-term trading, the trading is on the 5-minute time frame. When you read the 30-minute and 1-hour time frame to check today’s trend, the last stop loss refers to 30 minutes. This is fatal, so keep in mind Do not mis-match trading time frames.
13. Countertrend Trading
Follow the trend. When trading, we should follow the trend so that the success rate is high and the reward is high. Don’t always rush to rebound, otherwise the last game will be empty and the great opportunity will be missed. Because grabbing a rebound can easily cause traders to misjudge the trend.
14. Using too many technical indicators
Although technical indicators are generally divided into trend indicators and oscillator indicators, each indicator has different uses, so the signals sent are also different. If you use too many indicators, you will fall into a state of confusion. I don’t know. Which indicator signal to use.
14. Set the stop loss price at will, and lack the estimate of the profit stop position
You can't do anything you want, especially because of our transactions. When setting a stop loss, we should make a comprehensive judgment based on support and resistance, combined with market conditions and other factors. In theory, we should not set a stop profit, and we should follow up with a stop loss, but we should also have a general position in our minds to avoid callbacks and touch losses, and the cooked duck will fly away.
1 5. Lack of ability to correctly assess the market
Many traders and friends tend to listen to the analysis of some technical guidance groups or financial websites when trading. Are these things useful? Of course, it is useful to a certain extent. The important thing is how we extract useful things from it, and then combine the knowledge we have learned and the materials we read to form our own judgments. Unfortunately, many traders do not have this ability, so they lack the ability to gain insight into the entire market, and their trading performance is naturally not good.
To be continued, so stay tuned.
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Last updated: 09/07/2023 10:38
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