Investing successfully in any market does not happen by chance. There are statistics that cite that 95% of retail forex investors lose money in the market due to the very thing that can make it so profitable – high volatility.
You may be wondering, “with so much working against me, is forex a losing game?”. You may be relieved to know that it doesn’t have to be. Many investors realize profits in the foreign exchange market every day by avoiding these preventable mistakes.
The FX Market Is Not The Lottery
The currency market is not designed to be a get-rich-quick scheme. Despite what you may have heard, the foreign exchange market was never meant to be a lightning-fast profit generator. While it is true that there is a lot of money to be made in the FX market, that doesn’t mean it has to be made in an exceedingly short span of time.
You are almost certain to fail in the FX market if you do not develop and stick with a plan. Forex trading rewards the prepared, and you must formulate a plan for realizing gains as well as taking losses. If you can not answer the question, “what is your plan to grow your money” then you are not ready to invest in the currency market.
Successful Traders Manage Risk
Ignoring risk is a sure-fire way to join the majority of investors who lose money in the forex market. You must learn to handle risk in order to be successful in the foreign exchange market. If you have not formulated a risk-management plan you are exposing yourself to trading on fear and emotion, instead of fundamentals and logic.
Fear and emotion want you to buy at the top and sell at the bottom, while fundamentals and logic want you to buy at the bottom and sell at the top. Risk-control keeps you in the market during volatile periods, and positions you to realize profits during times when the forex market and your trading plan do not match up.
Practice Trading Discipline
Discipline is critical to your success as a forex investor. This may seem like a simple concept at first, but in real-world trading scenarios it can be easy to question even the best of trading plans. If you are experiencing an extended period of losses, you are vulnerable to acting on fear and not reason.
When you act on fear, you may miss out on a winning trade because you are afraid of a possible loss. You would be better served to put fear and emotion aside and do what your trading plan requires you to do.
Forex does not have to be a losing game for every investor. There are many opportunities for success in the foreign exchange market if you have the time to educate yourself on the fundamentals and basics, formulate and stick to a trading plan, and learn to manage risk.