Traders at the very outset, seem to get carried away by Forex’s potential. I remember when I was a beginner; Forex made me believe that I could be a millionaire in a flash. In fact, most of the traders think like that.
In reality, things are never as smooth as it looks at the beginning. Statistics says 95% traders lose their investment. That means, only 5% of traders will be successful and making money in the end by trading.
Question is what makes beginners think of being a millionaire in no time and why they end up losing money.
Most of the traders start trading by using the demo account. Usually, demo accounts come with a big amount and low spread with which demo traders keep taking entries. Let’s assume on a bullish (buy) day, a trader keeps taking long (buy) entries. As soon as he sees a profit, he comes out that. By doing so, five of those buy entries get him a profit.
However, one of his buy entries gets stuck and runs into a loss. He leaves that entry running and starts thinking I am a good trader because I have made a profit from five entries and only one entry went wrong; my success rate is amazing! With demo trading, if an entry is running on a loss, it is usually ignored. Reality is one running losing trade can easily kill an account gradually.
Since beginners do not use Stop Loss and the market keeps going up and coming down, thus making money from both directions is possible. Nonetheless, if we count the whole scenario, he is on the way to blow his account. Since balance starts getting bigger, it makes him think that making money by trading is an easy task. Matter of fact is that equity should be counted instead of balance. Before even demonstrate the actual reality up to the end, he jumps onto live trading.
The Real Drama
A beginner starts feeling the real heat with live trading. He keeps coming out with a profit but let his losing trade run. Moreover, more spread is to be paid on a live account. Thus, it gets difficult for him to scalp and make money by live trading. In the end, the result is very obvious. He loses his first investment. He may try the same thing over and over again but gets the same result. Eventually, he loses all his investments and the opportunity to make real money by Forex trading.
If you are a beginner, do not make the same mistake. Forex is not a scheme to be a millionaire in a flash. It needs long experience, confidence, hours of study and analysis to be able to make money by Forex trading. Jumping into live trading before having those will not take a beginner anywhere in trading.
One thing a beginner must remember is that Forex really is a great opportunity. Earning a lot of money by trading is certainly possible. Moreover, the best thing about trading is it allows a trader to have enough free time to enjoy life. Nevertheless, most traders give up trading after losing their investments several times in the beginning.
Do not be one of them; do not miss one of the best business opportunities, but give yourself enough time before jumping into live trading. Make every effort to learn trade management, risk management, volatility, trading pattern, etc. If a trader learns and gathers experience first, there is no reason that he will not be able to make money through Forex trading. If the right approach is taken at the beginning, surely Forex will make a trader handful.
** In the next article, I will write about ‘Importance of Demo Trading Experience in Forex Trading”.