Why 90% of All Traders Lose & How To Be Part of the 10% That WIN!

Why do traders lose?  The statistics show that 90% of all traders lose money.
It’s an age old question and while there is no magic formula and no way that anyone can guarantee that you won’t lose money, there are 5 fundamental things that you can do to become part of the 10% THAT ARE CONSISTENTLY PROFITABLE.
How do you do that?

Develop a clear and concise method.

First of all, if your goal is to become a consistently successful trader, you must have a clear and concise method for trading.

In order to have that you must have a clear and precise way of looking at and reading the markets.  Guessing or going by gut instinct might work occasionally, but if you don’t have a specific method, then you don’t have a way to know what constitutes a buy or sell signal, and aren’t able to correctly identify the trend.

The way to go about this is to write it down.  You need to define in writing what your analytical tools are and how to use them.  It really doesn’t matter what charts you use as long you actually take the effort to define it.

In other words, for example:

What constitutes a buy

What constitutes a sell

What constitutes a stop

Instructions on exiting a position

When to use limiting orders

Clearly define your methods and define it by writing it down, and keep it simple!  Don’t make it too complicated… if you can’t write it on the back of your hand it’s probably too complicated.

You must have the discipline to follow that method.

Once you have clearly and concisely defined your methodology, you absolutely must have the discipline to follow through with that method.
If you view a price chart different than you did 2 months ago then you either haven’t developed your method, or you lack the discipline to follow it.
The formula for success is to consistently follow and apply a proven method.

Have realistic expectations

Don’t be greedy!
We’ve all seen the ads that may get our blood pumping with promises of becoming wealthy overnight while we sleep , or investing a few bucks in stock and making a million in a week, what usually sounds too good to be true usually is.
Now it is possible to experience above average returns or some trades, although it may be difficult to do without above average risk.
The goal for every trader, especially in the first year is to not lose money!  Any percent return you see above that is icing on the cake.
In other words, don’t allow yourself to get greedy! This is the downfall of many traders.  They start to feel overly confident and start taking higher risks and end up losing mucho cash!

Be Patient

One of the reasons that most of us get into trading and the forex market is because it’s exciting.  I mean let’s face it, trading is a lot like gambling and any time money is involved it tends to get our blood pumping.
As a result, you will get tempted to start taking shortcuts on your methods or you’ll start making trades of lesser and lesser quality, seriously adding to your levels of risk and inherently over trading!
I have found that by reminding myself that I have no reason to worry about missing that next great opportunity, because there is another one right around the corner… guaranteed.

Manage Your Risk By Managing Your Money

I could seriously write a whole book on the importance of managing your money.  There are so many factors in managing your money… such as risk/reward analysis, probability of success and failure, and so much more.
With that in mind I am going to address the issue of money management with a focus on risk on the entire portfolio size and not each individual transaction. You’ll see what I mean.
I believe that many traders tend to be over aggressive in their trades.  A good rule of thumb is to never risk any higher that 1-3% of your portfolio.  If you have a small trading account, then trade small.
The bottom line to becoming a consistently successful trader is longevity!  Keep your risks small and you’ll be able to weather the rough spots.  If your risking 25% of your portfolio on each trade, then it will only take 4 consecutive losses for you to be completely out of business.
Remember the story of the tortoise and the hare… slow and steady win the race!

Although it is my belief that making money in the foreign exchange market is easier than any of the other trading markets, it isn’t easily done without your eyes wide open.
I can guarantee if you practice the above 5 steps, you won’t be caught in the 90% of losing traders.

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