1 Expectations: In spite of the information available to them many traders hope that income will grow steadily and that there are no drawdowns. The reality is that most systems go through drawdown phases and the results are achieved after a considerable number of negative transactions and drawdowns. Very few traders have realistic objective expectations which take both positive and negative aspects in to account.
2 System design: Most systems (manual and automated) were developed in varied market conditions based on historical market behaviour. Although not perfect this is one of the only ways techniques can be developed and tested. There are many shortcomings and limitations using this approach. Some systems will always do better in a sideways market and others in a trending market. So many systems are average systems. On average they make profits. This means they lose in poor market conditions and they make better profits in favourable market conditions. On average they make profits.
3 Joining time: This is the big one. Most traders join systems at the wrong time. Traders only want to join successful trading systems. So because of anticipated pleasure they invariably join when profits are peaking. They don’t like loses. So because of pain they invariably exit a system when it is having a drawdown. This means they are always getting into the market when it is at the top and exiting when it is at the bottom. The worst investment strategy possible. This strategy will make losses in the strongest growth market. But, that is human nature. The correct approach is to enter when there is a recovery after a drawdown and exit when profits become too good to be true. It takes an exceptionally disciplined trader to do that.
4 Marketing: As we have seen above trader want to join successful systems. They are not interested in ones that are experiencing drawdowns. So marketers naturally market when systems are doing well and keep quite when they are not. They would be crazy to do otherwise. They know that the only thing that sells is greed and impatience. This adds wood to the fire for the “joining time” problem mentioned above. Forex traders should let the Forex Market teach them how it wants to be traded. This is what marketers do – they let the customers tell them what marketing messages they want to hear.
5 Trader Maturity: Not many Forex traders regard Forex trading as gambling. If they want to win at Forex Trading, it would be to their advantage if they do. Successful gamblers know that the odds are heavily stacked against them and they know that winning takes consistent cleverness, discipline, risk management, money management, mental and psychological abilities not found in the normal person. They are prepared to lose when things don’t go well but they stay discipline. They get in and get out at the right time. They know the risks and the limitations and strengths of their system. Not like the average Forex trader. They know that they are in the game for the long haul. Treat Forex trading like gambling and your only job is to stack the odds in your favour – this attitude is closer to the truth. Not many Forex traders realise how the odds against success are stacked against them by something small like the spread. The spread, basically prevents you from turning 90% of unsuccessful systems into a successful systems by trading them in reverse – makes you think doesn’t it?
6. Objective attention to detail: Most Forex trading system supply considerable amount of information to evaluate risk. If the trading system you are using has had drawdowns in the past, acknowledge the fact and expect drawdown double in size when trading live. If the system has factors that allow you to manage risk like the maximum number of open deals at any one time, evaluate this risk management feature. It only takes a few minutes to objectively assess your risk. Greed, trust in information supplied and laziness to do the ground work required can results in disappointing results. Then again some traders or EA investors are very lucky and achieve initial success without paying attention to detail.
7. Greed and laziness: Most traders want to plug and play and switch off the brain. This applies to manual systems and automated systems. They spend zero time testing and refining the system and understand how it works. They never learn (from back testing) when it makes losses and know when it makes profits. It is so much easier to blame the designer or teacher if the system does not work. Or to call the system and the designer a scam - the best escape of all. When you can call a bought system your own, is the right time to implement it. Most people call a car their own when they drive it for the first time. Why don’t Forex traders do this to bought EAs and Forex techniques – if only they knew what a change it would make.
So the sad fact is that the average Forex trader will not succeed due to many of the factors mentioned above – there are main more (like lack of focus on what matters, or too much choice and information overload) but these are thebove ones are the main ones.
Hopefully you have a better idea or feel of how to win at Forex Trading
