Amazingly Enough According To Estimates, 90 Percent Of FOREX Traders Lose Money

Category: Finance, Currency Trading.

Amazingly enough according to estimates, 90 percent of FOREX traders lose money. Another fact is that the FOREX traders lose their trading capital in record time, compared to Futures, 6 months traders at about 12 months.

Futures traders fare a little better, 70 to 80 percent are losing traders. To put all this in perspective I will do a comparison with small business start- ups and how they cope with failure. For those of you that think this comparison is not relevant, think again. Further I will also look at the reasons traders and businesses fail. Why is FOREX trading different from any other business? Otherwise, it would be no different from roulette or any other game that can be found in Las Vegas or Macau.

The motive is to make money, right? According to the article, "Survival and Longevity in the Business Employment Dynamics Data, " (Monthly Labor Review 2005) Amy Knaup shows that about 60 percent of business establishments that opened in second quarter of 1998 were still in existence 24 months later. So why is it that business and traders fail and are there any similarities. In other words, only 40 percent of new businesses failed within 24 months, that is much better than any traders can show. Let s have a look at another 2005 study" Small businesses: Causes of bankruptcy" by Don B. In this study, they authors elaborate that roughly 90 percent of the business failure is due to" poor management caused by a lack of knowledge. " So what kind of knowledge are business owners lacking? Bradley III and Chris Cowdery from the University of Central Arkansas.

The areas where knowledge is lacking are many but the following are the most common: Bad management practices. Failure to invest in new products and efficient technology. Poor choice of location. Lack of adequate financing. Going through the above four reasons for business failure and translating it into the FOREX trading equivalent we get: Bad profit and risk management. In some ways FOREX trading is more straight- forward than starting a business( no incorporation, no sales or marketing etc) , but on the other hand it is also more complex and illogical since we are dealing with human consensus and expectations driving exchange rates up and down seemingly at random. Poor choice of FOREX broker.

Undercapitalized. Failure to invest in a proper trading and charting platform. But for a FOREX trader it usually doesn t stop here. On my website, www. forex- trading- insight. com, I have created a free FOREX trading course that addresses the deficiencies that lead to failure of FOREX traders. Most people signing up for a FOREX broker account do so without much knowledge about the FOREX market and the psychology involved. In order to make it easier for traders to grasp the difficulties, I developed the" Three Pillars to Profit" : The Right Trading System, i. e a validated Trading System that produces consistent profits.

The Right Experience, i. e an Experience that promotes confidence in your Trading System. The Right Psychology, i. e a Psychology that supports your trading effort towards consistent profits. This probably seems obvious but believe me, it isn t. We have established that FOREX traders and Business owners face pretty much the same problems, but why is it that FOREX traders fail to such an astounding degree compared to business owners. Contrary to what all FOREX Brokers want us to believe, FOREX trading is not easy. The" Three Pillars to Profit" I think explains it all, because most traders that enter the FOREX arena are severely lacking in all the three pillars.

Would you start a business without having any idea about how to generate sales or market your products? Would you start a Supermarket if you had only 1 or 2 weeks of experience as a Supermarket clerk? If you answered No then you are smart, but this is exactly how many aspiring FOREX traders approach their new venture. Not only are FOREX traders disregarding the" Three Pillars to Profit" , they are doing it with a certain naivet� and Get- Rich- Quick mentality that is just devastating to their success. They don t have a clue of what they are doing.

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