The trader and the market
The reality is that the numbers do not lie, almost 90% of those who are starting for the first time in the financial markets like Forex just fail and lose their hard earned money. In fact, there are only a few traders who makes huge profits and live comfortably with this activity. The question that comes to mind then, is why many people fail when begin to trade in the market?
In my opinion it is not a matter of intelligence, since even highly intelligent and prepared people is swept by the market very easily. In fact it is not uncommon to see doctors, lawyers, economists, engineers and similar losing large amounts of money constantly, money that they can not afford to let go as if nothing. It is also possible to find people whose skills and academic preparation is not the best, but they have being successful market speculators and therefore earns tons of money.
In my opinion that the factors limiting the success that all traders would like to have are the following:
1. The nature of the market: Anyone with some experience in the markets knows that is not easy to trade in any financial market. Anyone who says otherwise probably is lying or does not know what he’s talking about. The reality is that the market tends to be quite erratic and full of unpleasant surprises just waiting for the traders. It is not uncommon for a trader to spend hours analyzing the market and waiting for the right moment to enter and suddenly, once in position, the price makes a sudden move against and take him out of the game moments later, only to resume the direction that the trader had predicted at the beginning. The most we can hope for is to put the odds in our favor with a good strategy and do not ever expect to find a system that works 100% of the time since that does not exist.
2. The psychology of the trader: The trader’s worst enemy is not the market but himself. I could say that a 99.99999999999999999999% of the time, the main cause of failure of a trader is his psychology. To trade successfully in an environment as difficult as the financial markets requires cold blood, and above all a good psychology. A trader who has the best strategy in the world will never have success if not prepare its mind for everything that the market holds. For example, a trader must be sufficiently cold-blooded to accept both losses and gains and know that some days he just can not win and the best practice is therefore cease to trade that day and accept losses. Given the personality of many people who do not like losing, that is a very difficult of trading.
3. The lack of preparation of trader: It is very common that many people begin to trade believing that the market trading is simple because only have to guess if the market goes up or down. These people do not take into account that the market is affected by multiple variables, so it requires adequate preparation to meet the various conditions that arise. If we begin to trade thinking that everything will be easy and we do not need proper preparation, sooner or later we will get a nasty surprise. The speculation in the markets requires study and preparation as anything else in life. Would you let that anyone with no preparation in medicine make you a heart surgery? I guess not. It takes years of study for that. Something similar can be said about the trading.
4. The search for the perfect system: Many times the speculator spend more time searching for a perfect trading system than studying the market itself. Is important to understand that there is no such thing, even the best trader using the best system loses sometimes, that’s inevitable. Even, some experts say that a system that gives a 50%-60% of winning signals can be considered a good system. The search for the “perfect system” makes some traders spend thousands of dollars buying systems that promise easy money but in reality are worthless and only cause that the buyer will lose even more money.