Why to Trade Forex Leaders and Laggards

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Why do traders leave the forex market?

Why do novice traders decide not to trade forex anymore? Of course, in the first place it is a loss and disappointment. The foreign exchange market did not bring a quick income .

Sooner or later, every trader raises the question: is it worth it? We are talking about the comparability of the time and effort spent on material wealth. Of course, a beginner has this question to himself more often. One must be stubborn enough to continue trading on Forex, despite a series of financial losses and disappointments.

The process of becoming a trader goes through several stages:

  1. The initial stage, when a beginner tries to embrace the immensity. This stage is characterized by a large number of merged demos and real deposits.
  2. The stage of growth, when a trader begins to plan his trading, simplifies and improves his Trading Strategy.
  3. Stage of professional maturity. At this stage, the trader is distinguished by patience in achieving the set goal and sufficient discipline in observing his own trading system. A distinctive feature of this stage is the development of trading intuition, of course, it is associated with the accumulated experience of the behavior of currency pairs.

How fast does a newbie leave Forex?

Most often, the beginner does not reach the second and third stages and abandons the trade. And this is understandable, because the initial formation requires significant moral, physical, mental and financial costs from the newly-made trader. Sometimes a person returns to Forex, realizing that he has not gone all the way to becoming a trader. Significant interruptions in trading help the trader to accept the market not as a game, but as a tool for making money.

Sometimes traders leave Forex in the second and third stages. The reason for this may be getting a good position or a stable, well-paid job. Sometimes a trader gets bored with constant emotional stress, and he becomes an investor or finds a calmer job related to Forex trading, for example, a consultant or analyst with any broker.

Passing through all the stages of becoming a trader does not give the 100th guarantee that you will become successful traders. Unfortunately, Forex, like everywhere else, is affected by natural selection, and the most emotionally stable and well-adapted individuals survive. Statistics show that only 5% of traders consistently earn in the market, but this is not a reason to despair. This is an incentive to enter the top five. I wish you all good luck!

What reasons would make you stop trading Forex? Discuss on the forum.

Обсуждение книги Тома Лекси “«Locked-in Range Analysis: Why most traders must lose money in the futures market (Forex)»”

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Locked-in Range Analysis (Анализ диапазона заблокированных позиций, сокр. LRA) – метод анализа рынка фьючерсов, который был создан и описан Томом Лекси в книге «Locked-in Range Analysis: Why most traders must lose money in the futures market (Forex)», который сводит к минимуму неопределенность на рынке.

LRA – метод интерпретации графика цены и объема, для определения направления преобладающих объемов открытых позиций, дисбаланс которых будет информировать о будущем рыночном поведении.

Кто владеет данной методикой? Как Вы используете в своей торговле данный анализ?

LAGGARD

A stock (or company) that fails to perform in the overall market; opposite of leader. It pertains to a stock who has lower than average returns, fails consistently, and does not like to accept changes or new things unless they are forced to do so. They get information from friends and neighbors. Also, these laggards are the first candidates for selling.

Investors avoid laggards because they will achieve less-desired returns.

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Reasons Why Forex Traders Lose Money

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A commonly known fact is that most forex traders fail. In fact, it is estimated that 96 percent of forex traders lose money and end up quitting. The forex website DailyFX found that many forex traders do better than that, but new traders still have a tough timing gaining ground in this market. To help you make it into that elusive 4 percent of winning traders, the following list shows you some of the most common reasons why forex traders lose money.

Befriending the Market

The market is not something you beat, but something you understand and join when a trend is defined. At the same time, the market is something that can shake you out if you are trying to get too much from it with too little capital. Having the “beating the market” mindset often causes traders to trade too aggressively or go against trends, which is a sure recipe for disaster.

Low Start-Up Capital

Most currency traders start out looking for a way to get out of debt or to make easy money. It is common for forex marketers to encourage you to trade large lot sizes and trade using high leverage to generate large returns on a small amount of initial capital.

You must have some money to make some money, and it is possible for you to generate outstanding returns on limited capital in the short term. However, with only a small amount of capital and outsized risk because of too-high leverage, you will find yourself being emotional with each swing of the market’s ups and downs and jumping in and out and the worst times possible.

You can resolve this issue by never trading with a too-small amount of capital. This is a difficult problem to get around for someone that wants to start trading on a shoestring. $1,000 is a reasonable amount to start off with if you trade very small (micro lots or smaller). Otherwise, you are just setting yourself up for potential disaster.

Failure to Manage Risk

Risk management is key to survival as a forex trader as in life. You can be a very skilled trader and still be wiped out by poor risk management. Your number one job is not to make a profit, but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost.

To counteract this threat and implement good risk management, place stop-loss orders and move them once you have a reasonable profit. Use lot sizes that are reasonable compared to your account capital. Most of all, if a trade no longer makes sense, get out of it.

Giving in to Greed

Some traders feel that they need to squeeze every last pip out of a move in the market. There is money to be made in the forex markets every day. Trying to grab every last pip before a currency pair turns can cause you to hold positions too long and set you up to lose the profitable trade that you are trading.

The solution seems obvious here, just don’t be greedy. It’s fine to shoot for a reasonable profit but there are plenty of pips to go around. Currencies continue to move every day so there is no need to get that last pip; the next opportunity is right around the corner.

Indecisive Trading

Sometimes you might find yourself suffering from trading remorse. This happens when a trade that you open isn’t immediately profitable and you start saying to yourself that you picked the wrong direction. Then you close your trade and reverse it, only to see the market go back in the initial direction that you chose.

In this case, you need to pick a direction and stick with it. All that switching back and forth will just make you continually lose little bits of your account at a time until your investing capital is depleted.

Trying to Pick Tops or Bottoms

Many new traders try to pick turning points in currency pairs. They will place a trade on a pair, and as it keeps going in the wrong direction, they continue to add to their position being sure that it is about to turn around this time. If you trade this way, in the end, you end up with much more exposure than you planned, along with a terribly negative trade.

It’s best to trade with the trend. It’s not worth the bragging rights to know that you picked one bottom correctly out of 10 attempts. If you think the trend is going to change, and you want to take a trade in the new possible direction, wait for a confirmation on the trend change.

If you want to pick up a position at the bottom, pick up the bottom in an uptrend, not in a downtrend. If you want to open a position at the top, pick a top when the market’s making a corrective move higher, not an uptrend that’s part of a larger a downtrend.

Refusing to Be Wrong

Some trades just don’t work out. It is human nature to want to be right, but sometimes you just aren’t. As a trader, you just have to accept that you’re wrong sometimes and move on, instead of clinging to the idea of being right and ending up with a zero-balance trading account.

It is a difficult thing to do, but sometimes you just have to admit that you made a mistake. Either you entered the trade for the wrong reasons, or it just didn’t work out the way you planned it. Either way, the best thing to do is just admit the mistake, dump the trade, and move on to the next opportunity.

Buying a System

There are many so-called forex trading systems for sale on the internet. Some traders are out there looking for the ever-elusive 100-percent accurate forex trading system. They keep buying systems and trying them until finally giving up, deciding that there is no way to win.

As a new trader, you must accept that there is no such thing as a free lunch. Winning at forex trading takes work just like anything else. You can find success by building your own method, strategy, and system instead of buying worthless systems on the internet from less-than-reputable marketers.

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