5 Reasons Why Most Day Traders Fail

There is an alarming statistic that shadows the forex trading industry.

There is no official figure, but various sources claim that anywhere between 70% and 90% of forex traders lose money.

The downside of forex trading being so easily accessible is that people who are not educated, experienced or prepared, can and do trade forex.

These are the people who lose their investments, and it happens very quickly.

Day trading forex is most certainly risky, especially for people who did not take the time to study or make a trading strategy.

Driving a car is dangerous, which is why we need to get a driving license before we are legally permitted to drive vehicles on the road with other people.

There is no such requirement in the forex market.

Being unprepared is one of the reasons that most forex day traders fail, but there are many more mistakes that continue to be repeated by new traders despite how well documented they are.

Here are five key reasons why most day traders fail.

#1 Because they have unrealistically high expectations

The internet and more specifically, social media are filled with many self-proclaimed Forex gurus. Depressingly, an overwhelming majority of these Forex influencers are in-genuine and are unlikely to know the first thing about financial markets.

These impostors are paid a commission for convincing inexperienced traders they can earn an insane fortune by trading Forex.

Sadly, the majority of these new traders are set up for failure because they are filled with unrealistically high expectations before they start.

The sentiment of overnight success and an easy path to financial freedom lingers in the minds of new traders, and nothing could be further from the truth.

#1 Because they have unrealistically high expectations

For example, Tuesdays and Thursdays are usually the most active days of the week with the second half of the European trading session and the beginning of the US session are the best times of the day to trade volatility.

With a casual trading schedule, there is a chance you will miss the best moments to trade and are unlikely to develop your skills as a trader due to the lack of structure. Therefore, establishing a part-time trading strategy offers several merits.

#2: Because they think day trading is an easy way to make money

When you examine the schedules of most full-time traders, you would probably notice their agenda looks a lot like that of a part-time trader.

The reason for this goes back to the notion that there are only a few opportune hours each day in the forex market.

Trading Forex can be a stressful experience; this uncomfortable emotion can lead to quitting, particularly for traders who don’t necessarily need the money.

It can also be challenging for new traders to maintain a strict part-time schedule. It can be especially tricky if they have a full-time job and family obligations; which is why we recommend joining one of the daily Forex trading webinars hosted by Scope Market, the best investment platform in Kenya.

Even if you don’t find the time to place orders every day, at the very least, attending a webinar will keep your mind focused on the market, keeping you sharp for when you’re able to get more screen time.

#3 Because they try too many strategies

There are hundreds of techniques to identify where to buy and sell, and when to open and close trades.

New traders enter a Pandora’s box of possible trading strategies and generally don’t know where to start, so they pick at random.

When one strategy has a couple of losing trades consecutively, they often move to another strategy.

There are multiple problems with this approach; the main one is that a few losing trades is not enough data to conclude that the system has failed.

The reason the trades are unprofitable could be due to unusual market conditions the trader didn’t prepare for or just bad risk management.

New traders should always try to understand why a particular strategy failed before discarding it.

#4 Because they trade too often and too much

Too much of a good thing can be harmful.

This statement is especially true when it comes to day trading. Many new traders wrongly believe they need to be trading to make money.

The correct mindset is that being in a trade is a liability and is a risk of losing money.

Over trading is a common bad habit displayed by new traders.

They either trade because they have a compulsion to trade or they trade with orders which are too large for their account balance just because they believe they found a great opportunity which is worth breaking their own rules for.

#5 They follow unreliable sources of information

There are far too many unreliable sources of Forex day trading information on the internet.

As a new trader, it can be hard to verify what is a reliable source for news, education and guidance. Just like they say about investments, don’t put all your eggs into one basket.

The same is valid about where you get your information.

Never rely on a single source. Always do as much research as possible and determine for yourself what to believe and what not to believe.

One place you can always count on for reliable Forex education is from the Scope Markets daily webinars, hosted by experienced traders with a lot to offer new Forex traders.

Scope hub by SCFM Limited (trading as Scope Markets) is a leading provider of financial investing education, offering workshops in Nairobi and partner locations and also worldwide through Web-based courses (coming soon).

SCFM Limited is authorised and regulated by the Capital Markets Authority, Licence No. 123

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