Forex trading system 96 percent winners arent losers

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. Reviewing the following list will show you some of the most common reasons why forex traders lose money, and it can help you make it into that elusive percent of winning traders.

Key Takeaways Forex traders can lose money by trading too aggressively, particularly when bucking obvious trends. When you open a Forex trade, stick with it for a while. Be willing to eventually cut your losses in a worst-case scenario. 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 to go against trends, which is a sure recipe for disaster. Low Startup 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 to use 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 possible times. You can resolve this issue by never trading with too little capital. This limitation is a difficult problem to get around for someone who wants to start trading on a shoestring. 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 it is 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 pursuing. The solution seems obvious: 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, which happens when a trade that you open isn't immediately profitable, and you start saying to yourself that you picked the wrong direction.

Most people who attempt trading lose money. The profitable traders easily made up for all the losses of this much bigger losing group. European brokers have to report how many of their clients lose money. This percentage is how many active accounts are losing money. It does not reflect accounts that are closed because the trader lost everything.

Or, those who lost money, became dejected and withdrew their remaining balance. If the brokers disclosed this the percentage would move up drastically. More details, as well as what to do instead, are discussed below. For a quicker read of this lengthy article, read the bolded sections. Read the bullet points for further explanation.

There are a few traders who make loads of money at the top, then there are people who make a lot, then people who make a living, people who make a little, people who breakeven, people who lose, people who lose a lot, and people who lose everything.

To be profitable, you need to climb above and be better than those breaking even. How high you climb is up to you. But because it is a hierarchy, not everyone can win. You need to be better than most traders out there, on average, to make money. Think of trading like golf or any sport , and being able to make money at it. Millions of people play golf, but only a few thousand, male and female, make good money playing on major tours around the world in any given year.

Only a small subset of this make the really big money. Then there are many thousands who make a living playing on smaller tours, being pros at local golf clubs and driving ranges, and doing trick shots or long drive competitions. Then there are millions of others who just golf, and they range from horrible to good…but the golfers above are higher on the food chain. Trading works the same way.

To make money at it, we need to work our way up the ladder. We need to better than most people out there…and we need to stay there. Sometimes we are brilliant on one trade, and make money, but unless we stay better, we start losing again. We have to perform to stay there. If others get better on average, we need to get better as well, or we will lose ground. Successful trading is not a destination where we get to relax once we get there. We have to continually practice and train ourselves to maintain that level.

If we start lacking discipline or patience or focus, others will overtake and push us down the food chain—we make less money or start losing. Other pros contributed to the gain as well, but on the whole, the other pros made more than they lost too. Think of a poker tournament with thousands of people. Most players will win some hands, and even the pros may lose a pot to a weak player every now again, but on the whole, the money slowly shifts to the stronger players.

The money the strong players make has to come from somewhere, and it comes from weaker players. Weaker players will continue to give money to the stronger players in tournaments, until on the whole, the weaker player eventually if ever becomes better than most, and starts making more than they buy-in for.

Trading is the same thing. Every trade we take provides an opportunity for ourselves and someone else. Poor decisions over many trades mean our money goes to people making better decisions better strategies, better execution, etc.

Profits are created when someone else loses money OR gives up profit. This means that you need to be better, on average, than other market participants, as discussed in the hierarchy above. If you buy shares and make money, someone else sold you their shares allowing you to profit…they gave up that money to you. Without someone sacrificing those shares you never get the chance to profit. On the exit, you need someone to be there to sell to. Maybe you allow them to profit, or maybe you hand them a steaming bag of crap and they lose.

Either way, on the way in and out, someone allowed you to profit or lose. And you allow others to profit or lose with your transactions. The person who does this better, over many trades, is profitable. The person on the losing side of more of these exchanges loses. Not everyone can win. When you buy, others need to come in after you and be willing to pay higher prices for you to profit.

This plays out on all time frames. If you buy and no one comes in after or the sellers are stronger and are willing to sell at lower prices, the price moves against you and you face a loss. Buyers and sellers individuals push prices, creating losses and profits for those involved, and opportunities to win or lose for those about to get involved. For traders to profit they need to be better at capitalizing on those opportunities than others. Pros regularly have losses, just like losing traders, but on average pros make better decisions.

The pro held a little longer, squeezing out more profit, not allowing another trader into the position had the pro sold, someone else would have had the opportunity to profit. Or the pro sold quickly, cut their loss, and handed off a weak trade to someone else.

Anyone buying after them gets in at a worse price and has slightly less profit potential. I can get in or out whenever I please. So how can anyone else beat me to the punch? If your strategy tells you to get in at a specific price, there are only so many shares near that level.

When you exit, you exit on the shares available. But if everyone wants out at once, the fastest traders get out first. Or better yet, the pros likely saw the danger and sold before the panic. As the selling continues the price drops and those that are slower to react get lower and lower prices. You have to be better than others at doing it. The chart example below shows this. A massive amount of buyers created a price spike and allowed loads of prior buyers to sell and exit their position.

The buyers allowed potentially big profits for the sellers. Had the buyers not stepped in, the price would not have risen and there would be no profit for anyone trying to sell. The buyers created a profit opportunity for the sellers. This is a simplified explanation, but there is a clear wealth transfer that occurs. Every transaction is an example of this. Over many trades, the results show who made better decisions. Also, consider that there were limited shares at each level as the price started to rise.

Those that acted quickest got better prices. Those that reacted later bought at higher and higher prices, with reduced profit potential. Eventually, someone bought right at the top and someone sold to them …and no one followed them in. The race then starts the other way. Once the buyers started disappearing, people started selling at lower prices to find willing buyers.

The quickest sellers got out near the highs, and those that are slower got out lower and lower. Those that got in earlier than most, and out earlier than most, fairly ok. Over many trades, this creates the hierarchy. This chart also emphasizes the point that profits are only made if others follow you in. For the early buyers, they had followers. The higher the price went, fewer and fewer buyers followed them in.

Eventually, sellers overwhelmed the buying interest, and the buyers backed off. They were willing to buy at lower prices, but no longer at higher prices. Charts are provided by TradingView — the charts I personally use. The chart above looks like an extreme scenario. Yet, this is actually playing out every second of every day. Every up and down gyration in every stock, currency pair, option, bond, and contract is created by people buying and selling.

There HAS TO BE people who got better prices and people who got worse prices, and then as the inevitable ups and downs continue there will be people who sell at better prices and at worse prices. We need to be better than others to be able to get in and out with a profit, on average, in this battle for prices this where Stock Strategies or Forex Strategies come in.

Most traders buy too late or too early, and sell too early or too late, thus handing over profit opportunities to others instead of capitalizing themselves. This is discussed more in the sections below. The financial market is one of the only places that no matter how much experience or money you have, and no matter where you come from or what you do in life, you can play with the pros as soon as you open an account and place a trade. That is pretty cool. It is also dangerous. There are strong systematic forces that keep most traders in the losing column.

Being a good trader takes at least 6 months for some, and a year or more for most. Expecting to put in at least several months of hard work will save many people from quitting too early…or losing all their profits if they happened to get lucky and start winning right away. To be good at anything takes time. Most want-to-be-traders left the trading firm I worked at within a couple of months. Had people put in more time, they would have increased their chance of success…if they practiced correctly discussed later.

Really quick success is usually due to luck or very favorable market conditions easy money. Most of and , for example, was the easiest money environment in a decade, and it lured in many new traders who now believe trading is easy. The time you put in needs to be focused on your method. General knowledge is not of much use to a trader beyond being able to banter with strangers about the market. I would rather hire a trader who knows how to trade one strategy really well and is willing to put in the focused work to make that one strategy better than hire an Ivy League Ph.

General info is useless in trading; you must master at least one strategy to be a good trader. How to make any strategy idea profitable is discussed next. You can decide to trade any way you like, but then you need to become better at it than most others.

Unsuccessful traders never bother to do this. If you decide you are only going to trade Triangle Breakouts , you need to look through hundreds of charts to see what conditions were present in the best breakouts. Then you need to see if those conditions were also present in the losers. Find conditions that exist more often in winning trades than losing trades. Define exactly how you will know what those conditions are, and how you will enter and exit.

This concept is discussed in more detail below, with a chart example. We can do something every day and not get better at it. Think golf courses, tennis courts, the neighborhood basketball courts, maybe the bedroom, and so on. Perfect practice simply creates improvement. Most traders read a few books, learn a strategy online, and think that is all it takes. Not even close. Slight variations arise, and you need to learn what to do in those circumstances.

You have to learn what your common mistakes are and find ways to correct them. They just put in hours. There is a big difference. Here are things to specifically practice. Create a trading plan and follow it. A trading plan is your rule book for trading, telling you explicitly and exactly when to get into and out of trades, how much to risk, when to trade, what markets to trade see sections above on doing your OWN research.

A good plan lays out everything you may come across. Creating a plan takes time; typically months, but for some it may take a year or more. It takes months because each trader needs to see different conditions, slight variations, and figure out what to do. No two trades or trading days are ever exactly alike.

We need to develop rules that account for various trading conditions, but at the same time are precise. Not having and not following a trading plan is a big reason most traders fail. If you believe you can easily and with little effort beat people who do something for a living, sign up to spar with a UFC fighter in your area.

Practice following a plan. It should be so easy, but it is not. It is not time wasted. Put a winning plan in your hand and you have a much better chance of following it. Following a plan takes practice too. It is not natural for most people; think diets, workout plans, saving money, and so on.

It is a skill. Without it, all the other work is for nothing. Is there strong movement?

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Now you know why there are 9 losers for every 1 winner in Forex trading. The peril of curve fitting your trading system. Curve fitting involves the tweaking of parameters of the trading system to fit the historical prices to show extraordinary profits. If you have or come across an EA that requires you to set different parameters for trading different currencies or for different sessions, chances are it is a curve fitting system. Indeed, most commercially available EAs fall in this category of curve fitting systems.

The reason why most of these EAs failed after you had purchased them is because they become unprofitable whenever the market condition changes. It is achievable when you can consistently: Enter your trade at the best price to minimize the chance of being stopped out prematurely. Trail your stop losses when the prices have moved in the right direction to cut loss when the price reverses. Capture partial profits along the way to protect your capital. Let your remaining lots ride the trend to maximize your profitability.

The most important goal for the trader is to build a profitable strategy which on average brings more winnings than losses. The most effective trading system is a simple one. It should have the same rules for all market conditions.

Please visit Price Action Trading for an example.