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By eWeb Media
Let's face the difficult truth. Most traders lose money. And it is difficult to be one of the few who actually makes a good income from trading. Remember this is what is called a zero sum game. For someone to profit, someone must lose. And for someone to win big, either a lot of people have to lose a little or someone else has lost a lot.
If that fact has not discouraged you from risking your own money, then what can you do improve your odds? There are 2 main reasons that most traders lose.
The primary reason that traders lose is that they stay in a losing trade too long. Before you get into any trade, whether Forex, stock or even real estate, you need to know how and when you will exit the trade if it goes against you.
In trading there are many trading systems that have exit strategies built in. Be sure, if you are using such a system that you know how the exits are determined and that you follow them. You need to trust your trading method so that when the time comes to exit, you can do it without second guessing. If you try to stay in a losing trade when your system has said get out, then you are not trading that system, and you are working on something else. That again is
the number one way that traders lose and keep losing.
The second reason that many traders fail is fear that gets them to exit profitable trades too soon. Again this comes down to not having a system that the trader trusts or not having any system. Your system should keep you in winning trades long enough so that your profits can more than offset the losing trades.
So all this can be summarized by simply saying that to win in trading, you have to be disciplined enough to minimize your losses and maximize your winning trades. It sounds easy, but once you are in a trade, emotions can take over reason, and that will be a sure indicator of a failing trader.
You need a system that you understand how to use, and that you trust. You gain that trust by backtesting the system on historical data, and by practice trading before you risk your own money. Your system should include dynamically adjusting stop orders that will get you out of a losing trade and lock in gains in a winning trade. There are many ways that these stop orders can be determined, so do your research find the one that you trust enough to follow, to keep your emotions to a minimum and perhaps you will be one of the few winning traders.
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