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A 30-year veteran trader warns traders not to fall into the “Cycle of Doom” in the forex market by having confidence in their strategy after fully backtesting it. The trader reminds traders to have realistic expectations and avoid unnecessary risks that often lead to blowing trading accounts. The trader plans to share tips on turning small accounts into a lucrative business in future videos. The trader welcomes questions and comments from traders to help them avoid making common mistakes.
Why Traders Fail in Forex Trading: Avoiding the Cycle of Doom
Introduction
Many aspiring traders enter the forex market with high hopes of making significant profits. However, a significant number of them end up losing more than they gain. As a thirty-year veteran trader, the author highlights two common mistakes that make most traders fail in the forex market:
– Falling into the “Cycle of Doom” by constantly tweaking and changing their strategies.
– Having unrealistic goals and expectations of the forex market.
By discussing these mistakes, the author aims to help new and aspiring traders avoid them and become successful traders.
The Cycle of Doom
The “Cycle of Doom” refers to the trap that many traders fall into when they start tweaking their trading strategies after losses. According to the author, when traders start trading with their new strategy, they start making profits. However, when they start losing money, they start becoming skeptical about their strategy. They tweak it a little bit before starting to trade again.
This cycle continues until they lose faith in their initial strategy, and they throw it out for a new one, thinking it will be better. They hop between trading strategies, making money, and losing money, never finding the perfect strategy. Unfortunately, there is no such thing as a perfect strategy. Every strategy has winning and losing periods.
To avoid falling into the Cycle of Doom, the author advises traders to have confidence in their trading strategies. They can achieve this by fully backtesting the strategy using historical data. By doing this, traders can learn the winning and losing periods and are less likely to lose faith in the strategy after some losses.
Realistic Goals and Expectations
Most traders enter the forex market with unrealistic expectations. They believe that they will make it big in the forex market with minimal effort and time. However, this is not true. It takes commitment, effort, and time to become a successful trader. According to the author, traders need to be realistic about what they can achieve in the forex market.
The author explains that most brokers offer bonuses to new traders to join them, such as matching their $500 deposit. But many new traders end up losing that money because they come into the market with the wrong expectations. The author advises traders to be realistic about what they can achieve in the forex market and to understand that it takes time and effort to succeed.
Over-Leveraging
Another mistake that most traders make is over-leveraging. Traders take unnecessary risks because they have unrealistic goals and expectations. Most brokers offer high leverage levels, such as 100, 200, or 500 to one, to lure traders into taking unnecessary risks.
Traders need to avoid over-leveraging by understanding their risks and setting realistic goals. The author advises traders to avoid falling into the cycle of doom, understand the market’s realistic expectations, and avoid over-leveraging.
Conclusion
The author’s video emphasizes the two common mistakes that traders make in forex trading, leading them to failure. The cycle of doom can be avoided by gaining confidence in the trading strategy through backtesting and realistic expectations. On the other hand, traders need to avoid over-leveraging, understand their risks, and set realistic goals in the forex market.
By guiding new and aspiring traders to avoid these mistakes, the author equips them with the right mindset and knowledge to succeed in forex trading, proving that one can make a decent living through commitment and hard work.
