Compliments from Tony El Fata, one of our favourite Forex commentators and writers.
Admin note: Thanks for the excellent article, hope this will shed some light to our readers on forex pitfalls and understanding one's inner trader.
To understand this truth, we need to study human weaknesses very good when it's related to the world of investment, because behind everything in life "banks, companies, countries, ..." there's human and behind Forex charts moves there's human ... speculations and decisions from human make the market move ... market moves is translated as charts crazy moves.
Fx charts moves prove clearly human weaknesses in taking a united decision as it move in full chaos each single minute during trading time "watch 1 minute chart"...
if we want to make a list of human weaknesses concentrating on traders weaknesses according to my 5 years of experience in Forex ... the list of human weaknesses is based on my observations for more then 1000 traders trader i meet during the past years also based on my personal weaknesses as a human:
1- Human Greed, is the main because behind why 95% of traders lose in Forex ... and that greed expand to casinos, poker and all the aggressive games human play or have access to them ... when a human bet on all his fortune to double or triple it's money in a short time its the greed human weakness controlling his actions ... human greed is attached strongly to the nature of a human because the life of a human is short ...
50 or 60 years if someone is extremely lucky will see 80 or 90 with a good brain... and because of this speedy life where a year pass in a blink of an eye ... the greed of human lead them to greedy aggressive investments to gain money in a fast way ... and bank know this fact so good ... what big Forex players do, they hunt greedy traders who expose there money by going against the mass or against the trend ... in the trading world we call it correction or market changing direction ... Greed will always make you lose because the market is full of surprises ...
this is why a trader need to have a pure view about the risk involved in Forex and calculate his affordable loses before he calculate his winnings ... and if you can afford losing stop lose in a trader then you can open this trade, ... wisdom in trading is to control your greed or eliminate your greed one time and for all ... because always you will lose or you might win in Forex because nothing is 100% in Forex and wisdom is to lose small when the market go against you "cut lose small & let profit grow"
- Human fear, let's be realistic all human have fears as i m a human i have my fears ... and my biggest fear in life is to end up someday not fearing anything as it will not be braveness at all but full stupidity ... and this fear level vary from a human to another, only a fool don't fear nothing ... and if we allow fear to control us in Forex we will end up watching the market action and never to be part of it by opening a trade ... always i divide fear to 2 categories, Good fear: where a trader is always training his skills to become better and he fear to lose big in the market which might be translated as bad performances which mean he is not discipline or wise and just one of these 95% who always lose ... this fear will help a trader to always push his limits to become better, train better, be more serious in the market and this is why i see it a good fear because the trader will be always pushing the limits to analyze the market better and be aware of all the tricks which might happen in the market, just to be alert and ready as a true hunter ... on the other hand ... the Bad fear: is when a trader enter big size greed greed greed, and his heart start to pump fast when the market move against him or will be worried not knowing when to close fast with profits as a scared rabbit when the market give him some pips "they call them selves scalpers and they do the biggest mistake of all because they cut profit small and let lose grow hahaha" when you hear a trader saying he is a scalper = he is terrified when he trade and it's a bad fear because he stress too much next to charts because of fear ... and this fear will be translated as bad performances ... "trading is about performance, control your fears by doing good calculating for the worst case scenario and be ready for it before you calculate your potential profits"
3- Human ego, pure weakness in a human and when you hear a human in life saying he know everything meaning he know nothing, because life is an open test and we all keep on learning new things till the last day of our lives ... and day life give us tests which prove to us that we still need to learn lot lot of things ... many traders i met they have 10 years of experience or 30 or 40 years of exp "in most cases 10 years of experience losing accounts" they end up full of ego writing books, teaching new traders, forecasting on TV’s, simply to hide this big fail ... think about it for a second ... why a professional trader need to sell books for few dollars where he can make sooo much in one trade ... it's where the trader become weak drowning under his own ego ... thinking he know too much, where in reality he still small facing the market ... and need to change all his foundations as a human first then as a trader to become better ... learning new things each day each hour to survive when tests happen ... and each trade put all your Forex knowledge under a direct test in the market ... how you manage your trade in a brave and humble way, is what make you a true brave wise trader ... to perform better and make steady profits ... always when you stand next to the beach feel small watching the greatness of our creator ... always when you trade respect these 7 billions human living on earth in the same time you are living doing all this action of supply and demand - big mass economy reflected on your small chart of 3 trillions daily market turn over ... always say to your self it's a new day, new trade to learn something new, no matter what the result will be hitting my stop lose or my take profits ... i will manage my trade in a professional way never let the market go under my skin and make me angry and start trading with supper greed ...patience, prudence, to control greed, to control fear in a perfect way ... is the only way to become a good daily trader and to manage trades with braveness ... at first it look hard ... but with good training even the hardest things in life as trading will become so simple and easy to do each day :)
4- Human addiction ... when you will know you are a tradoholic or trader addicted ... here's a simple test for you to know that, just ask your self these questions:
- do you open trades as you buy vegetables?
- do you watch charts for 6 consecutive hours and you don't feel board?
- do you trade with vengeance and an extreme aggressive way when you lose?
- do you try to go against the trend in the extreme rush market hours? challenging the market?
- do you always end up increasing your stop lose where you will end up with - 300 or -400 pips, never willing to accept you was wrong in your trade?
- do you keep losing trades open for days, weeks, months even you add more money to your account to lose more on the hope the market switch direction and go your way? never accepting you was wrong in your trade?
- do you keep on trading in a bad day even if you last 2 or 3 trades consecutively in one market season?
If your answers are yes for the questions above, yes you are another tradoholic ... and you start accepting the fact of losing in a easy way "becoming one of those 95% losers" you will be making your first step to become a forex addictive or forexoholic, and you must solve your addiction immediately before you lose all your money ... trading is a business to make money slowly, it's not a hobby of betting ... in life in everything "easy come easy go" and nothing will come in a easy way even in Forex ... if you don't respect the Fx chart Forex will burn you over and over again ... no one is bigger then the Fx market in fortune ... even billionaires might bankrupt trading Forex in a bad way without working first on eliminating there human weaknesses ... this is why train your self good to become a good trader and always do your best to avoid becoming another tradoholic or Fxoholic :)
5- Human laziness, yes the majority of human don't like to use this wonderful machine we all have "the brain" even if the brain is an amazing tool "the best gift from our creator to us" and when you know how to use it, and allow your brain storm to rage all the time questioning everything is where you will start to really feel alive in life and aware what is going on in the present ... usually lazy people live in the future or in the past in a illusion ... running away from the present ... and in Forex lazy traders enter long term trades only God know based on what they do enter "just based on 100% of luck" and lazy trader never do there homework good before trading, and the best lazy traders i like are the ones who are fan for robots hahaha ... someone must tell them the truth and in a tricky market like Forex ... the easiest tricks big players do is to trick your robots ... to know if you are a lazy trader or not just ask your self these questions:
- do you read important news each day before you enter the market?
- do you keep wake-up at night to trade till the morning? yes those who can't sleep they are lazy because they can't relax and control there Forex passion to go and let there brains get the normal daily rest it need.
- do you keep you enter trades based on your personal feelings without any system at all or any important news which back up your trades?
- do you trade without clear stop levels as an exit point or take profit level?
Then you are another daily lazy trader, most lazy traders trade long term trades as i told before ... and lazy coward traders trade scalping style ... and brave ones stand in between ... its what i call it human equilibrium and i can write 100000 pages about this subject, yet i m doing my best to keep these articles simple and funny to read ... Briefly anyone can change this lazy fact and become a wise daily trader it's a real nice journey ... and i wonder how can someone invest in the most dangerous market which is Forex and they are lazy by doing there homework good ... one of my traders friends she was trading without watching charts only based on numbers.
This is why 95% of traders lose in Forex ... because of human natural weaknesses "greed + fear + ego + laziness ... yet we didn't finish our study for tonight ... and human weakness is related in a very strong way to the weakness of the body...
6- Human body weakness, how can you become a brave trader if you are not brave in life? or in sport exercises? how can you have a fast reaction in trading if you don't have fast reaction in sport exercises or competitions? how can you manage your trades good if you can't control your heart beets good when you face danger? ... usually the majority of traders with time they become fat or so skinny because they forget to eat, for fat ones trading might be the best diet ever hahaha ... anyway sitting for long hours online is not healthy at all ... or linking days without sleeping, i did try it few times linking days without sleeping and it's not good at all i managed to stay for 3 days without sleeping in my early trading time yet in the fourth day you start to feel like drunk and your body is shutting down alone ... also your brain start to function in a very strange way ... but it was fun to try it for few times to test my strength limits ... but now i sleep so good each night because i close my trades each day before i go to sleep ... knowing what i lose and what i won ... this is why a daily trader need a full daily sport exercises ... and don't be lazy in your sport exercises where many go do body building "horrible sport" in closed gyms ... go run in nature, play games like football, basketball, ... and when you do sport exercises here's the magic trick ... push the limits of your strength each day to let your heart beat fast reaching the limits for 1 minute or 3 minutes no need for more ... 30 minutes of running or walking for those starting new to do sport exercises is enough each day as long you push to the limits for 1 minute each day ... test your heart before doing so if you are old ... also respect your sleeping times each night, never,never, never stay awake for your lost trades all night without sleeping ... cut your lose bravely ... and say to your self tomorrow will be another day with another trades opportunities... to recover and make reasonable profits ...
Briefly to become a brave profitable trader you need to keep your positive thinking all the way and to work hard all the time to become better with time, trading Forex is one of the hardest tasks in life, because you might do lot of work and results will be bad ... and it's a long journey which need patience, discipline, control, braveness, honesty, transparency, humbleness,wisdom ...
"trading is about personality, to become a brave trader you need to have a brave heart & a wise brain"
Happy trade everyone