Most traders have heard or read about a very common myth which says that 95% of people that try their luck in the market fail to succeed. This myth is based on general statement that is actually incorrect, without any solid evidence and with flawed logic. Unfortunately alot of potential traders believe the myth and are overcome by fear from the very start of their trading career.
SO WHAT ARE YOUR CHANCES OF SUCCESS AS A FOREX TRADER?
This is a very important question that deserves a discussion based on logic and not the vague general statements that we often find on the internet. Let’s start with some supporting evidence and logical thought, to give you some confidence and remove some of tge ”i’m just another doomed trader” thoughts that you have had or are you having them right this moment.
WHAT PERCENTAGE OF RETAIL TRADERS MAKE MONEY ?
There are always people making money on the market, you could say that in theory for every loser there is a winner. But consistently making money is something completely different. In the long-term there are going to be more traders that have lost their money than the ones that have made it. 95% of traders are not professional or full-time traders, but this does not mean that 95% of traders don’t make money in the long-term. Many beginning traders over-trade or over-leverage their accounts because they aim to be ”professional” right from the start. Your goal should be to make profit at the end of every month, if you acomplish that you are not yet a professional but you are a profitable trader. If youvaim to make a profit each month your chqnces of success will jump real high. With time you gain more knowledge and skills and you can change your goal from profiting every month to profiting every week and eventually to pro- trading. You will see your trading skills are improving and your account is growing. But first you need to understand the diference between”professional”/full-time trading and being a profitable/part-time trader.
Traders that want to make money and become good traders, have better chances at succeding in the markets in the long-term. There are reasons why this is so, let’s explain them in more details.
First reason why you have better chances to succed if you lower your expectations of ”professional” trading right from the start, is because it puts you at a much more advantageous emotional point than expecting to become a pro the first month you starr trading. When your expectations are reasonable, you won’t have desire to over-trade or to trade large position sizes. When your goal is to be profitable at the end of the month and not to make a living from trading like most beginning traders feel they need to do, your temptation to over-trade and over- leverage your account is really small.
If you don’t feel pressure to depend on your trading exclusively for income, you get rid of most if not all of the emotional bond to your trades and to the money you have at risk. Releasing your emotional bonds with the market is the easiest and quickest way to success, you just need to have realistic expectations, so don’t expect to become a pro-trader right away, FOREX TRADING SUCCESS COMES FROM WITHIN. As a part-time trader you can make profit, and the statistic of people that make money every month is 20-30% not 5-10% we so often hear about.
SO WHAT ARE YOUR CHANCES TO ACTUALLY MAKING MONEY AS A FOREX TRADER?
Let’s take a look at some actual facts and figures, so you can see your actual chances of making money as a Forex trader with an effective FOREX TRADING STRATEGY vs. A trader without any strategy at all.
We will take a ”control group” that will present the risk reward ratios, and the ”variable group” that will present the trading strategy or entry method.
Let’s first take a look at what it takes to be a break-even trader in terms of risk reward.
As you can see in the chart below, with a risk reward of 1:1 you have to win 50% of your trades to breakeven. As your risk reward moves up you can win less of your trades and still breakeven; a risk reward of 1:2 requires only winning about 33% of your trades to get to breakeven, and a risk reward of 1:3 requires you only to win about 25% of your trades to breakeven, take a look at the chart:
If you want to be a trader who simply makes 1 times risk on each trade, you have to win 66% of time with a risk reward of 1:1, 50% of the time with a 1:2 risk reward, and with a 1:3 risk reward your winning percentage can be as low as 33% to make a 1R profit.
The power of RISK REWARD IN FOREX TRADING is a common discussion in my aticles and for good reason. Rvery trader must understand and seè that by letting your wins out-pace your loses, your way to successful trading will become easier to achieve.
But over the long-term, risk reward is not the only thing thst makes a profitable trader. You need a high-probability trading edge like PRICE ACTION. And that will increase your chances for making money constantly.
The chart below on the left displays how many winners are required to breakeven with no particular trading edge, basically, over a long-series of trades, you will breakeven by winning 50% of the time on a 1:1 risk reward ratio, 33% of the time on a 1:2 risk reward ratio, and 25% of the time on a 1:3 risk ratio. With only random entry and risk reward in Forex trading, you are likely to just perform around breakeven over the long-run.
Now compare this random entry risk reward model with the chart on the right; it shows your approximate chances of winning using a high-probability trading edge like price action trading strategies in conjunction with the power of risk reward…
Your chances of winning will be lower when the tisk reward ratio raises, it happens so because your target moves further away, but your stop loss stays in the same place. In the mean time as the percentage of your stop getting hit is increasing so will your target, so you need to stack the odds in your favor as much as possible by using a high-probability entry method like price action.
From images above you can see that an experienced trader with a solid FOREX TRADING PLAN who knows exactly their way around the market, has a much better chance to make money , than a non-experienced trader who is essentially entering ranfomly. The reason why so many traders lose money is because they
- Don’t understand risk reward and FOREX MONEY MANAGEMENT
- They have not fully mastered a highly-effective trading strategy like ELITE STRATEGY .
Your first priority as a trader should be to master these two things.
MAKING MONEY IN FOREX IS REALIZABLE.
Chances to become a profitable trader are very good if you do things like discussed in the article. But be careful I didn’t say ”professional trader”. The reason I didn’t say it, is because as we stated above, your goal at first should be to be a profitable trader at the end of each month. That’s a goal that is easier to achieve at the beginning. Doing things this way will give you a realistic goal and your chances for success will increase dramatically. You will avoid common mistakes that many traders make because they try to rush into being a pro right away. Start with a plan to trade part-time and do it successfully. Your attitude should be to TRADE LESS AND PROFIT MORE.
In the end, I just want to say that i get responds from people that read my articles all the time. From people that are truly making it in their trading, not because they are professional full-time traders but because they learned the importance of effective money management and price action trading, combined with one another. Having a solid education in an effective trading strategy and truly ”mastering” it increases your chances of making money consistently in the market.
As a Forex trading coach it’s my goal to push traders onto the correct path that gives them better chance at success in the Forex market. So it’s a great satisfaction to know i helped so many traders through my courses and lessons and that because of it they have a better chance at making money consistently than someone that has no formal FOREX TRADING EDUCATION or no effective trading method.
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