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 succed. 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 SUCCEEDING 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 TRADERS MAKE MONEY BUT ARE NOT
»PROFESSIONAL«?
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 that 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
1. Don’t understand risk reward and FOREX MONEY MANAGEMENT
2. They have not fully mastered a highly-effective trading strategy like
price action
Your firsst priority as a trader should be to master these two things.
MAKING MONEY IN FOREX ISN’T UNATTAINABLE…
Chances to become a profitable trader are very good if xou do things
likr discused in the article. But be careful I didn’t say ”professionale
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 esch
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 dramaticaly. 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. You’re
attitude should be to TRADE LESS AND PROFIT MORE/SET AND
FORGET.
In the end, I just want to say that i get responds from people thst read
my articles all the time. From people that are truly making it in
theirbtrading, 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 forma FOREX
TRADING EDUCATION or no effective trading method
