Why Most Retail Forex Traders Struggle

It is commonly said that retail traders are subject to the 90-90-90 rule:

90% of them lose 90% of their money within 90 days.

Although this is somewhat an exaggeration, the point is nonetheless anchored to the reality that the vast majority of retail traders lose money more quickly then they expect.

Why? Because this is an industry with a strong conflict of interest from multiple parties.

Most of the so-called “educational” websites you’ve seen offer practically nothing more than entertainment, which keeps amateur traders interested and excited about trading.

These websites are funded by advertisements, and their goal is to keep their advertisers happy. How do they do that? By getting you to keep coming back to their site and spending time reading their “educational” articles and participating in online forums.

Like television programs, these sites get paid for keeping you distracted and entertained. Not for helping you trade better.

And who are paying for the advertisements that support these sites? Most of the time, they are the brokers who promote trading to be an exciting, fun and profitable activity.

Like the flashing neon lights you see in Las Vegas, these are all distractions to sucker unsuspecting traders to adopt a gambler’s mentality.

This tactic works exceptionally well, as it often leads people to over-trade.

Over-Trading is for suckers

Over-trading refers to a situation where the trader either trades too often, and/or trades too large.

This is a situation that brokers encourage, simply because it generates more revenue (fees) for them. They provide all kinds of technical indicators, advanced trading platforms and often hold “educational” webinars that claim to help you trade better.

But if you really think about it, this is like the fox convincing you to let it guard the hen house. In reality, what they’re really trying to do is get you to press the ‘buy’ and ‘sell’ buttons more often.

One result of this, is the popular perception of retail trading to be an ongoing, active process. That is to say, “if I’m not buying or selling, I’m not trading”.

In practice though, most of profitable trading is about the waiting. You plan ahead and don’t take action until you see an obvious opportunity. For the rest (80-90%) of the time, you’re choosing to stay out of the market.

This runs contrary to what most people assume profitable trading to be like – watching fast-moving prices and furiously clicking the mouse.

I am reminded of a wonderful phrase by Jim Rogers that summarizes this mindset.

When asked how he makes money, he said,

“I just wait until there’s money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”

Now think about that. Although Mr. Rogers is primarily an investor, this mindset is relevant to trading as well.

The way I see it, the last sentence is the most important.

Ironically (but unsurprisingly), it’s the part most people ignore.

They’d rather look at the flashing lights, go on an information binge and have a “great” time, rather than focus on making money.

Paradigm Shift

So the next time you open up your trading chart, pay attention to your mindset:

Are you looking for a trade?

Or are you sitting back, waiting for a trade to ‘show itself’?

Instead of asking, “where can I take a trade?”…

… try asking “what’s going on in the market?”

The paradigm shift comes when you notice how the best trades tend to show up on their own, instead of you having to search for them.

And in the meantime, you would be doing nothing.

By |2018-12-17T19:01:13+00:00November 24th, 2018|Mindset|8 Comments

8 Comments

  1. Wale June 11, 2014 at 4:38 am - Reply

    This is a phenomenal and really an eye opener.
    It goes a long way in equipping one the more in becoming a professional TRADER and a winning one for that matter.
    Chris , Thanks a lot for this wonderful work that you are doing , May the Good Lord continue to bless u mightily in Jesus name-Amen

  2. Robert MacIver June 11, 2014 at 6:44 am - Reply

    This is the simple reality of retail trading. Think about it, the markets are open 24 hours per day 5 days a week, most if not all of your bigger moves are going to happen during the overlap of the different markets. These are the simple facts. So why not wait for as many indicators lining up as possible and then stepping into the market? Because our EGO says go go go, when the reality is that less is more. My most profitable month I made 8 trades all month, 7 were profitable. Patient, patient, we sit and wait.

  3. keith June 11, 2014 at 8:04 am - Reply

    Hi Chris, great Blog, you tell it the way it is, no bells and whistles. I purchased your Candlesticks Made Easy and now your update. I believe every retail trader starting out should read it, it’s a no brainer. I am showing my daughter how to trade and I told her to start by learning the candlesticks like she did her times tables when she was at school. I found my biggest problem in the beginning was having the patients to wait for the last candle to fully form (parsing the Anchor candle) and the next candle to open. Patients! patients! patients! Wow, what a game. Oh and learn, learn, learn.
    I’ll be following your Blog closely, I like your style.
    Cheers!

    • Chris June 11, 2014 at 10:20 am - Reply

      Hi Keith,

      Thanks for the support!

      Man, if only I had started trading when I was much younger…

  4. edward June 11, 2014 at 11:15 am - Reply

    I believe I have finally made it, after a lot of time and study, keeping ahead now and have a good profit, that I am happy with anyway, a profit is a profit and small fish are sweet, I believe anyone, as you also say who is new at trading thinks they can earn a living from it in a very short time is misinformed ,yes there a lot of time when you need to not trade, when the market is stagnant, Experience is a great teacher and we all need it to become at least profitable, forget the millions for a long time, just be happy to have a profit showing

  5. andrew June 11, 2014 at 11:46 am - Reply

    Well said.
    I don’t trade manually any more because as much as I understood and understand this truth, I could never follow it.
    I just found it impossible not to chase the trades instead of waiting for them.
    So now I set my strategies and let the EA follow the rules that I have set; and wait for the trade to appear. Something I am not emotionally wired to do myself.

    • edward June 11, 2014 at 12:55 pm - Reply

      Andrew with lots time n experience you can do manual trades, I do both just had a win on manual trade, nothing to rave about ,just a profit ,its all about profit, I will only do a manual trade if set up right, Chris lees latest candle book is worth every cent and will add to your knowledge, and be a great help , there is a setup [sell] on GBP/JPY now finished from his book 8.54pm manila time Wednesday,

  6. Jasin September 9, 2015 at 10:58 am - Reply

    I recommend reading everything you can at your local bookstore about stock trading and trading. That will give you a good introduction. But you’ll still need to develop your own personal trading strategy, and that takes years of study and experience.You can trade with as little as $1,000, but that has to be $1,000 that you can afford to lose, because most people do lose money in the beginning. Most all brokers offer free demo accounts, and you should have 3-4 months of demo profits before you risk real money. Even then, be careful when switching to real money that you don’t risk too much.Best of luck!

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