Today I want to discuss 10 harsh truths about forex trading that all aspiring traders should be aware of when entering the forex industry.
We have all seen the flashy young guys on Instagram showing off their dream lifestyles with their exotic holidays, gold watches and lamborghinis, but they are selling a dream and this is not the reality for most traders.
In fact a lot of these people don’t make their money from trading at all. All of their income comes from selling signals and second-rate courses to newbies.
So this trading lifestyle is one myth that needs exposing right away, but there are other truths about currency trading that you should be aware of.
The goal of this article is not to put you off forex trading because it can be a very rewarding career and you can make some great profits working from home, but as someone who has been trading for many years, I simply want to show you how difficult it can be to start making consistent profits.
Okay so here are the 10 home truths based on my own personal experience:
Forex trading is not a get rich scheme
Many people become interested in forex trading because they think they can get rich in a short space of time, possibly inspired by stories of people turning an initial $1000 into $100,000, for example.
However while this is possible in theory if you use a lot of leverage, a more realistic goal is to build wealth slowly over long periods of time because this is a much more achievable goal.
If you could just make a consistent 1-2% per month, you could still become very wealthy in the long run.
Forex robots are not going to make you rich
Forex robots, also known as expert advisors or EAs, are everywhere these days, but the truth is that most of them are not very profitable or reliable.
While they may have hugely impressive results based on years of backtests, they rarely deliver the same kind of profits once you actually start using them yourself on live markets, especially when you factor in spreads, fees and slippage.
Most forex products sold online are completely useless
I rarely promote any forex strategies or courses any more because it’s very rare that I come across any decent ones that are worth promoting. Sadly most of them are a complete waste of time and money.
In a lot of cases they have simply copied a trading strategy that they found online and resold it as their own. You only need to see how many people are teaching ICT’s strategies for evidence of this.
Only a small minority of currency traders are actually profitable
It is estimated that only 5% of traders actually make money, although figures from brokers show that this figure is slightly higher than this.
Anyway the brutal reality is that most currency traders eventually end up losing money in the long run, despite experiencing profitable periods at some point in their careers.
You may not have the discipline needed to succeed
It is a fact of life that not everyone is cut out to be a profitable forex trader. To be consistently profitable requires a great deal of discipline, and some people just do not have this level of discipline.
You need to learn to take losses regularly, you need to cut your losses early when they do occur to avoid any blowouts and you need to maintain the discipline to trade only the best set-ups and hold your trades until they hit your target price, none of which is easy to do.
Working hard does not guarantee success
In most walks of life you will enjoy a long and fruitful career if you knuckle down and work hard. However in forex trading this is no guarantee of success.
You could study charts for 12 hours a day every day for years and years and still not come up with a profitable trading system, while other people may develop their own winning system after just a few days or weeks.
Being intelligent is not an advantage
In many ways the fact that forex trading does not require immense brain power is a good thing. A little knowledge of maths is always helpful when placing trades, but it is possible for anyone to become successful trading currencies.
Forex trading is a lonely profession
Working from home staring at a computer screen all day is not many people’s idea of fun, and unfortunately you cannot get away from the fact that this can be a very lonely profession at times.
That’s why it’s important you lead an active social life and try to take breaks and go outside during the day because otherwise you may well find yourself going mad.
Profitable systems may not remain profitable forever
A lot of people get excited when they finally manage to develop a profitable trading system, and may even believe that they have found the holy grail.
However the holy grail simply doesn’t exist. Market conditions can change and there is no guarantee that your system will still be making consistent profits in the coming months and years. You always need to be adaptable and ready to adjust your system accordingly.
Even the most profitable traders go through bad patches
There are some very talented traders out there, but everyone goes through bad patches at times. These losing periods are part of the job. I’m experiencing one right now in one of my new prop accounts.
You have to remind yourself that as long as your system is still making money overall in the current market conditions, you have nothing to worry about. Eventually your equity curve will start trending upwards once again if you stick to your strategy.
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