This week’s question comes from Manny, who asks:
Hi Justin, why do you think so many Forex traders fail to make money consistently?
Trading Forex successfully is one of the most difficult endeavors you will ever pursue. If you’ve been trading for a minimum of a few months, you’ll know I’m not exaggerating.
Confounding, isn’t it? That a task which involves either buying or selling can be this hard.
Chances are though, if you’re reading this, you know it isn’t just about buying and selling. There are a plethora of other factors that affect whether or not you’re profitable.
I’ve discussed many of those factors on this site. Everything from risk-to-reward ratios, to chart patterns, to emotional discipline.
However, I’d like to take a different approach today. Instead of listing what you should do, I want to share the top three reasons I believe most Forex traders fail.
By the time you finish reading, you’ll know why starting with indicators may not be the best approach. I’ll also share a few strategies for developing patience, and discuss a little-known reason many traders fail to achieve consistent profits.
1. A Misguided Approach to Forex
The root of many traders’ failures is twofold. Not only are most individuals lured into Forex with the promise of quick and easy money, but they are also misguided in the methods required to achieve said money.
I discuss the attraction to money later in this lesson, so for now let’s focus on what it takes to make money as a Forex trader.
More specifically, I want to share what isn’t necessary.
Before I do though, I want to make it clear that every individual needs to find his or her own path. There is no right or wrong style or method of trading, and the “best” strategy is always the one that works best for you.
With that said, most indicators are a complete waste of time. In my opinion, they’re a distraction from what’s important—the price action on your charts.
You see, every indicator lags. It’s like trying to drive a car while looking only in the rearview mirror.
Price action, on the other hand, is what’s happening now. It’s the movement you see occurring each and every day.
And if you combine the study of that movement with end-of-day trading using New York close charts, you’ll find that navigating the Forex market isn’t all that difficult.
Take it one step further by learning how to draw key levels and chart patterns like channels and wedges and you’ll be unstoppable.
It isn’t a guaranteed path to success, nor is it quick and painless. You’ll still need to put in the time and effort, but it is a far superior method than staring at a bunch of lagging indicators all day.
Now, I’m not saying you can’t be profitable using indicators. I know there are traders out there who have found success using indicator-based systems. Heck, even I use the 10 and 20 exponential moving averages (although probably not in the ways you’d expect).
But here’s the deal…
Even if you’re convinced that indicators such as the MACD or RSI are the best way forward, learning how to read and trade price action can only help.
When was the last time you saw someone using an indicator-based system without any support or resistance levels of any kind?
I’ve never seen it, and the mere act of identifying support and resistance levels is part of the study of price action.
So no matter how you evolve as a Forex trader, learning the ins and outs of price action is beneficial.
I always recommend that traders start with price action first. Only once you fully understand support and resistance and various chart and candlestick patterns should you begin adding an indicator or two.
That’s the opposite of what most new traders do. Instead, they start with five conflicting indicators, continually swapping them out and failing to understand why after two years they continue to struggle.
The solution is to wipe your charts clean. Study the natural ebb and flow of the market first, and then add an indicator—but only if it complements your new approach.
If it doesn’t, leave it off your charts. The more indicators you add, the less price action you’re able to see.
Although there is no single best way to trade, I’ve seen far more traders achieve success by removing indicators than adding them. Keep this in mind as you search for your best approach.
2. Lack of Patience
Let’s move outside the realm of trading for a moment. Instead of thinking about why traders fail, let’s focus on what most humans lack and see if we can’t find a correlation.
I’m guessing you know where I’m going with this. The very name of the subheading above is a massive clue.
Yes, we’re talking about patience, or a lack thereof.
You see, most people lack patience. For those who commute to work and are forced to sit in rush hour traffic, you know this all too well.
Look around at how many drivers nearly rear-end the car in front of them just to get a few feet closer to home. And yet, their turn toward home is always the same and driving closer to the car in front of them never speeds up the process.
Trading is much the same. You develop a list of requirements for opening a trade, so you know what you’re looking for, yet you open positions with little regard to your own criteria.
Why do you do it?
Just like the driver sitting in rush hour traffic, it’s a lack of patience that draws you out and urges you to take the trade even when everything inside of you says to wait.
Trading isn’t what will make you profitable, it’s the waiting!
The time you spend waiting for that A+ setup is what sets you apart from the rest. How many people have the patience to wait days or even weeks before shorting the EURUSD?
Not many. Yet that’s what it often takes to get the most favorable entry.
I’d bet that more than 90% of the global population lacks patience. Again, just have a look around the next time you’re stuck in traffic or waiting in a line.
At the same time, more than 90% of Forex traders lose money consistently.
Is that a mere coincidence or something more?
In my opinion, it’s most certainly something more. Of course, patience isn’t the only factor when it comes to successful trading, but it is the one that can make or break your trading career.
So how do you develop patience?
A few basic yet effective techniques come to mind…
Don’t lose sight of the big picture
Trading Forex is a process. The journey never ends, even once you achieve consistent profits.
You don’t wake up and say, okay, I need to know everything there is to know about Forex trading by July 20th.
It just doesn’t work that way.
Rather, it takes most individuals years, not weeks or months, to become successful in this industry.
Trading is a career choice just as others choose the medical or law professions. Both of those paths require years of education and experience before the individual can be considered successful at their chosen career.
Why should trading Forex be any different?
The truth is, it isn’t. It’s a long journey that requires discipline, consistency, passion and a hefty dose of perseverance.
For those who embrace the journey and understand the effort and time required, the results are well worth the wait.
Understand that patience is a part of your edge
If more than 90% of the population lack patience and over 90% of Forex traders fail, what would happen if you developed patience?
Well, for starters you’d be in the five to ten percent of people with patience. That can’t be a bad thing, right?
But what effect would it have on your trading?
While this question is more difficult to answer, I can all but guarantee that it’d put you much closer to the five to ten percent of successful Forex traders.
It may even put you right in the middle of the pack. That’s how confident I am that the single biggest personality trait you’re missing is patience.
While knowing this won’t directly help you develop patience, it will emphasize how important this trait truly is. Otherwise, why spend any time or effort on developing patience as a trader?
Everything you do as a trader that helps to separate you from the 90% that lose money is part of your trading edge.
At the top of that list is patience.
Plan your trades ahead of time
When the market opens each Monday, do you have a plan?
I hope for your sake that you do because I can assure you that the market won’t take it easy on you if you don’t.
The only way to utilize patience as part of your trading edge is to plan your trades ahead of time.
They may not all work out and many won’t even materialize, but that’s okay. Having a plan is enough, regardless of how the market decides to behave that week.
I’ve found that weekends offer the best time to plan for the week ahead. Even if you’re busy most weekends, I bet you can carve out an hour or two to do some planning for the upcoming week.
As for what information you should capture, there is no one-size-fits-all answer. It depends on your style and preferences.
Personally, I keep notes inside of the same online trading journal I provide to new Daily Price Action members.
You can be as detailed or brief as you like. However, I would recommend that you keep track of the currency pair, any key levels of interest as well as any potential opportunities that may develop.
Above all, keep it simple. Track only what you need and keep any pending opportunities to a minimum. Remember, the quality is more important than the quantity.
Stop focusing on making money
I cringe every time I receive an email that asks how much someone can make with a $1,000 account.
Why should that even matter? It’s far more important to learn the process of good trading than it is to try and make money. In fact, that’s the only way it works.
Those who attempt to profit or even focus on making money before understanding the process are destined to struggle—and perhaps even fail.
As I’ve mentioned before, focus on the process of good trading and the money will follow.
For those who are chasing quick money, the Forex market is the quickest way to the poorhouse.
On the other hand, for those who understand and accept the process and are willing to put in the time, the Forex market can eventually be a stream of income.
3. A Love of Money, Not of Trading
This is one of my favorite topics to discuss. It gets into the one factor that you cannot control, yet can prevent you from becoming a successful Forex trader.
What is that one thing?
Passion! That burning desire that pushes you ahead after each blown account and refuses to go away regardless of how many times you’ve fallen down.
I’m talking about a love for all things Forex. It’s the one thing I cannot teach. You either have it or you don’t.
There aren’t many guarantees in this business. We sit down at our computers every day knowing that the best we can do is stack the odds in our favor.
However, there is one guarantee that’s impossible to escape…
If you don’t absolutely love trading, you won’t succeed.
I’ve been in this industry since 2002 and have never met a successful trader who isn’t obsessed with the markets—the trading itself, not the money.
For those who have read the Market Wizards books by Jack Schwager, you know this to be true.
Schwager conducted more than 40 interviews over the years, and not one person mentioned a love for money. While each of them have made millions or even billions of dollars, it isn’t what attracted them to trading, nor did it fuel their desires.
Every one of the traders in those books was fueled by a childlike fascination with the markets. The money they made—and continue to make—was the byproduct of their passion for trading.
I can’t stress this point enough. I get hundreds of emails each week from hopeful traders, and unfortunately one of the leading questions is, how much money can I make with a $1,000 account?
You can insert any number there. What’s significant about this question is that these individuals are focused on the wrong thing.
Questions like that tell me one thing—the person asking it is more in love with the money than they are with trading and markets.
I’m not saying you can’t want more money and still succeed. There’s nothing wrong with wanting a better life for you or your family.
However, if you’re more interested in the cash, fancy clothes and exotic cars, you may be in the wrong business.
This may come as a surprise, but I believe trading is one of the worst ways to make money in this world. If it were such a great way to get rich there would be a lot more successful retail traders out there.
It’s a bit of a conundrum. Those who only want to get rich get poorer, and those who aren’t focused on making money earn the most.
Focus on the process of good trading and the money will follow. That is the best advice I can give to any aspiring trader.
There’s no single answer for why most Forex retail traders fail. It’s a combination of factors that affect each trader differently.
However, the three topics above are at the top of my list. Some are more obvious than others, but each plays a critical role in the road to successful Forex trading.
Regardless of whether you decide to use indicators or not, an understanding of price action trading can only help. After all, it’s the movement of the market that causes indicators to do what they do.
If I were forced to give my number one reason most traders fail, I’d have to say a lack of patience. It’s the one thing most people struggle with, so it makes sense that it would also cause traders to struggle.
A passion for trading is a must if you want to succeed. It’s the one thing I can’t teach, and it’s also the one thing that can keep you from making money.
And make no mistake, a desire to make more money will not suffice. In fact, a desire for money without an overwhelming passion for trading will only lead to more blown trading accounts.
Your Turn: Ask Justin Anything
I’d love for this new weekly Q&A to be successful and provide an invaluable repository of answers to common Forex questions.
To do that, I need your help.
Here’s what you can do to get involved and have your question answered in next week’s post:
- Ask questions. Post them in the comments below or Tweet them to me @JustinBennettFX
- Help me answer questions. If I missed something or if you have something to add, don’t hesitate to leave a comment below.
This post is very true and helpful. I felt it in my spirit cause it is TRUE!!!!! I Started trading with a large account but i lost them all cause i wanted an action packed account and I wanted to make money every week. But after finding your page, I realized i’ve just been chasing shadows cause real traders use 4H, Daily and weekly time frames to scan for a great setup, this takes PATIENCE!!!!!!!. “Don’t chase the market, let the market chase you”
Justin, before joining you, I lacked patience. I enter a trade and close it in a matter of minutes because it was going against me, no patience!!!! . But after going through all your modules I hold my trades to my TP. I am very profitable now since joining you than ever before. Thank you Justin… You are the best forex mentor. Have a great weekend boss.
Nice artice coach. Nice reminder too always focus on the process of trading and consistently develop patience over the years. Thank you.
I’m a follower of your blog for a couple months now and I’ve seen some improvements in my trading. I took your advice and seriously remember you advised me to stop Trading my real account I listened, and for six weeks I haven’t been Trading my real account. I’ve since dropped indicators into the bin and what I see now is different, each time I open chart I strart talking to myself narrating what every candle is meaning . I’ve cut down my number of trades per day from over thirty to 0 to 5 trades. The number of my trades per week is now less than I used to trade per day.
My problem now is reading correctly momentum, often my trades fail to reach my intended target. Is it I’m not drawing my support and resistance correctly. And if I see spot a say an engulfing I wait for the second candle to close but the next candles won’t last long. How do I fix this?
. yes you might not be drawing your structure correctly.
secondly, for me, as soon as the candle closes as my signal, i pull the trigger immediately as i use instant execution order. i am not a fan of limit orders in anyway. infact i hat limit orders
Hi, Mr. Justin
may i ask patience problem. little story about me (I am a person of every thing).
but if you’ve seen the forex, I can not wait?
what is the main recipe to be patient in front of the screen.
the extent of the level of patience?
is it possible to be too patient to miss the opportunity to trade?
thank you, regards
sorry I use Google translite.
Your very honest comment will affect 89% of new traders-
either they will listen or stop trading[I Hope]. Short cuts in life equals failure-
Thank you for your site.
Thank you, Justin, for broaching themes that are always enlightening and encouraging.
Thank you Justin for your comments on the difficulty of trading. I am not much of a technical person but you surely helped me on the way of becoming a little wiser. I have lost money probably not as much as others have but it is enough to be annoyed about. I have now learned to look at money as second of importance and as a byproduct of trading. Even trading itself is not important to me anymore but this one thing that has become a part of my main focus … getting it right. Even this imo takes second place after ‘loving to trade’ which I really don’t. It’s one step lower that takes the word trading out of the picture. This is very relieving to the mind taking the focus off of the word ‘trading’ which constitutes a plethora of frustrations that could lead to tremendous fear of not daring to push the button any more which is where I had to counsel myself through to overcome that. So I use a couple of hundred Forex $s to earn pennies or a few $s at the time to get this total satisfaction of DOING IT RIGHT followed by the byproduct before I decide to upgrade my account to a higher level. I hope this may help someone who may not have thought of this type of approach.
I have been learning forex trade since 2004 but due the nature of my job I have never settled to trade with real money I have always been trading with virtual money little profit, till now I’m still engaged in my salary work. What effort do you thing I can put up excel in forex trading.
* Don’t even think of “letting go” your current job. You need regular income so that you can focus on TRADING and not on Money.
* Dedicate regular time to learn and practice Forex.
* Trade/practice on a Demo/Virtual account
* After consistently making profit for 3-6 months on Demo account open a Micro account (probably with $100).
* Continue practicing both on Demo and Live Micro accounts.
* Once you are comfortable and after consistent profit of 3-6 months in Micro account you may consider investing higher.
Just my 2 cents…
I am just sharing my experience. I am still learning & practicing. I joined member’s community 3 years ago and have been learning/practicing. I recently opened micro account. I wouldn’t call myself a successful Fx trader yet … but I know that day is not too far. 🙂
decide to dedicate serious time to learning how to read & interpret a naked chart, draw support, resistance and trendlines. get serious with this shit man this business can liberate you for ever. get serious baba
I can see Justin really writes from the heart and speaks the truth
Wonderful enlightening article, worthy to print it, buy a frame and hang it on a wall to re-read again and again_
Also I’m Proud to be one of your students
Good day Justine.I ‘m a lucky man today to read this article of yours.Sir what you’ve just narrated here is absolutely correct there is no point that is wrong,actually some of us the newbie we are misguided by our mentors,giving us the mindset that there is money in Forex trading without telling us the risk involve in it, all they needed from those that want to go into Forex trading is money. Infact sir, I really enjoy all your write-up that I’ve been following,Keep it up.
Thank you Justin, You remain my best Forex educator…Remain-blessed for the pieces of advice dissected here…
I’ve been live for 3 weeks after six months on demo, learning/studying every day.
I love price action, trendlines, support and resistance. When you see price travelling along, or bouncing off, your trendline or price zone, its a little bit of magic. I only use a couple of EMAs and volume. Love Anna Coulling’s book on volume price analysis.
All this work has given me a great foundation, but my first two weeks live were challenging to say the least.
I was focused on not losing money. In demo, I had few losses because I enjoyed it and trusted my analysis. Live, I temporarily lost that trust and simple pleasure in the process.
I managed to stay ahead with my bank, two steps forward, two steps back but wasn’t enjoying it. Fear of losing was my biggest issue.
So, the next stage was tp become absorbed in reading trading psychology books, I read about focusing on the process instead of results (money) and I applied that learning. 3 books I have read this week and listened to Trading in the zone every day for an hour.
It’s only been a week but what a huge difference. The last three days, I felt in the flow, made less impatient errors in timing and enjoyed every minute. I also ended with 160 pips over 3 days of trading. I have a strategic, problem solving nature which leads Forex to be great fun for me, if I let It.
It felt good to discipline myself and focus on waiting for the perfect set up. I’ve missed some, and taken profit too early on others. That will improve as I focus on process and my performance as a trader.
I love that I’ve seen this article as further confirmation. It makes so much sense. I love Forex. I love the entire process and never tire of reading, watching videos, studying charts. It fascinates me. Now I know that this is a big plus. So many just don’t do this and the market sucks them up and spits them out :-O
I now rate every trade, win or lose, journal every day and start each new trading day armed with the lessons from the day before 😊
Terima kasih Justin, sudah bergabung di BLOCK anda, saya sudah trading forex tapi selalu loss , belum pernah profit. Saya berharap bisa dapat masukan lewat blog Justin untuk merencanakan trading saya dengan penuh kesabaran. Terima kasih sudah bisa baca dalam bahasa Indonesia. Salam
Aris saya juga dari indonesia saya sering ga tau kapan hrs closing ,jadi sering kewalahan jadi lost .bisa anda bantu .tks
I believe most people on the planet would want to have trading as a business.
But the reality is most people will not succeed in it for a variety of reasons.
Pattern trading or support resistence do not always work out.
The only mechanical thing we can control is position size.
Personally ive traded the forex markets for a long time now and still have not made any real progress with it inspite of many thousands invested and countless practise houres.
We as retail traders lack “the inside knowledge” of the large institutions which need to “real in” the majority of traders to make their profits.
Just start very small.
And this is just my opinion,
From a struggling trader.
Trading dengan baik dan benar sesuai plan trading. Maka profit dapat dihasilkan.
no. one reason traders fail is they have no edge. back to the basics of building a trading system first. you could be patient but no edge……..dmmmm game over. patience becomes a pillar once you’ve identified YOUR OWN EDGE not someone elses.
Thank you Justin for clarifying my frustration with trading FOREX. Patience and Passion-the two things that I will need to develop if I want to succeed in this career field.
Making money cannot be taken away from any body going into any activity. Elementary Economics educated us well on this that every economic activity is geared towards satisfying needs. The time, opportunity cost of both energy and resources deployed to procure data, equipments or tools are all money. Your point is valid on patience. I really get that well. Thank you so much.
Excellent article and so true
Thanks for summing it so well
This is great.
Last time you taught about Tradng the Margin. Does it go with Stop Loss? How can I place stop loss while trading the margin since it it so small
Justin beautiful article… the passion of which you speak I reckon I have… it’s not about the money for me anyway… but could you give a bit more insight on how to deal with those moments (mentally) when you believe you have done everything right and you know you are on a winning streak and then your bubble is burst or the rug is pulled from under your feet and you start to question whether you really are ever going to get this?… I step away after such occurrence mad at myself but keep on going back to rectify my mistake and can never seem to find one??
Hi Justin…I would like to know how do you even begin to recover after blowing your account for the 4th time?It gets very discouraging how do you bounce back from such?
Learn to calculate lots chana. You can’t go all out on every trade you take. Have passion for trading and have a will to learn. Try learning every word you saw on this brokers.
Patience is a virtue..!
Boss, I’v lost my language how I can thank. Your article is a medicine of my heart. I will use it during my trading
How do I identify resistance and support levels?
Also, how I use MACD and RSI? For example, when one talks about MACD 5, 10, 20? Please explain this jargon.
It’s not Justin’s way of trading. My advice, ditch the indicators and learn to read the charts. I am not a big fan of candlestick patterns, simple use plain chart with horizontal lines
This is quite timely. It would save a lot of lives and rekindle some dying passion in this business. Thanks a million.
Justin, great and helpful article.
Justin,I really need your help I have been a trader for years and not successful yes I tried to remove my attention from making money or get rich quickly syndrome but concentrate on act of good trading.I discovered that I always go against trend is now becoming a trait I don’t know to break out of it when I go over all the trade I took most of them are all counter trend trading.Even after affirmative statement that I will never go against the dominant trend in the market I see myself doing the same thing over again.Is it lack of patience that is causing this.please help me.
This hits me straight to the bone. Patience is my problem too. I also tend to focus on making money. I rush into seeing setup even when there’s none. If you come to think of it, trading isn’t really that profound. Patience and discipline is all you need to make it and succeed. Thanks for thr the article Justin.
This is very helpful and inspiring to me as a begginer in trading.i agree that patience and focusing on the process and not money is the key. Thank you
Yes you are right!! The main factor is patience. Whenever I lost it, I lost money as well. Your blog is very much helpful and you say it so open. Thank you.
Experience is what you get when you don’t get what you expect its as if the market takes a conscious decision to get rid of those who are not determined who lack the ability to roll up there sleeves and get to work (those who take it for granted ). Every beginning is difficult this is especially true of forex trading if you can grasp the essences of the above article your off to a great start on your journey to finding yourself within the markets. Great wisdom as always one of the best and most informative sites if not the best on forex trading 15 out of 10 its amazing what you are doing for novice and those that have experience trading
Hey Justin, thanks for what you offer for free. I am wanting to learn to read the forex market. I don’t see how anyone can trade without being able to read what the market is saying. I want to sit down and trade the market for a couple hours and leave with a profit. Is it possible to read the market as it is moving, say during openings and closings and determine direction, profitability, and high percentage of success?
Thanks boss , Im highly enlightened with this article. But my problem is dt sometime a winning trade turns to be loss while waiting for Tp to be hit. Could it be too much patience
Hi Justin thank you for this great article.
Amazing article…..put very simply. Thank you Justin, you are a star!!! Raj