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Commitment, Knowledge and Ego

Many programs tell you that anyone can make money trading the currencies. But in the real world many of the beginners fail. Why do so those people fail ? 90% of trading is psychological; the other 10% is technical knowledge. So your success is based on how you approach becoming a trader. Here are the three main reasons why many beginners :

  • Lack of commitment.
  • Lack of knowledge.
  • Your ego needs to win.

Traders should address these issues otherwise they will not survive.Commitment is critical. Most become frustrated because they do not realize instant success. In fact this holds true in any new pursuit. The average person quits early in the game solely because of lack of commitment and unrealistic expectation of immediate success.

Lack of knowledge and appropriate trading strategy, which is a major cause of failure, is a result of an individual's attitude. How anyone thinks they can trade the currency market without training? However, more often than not it happens. People who accept that tennis lessons are necessary before they head out onto the court will start trading with little or no knowledge. Most underestimate the level of skills needed to trade. They have no foundation in how to understand price activity. They do not have a set of rules or guidelines. In actuality, all these individuals are gambling. Another common mistake is collecting too much information. It has been statistically proven that if you narrow your focus, you have a higher probability of success.

Ego is one of the greatest enemies to a trader's success. The ego needs to win all the time and wants to win now and tomorrow and the day after tomorrow . It can not admit being wrong. And so it denies the reality. You must be able to perceive the market as it is, not how you want to believe it is. But it is difficult to clearly see price action if your ego is in the way. Ego makes us take small profits but large losses. It argues that even a small profit is a win. But a loss hurts and instead of accepting a small loss we try and get it back. Ego is why we hold onto bad trades that end up being even bigger losing trades.