When you are researching and reading different authors who present on forex trading it is impossible not to feel identified with some scholars who manage to give you in the vein with their postulates and ideas. Something like this happened to me when I started reading Mark Douglas, with Alexander Elder, and I also feel this way with some conclusions of famous trader and international speaker Alpesh B. Pastel. For those who don’t know him, Dr. Patel is one of the UK’s best-known financial commentators and founder of investingbetter. In addition to writing 9 books on trading (several of them sales records on Amazon.com and eBay), he is a regular columnist for the Financial Times, Bloomberg, CNN, Sky Business News, CNBC, among other financial media.
In his e-trading work, Alpesh explains why 90% of intraday operators fail. I share with you some excerpts from this great work, but above all pay attention to what this well-known expert says about what some people still don’t realize… but it’s never too late… Why do 90% of intraday traders and investors in futures fail?
One widely circulated figure is the level of failure of investors in stocks and short-term futures. That’s an argument enough to make you think twice. There are five main reasons why this level of failure is so high.
Those who plan to invest in the short term should take the following into account:
1. Issues related to your Forex trading system (strategy)
Short-term investment, by its very nature requires a more elaborate investment system, many short-term investors lose money because they do not understand the importance of having an efficient investment system. They simply lack a reliable system.
2. Psychological aspects of the investment
The psychological aspects are those that can upset an investment. Paul RT Johnson, Vice President of ING Barings Futures and Options comments: “Before trading you should study more psychology than mathematics. Many investors have failed to master the facets of investment psychology and this contributes to the 90% increase in the number of investors who lose money.
3. Forex Commission Issues
Commission costs are another factor that affects short-term investors more than long-term investors (does it make sense to earn 10 pips and risk 15 pips?). Many short-term investors believe they have profits until they count the commissions. Some assume that commissions are too small to make the difference between profit and loss, but they are wrong.
4. Issues related to the ability to trade Forex Trading
Let’s compare a long-term business strategy with that of a day trader. The latter is previously faced with counterparties or market-makers (e.g. JP Morgan). It takes much more than reading a book to succeed in negotiating in the short term. 90% of short-term investors fail, most of them in their first year of business, when they have less experience.
5. Money and risk management issues
Uneducated operators do not know how to calculate the levels of profit and risk they must assume. Short-term investing is “stock market inflation”, i.e. more frequent circulation of capital (don’t forget that the more trades you make, the more you are exposed to market risks).
I do not intend to demonize short-term trading, on the contrary, I respect other ways of trading and I believe that if a strategy of this kind can make you earn pip’s and fits the profile of a trader then welcome that system. What I do believe and am quite convinced is that a person who starts trading should learn to trade first in the medium term and then in the short term. The answer lies in what Alpesh and several other authors tacitly point out. Operating in the short term requires much more skill, education, emotional control and, in short, more experience. A novice ends up with his beads fulminated in the short term because he has none of these ingredients. Perhaps this explains why most forex traders start trading in the short term and the level of failure is so high. At least think about it, so you won’t be part of the statistics.
Operate with judgment and responsibility, do not operate by trading. This is the only way to understand the Forex market. The Es.DailyForex.com team is made up of Forex researchers and analysts from all over the world who observe the markets daily in order to offer you a unique and useful perspective that can help you in your forex trading.