FOREX TRADING IS A BUSINESS
I agree that you should think about your trading (FOREX or otherwise) the same way as any other business, If we assume (retail) traders are in business for themselves then some prior experience as entrepreneurs (bringing a startup based on an original idea to the point where it attracts outside investment or triggers the exit plan) may help, given that in general (according to http://www.statisticbrain.com/startup-failure-by-industry/), 44% of businesses fail in the first 3 years, 71% after 10 years.
According the link the top reasons for failure of a business include "Incompetence" (46%), "Unbalanced Experience or Lack of Managerial Experience" (30%), followed by "Lack of Experiences in line of goods or services" (11%).
Given that up to 98% of retail traders fail, IMO some explanation of the difference of 20% or so between "regular business" failure and trading failure should be debated. Forex trading can be as simple or as complicated as you want it to be. In the beginning forex trading seems like it is simple. It seems like your only job as a trader is to pick what direction a currency pair is going to go and collect your profit. But 98% of people fails show that trading is very difficult. And not everyone is made for it..
Given that most businesses are started by someone who loves the product I suggest retail traders fail because they love money ("money" once removed from anything worth owning) and love of money shunned by at least one religion for very good reasons.
The most important thing in trading is Patience and Discipline which is more than 80% of trading, specially in Forex as if you miss trade there will always be another to come to your level or strategy entry point, even though the pro Traders know this but it is difficult to master. Trading is about strategy and sticking to your trades, no chopping or changing, whether you use elliot wave or simple point and figure charting, there are those that have an ability to defy the norm. Few important trades you must not take revenge trades and doubling trades to get you out of losses, these can be very dangerous which takes you into the gambling side of trading. The rest 20% is the actual trading using indicators strategies and confluences.
Also trading as an individual is much harder and less successful than if you trade for a fund or a bank as it comes down to money and the ability to support your position, many small traders can get the end result correct but do not have the capital to get there. Many of the so called Forex traders are trading without the needed capital. For example, if you are trading with $10,000, 3% target is about $300, or on average $15 for each day of the month (ca. 20 working days), which may not sound as much to a trader that is sitting in the front of her computer for a couple of hours every day of the month. Which again may mean that she may be open for some ideas that promises a bit better ROE.
Investing in anything - be it real estate, stocks, commodities, FOREX, etc. - gets a bad rap from people who don't bother to learn anything about it before making their "pronouncements". If you do your homework in order to understand the market you're investing in as well as the particular vehicle you're going to use, investing is not gambling. Sure, there is an element of risk but that's true of any type of venture involving money. It doesn't matter if you're talking about starting a business, investing in the security of your choice or any other endeavor that involves the potential of monetary gain or loss. If you don't learn your market and develop a sound strategy for success, you're going to lose. If don't do those two essential steps before you throw your money into the ring, you ARE gambling and almost assured to lose.
According the link the top reasons for failure of a business include "Incompetence" (46%), "Unbalanced Experience or Lack of Managerial Experience" (30%), followed by "Lack of Experiences in line of goods or services" (11%).
Given that up to 98% of retail traders fail, IMO some explanation of the difference of 20% or so between "regular business" failure and trading failure should be debated. Forex trading can be as simple or as complicated as you want it to be. In the beginning forex trading seems like it is simple. It seems like your only job as a trader is to pick what direction a currency pair is going to go and collect your profit. But 98% of people fails show that trading is very difficult. And not everyone is made for it..
Given that most businesses are started by someone who loves the product I suggest retail traders fail because they love money ("money" once removed from anything worth owning) and love of money shunned by at least one religion for very good reasons.
The most important thing in trading is Patience and Discipline which is more than 80% of trading, specially in Forex as if you miss trade there will always be another to come to your level or strategy entry point, even though the pro Traders know this but it is difficult to master. Trading is about strategy and sticking to your trades, no chopping or changing, whether you use elliot wave or simple point and figure charting, there are those that have an ability to defy the norm. Few important trades you must not take revenge trades and doubling trades to get you out of losses, these can be very dangerous which takes you into the gambling side of trading. The rest 20% is the actual trading using indicators strategies and confluences.
Also trading as an individual is much harder and less successful than if you trade for a fund or a bank as it comes down to money and the ability to support your position, many small traders can get the end result correct but do not have the capital to get there. Many of the so called Forex traders are trading without the needed capital. For example, if you are trading with $10,000, 3% target is about $300, or on average $15 for each day of the month (ca. 20 working days), which may not sound as much to a trader that is sitting in the front of her computer for a couple of hours every day of the month. Which again may mean that she may be open for some ideas that promises a bit better ROE.
In my opinion, you need 2 strengths to be among the 2% survivor list:
* You need an edge. Do not enter a trade if you do not have more than 50% chance of gain, this is why I never play casino. If you do not have that edge, your broker holds it: his house edge are the transaction costs (spreads). Your edge can hardly be built with a single indicator, However, if you start to combine them and add filters, you might be above 50% on the long term.
* Even with a great edge, control your leverage, otherwise you are likely to hit the point of no return and never exit a major drawdown! Several losses in a row will hurt you, irreversibly! Hollow a major drawdown is always a challenge. Do not use high leverage even if your trading station allows it! My recommendation for max leverage is the standard 1:100.
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