Forex trading can be highly profitable, but it’s not easy to continue your profit-making streaks. Many forex traders keep losing money due to taking the wrong direction. They don’t know why the market goes against them.
Forex turns against you mainly because you don’t have enough knowledge. Newbies think trial and error can replace analysis, learning, and education. They fail to develop strategies and don’t stick to them. Plus, they give in to their emotions and try to beat the market, ignoring market dynamics.
In this post, we’ll elaborate on different reasons why the market goes against you. We’ll also give you some tips to follow when the market goes against you.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
6 Reasons Why Market Turns Against You
Here are six reasons you might occasionally feel that the market unfairly turns against you:
Lack of Experience
New traders make rookie mistakes because they’re not familiar with how the market works. For example, when they see an uptrend, they assume it’ll go up forever. So, they buy high and have to sell low.
They need to study market patterns for months and consider many factors to predict the potential direction of a currency’s price. They underestimate the importance of research, which is the only way to predict market trends.
Instead of focusing on trading, they need to research to see the whole trend, not the end of the trend, which doesn’t help. The market doesn’t turn against anyone. It’s the traders who fail to analyze market movements and make wrong decisions.
Lack of Discipline
Every experienced trader knows that trading comes with wins and losses. If you can have a few big gains and lots of small losses, you can call yourself a successful trader.
One of the biggest mistakes is to let emotions get in the way of your logical thinking. When you experience a streak of losses, it’s easy to give in to fear and lose your confidence and patience. You can’t control your losses with emotions; instead, you need a well-structured trading plan and sticking to it. You should let the plan guide you, not the emotions.
The first step to trading is devising a trading plan that considers your risk appetite, goals, and start-up capital. You should always consider the best time-frame that suits you and your circumstances. For example, if you have a full-time job and can’t check the charts every 15 minutes, a 15-minute time-frame isn’t your thing.
Plus, you should have stop-loss orders in place to remove you from the position as soon as the market turns against you.
Lack of Risk Management Strategy
Risk management is a critical aspect of any trading plan. Some traders think stop-loss orders close their trades too early and deny them potential profits. They give in to their greed and try to pick up the last pips before the trend changes. That’s a deadly mistake that can wipe out your whole account. You should know how much of your capital you put at risk and expect profits compared to that degree.
Failing To Adapt to the Market
In addition to having an overall plan for your whole trading career, you need to have strategic planning for every trade that opens. Not every situation is the same, and you should plan every move and countermove to lower the risk of unexpected losses.
You can’t stick to the same plan for a long time, even if it’s winning. If you don’t adapt to market developments and modify your strategies, you’ll see the market will turn against you since you fail to see the upcoming movement. Always try to stay ahead of the pack through constant learning and adaptation to find new ways to turn in profits in this ever-changing market.
What’s more, you shouldn’t try to beat the market; rather, you should try to understand it. Look for defined trends and join them instead of looking for getting high profits out of the market with small capital. If you want to beat the market, you’ll end up trading aggressively and investing in the wrong trends.
Being Impatient
Sometimes it’s not the market that goes against you. When you open a trade, you expect it to be profitable immediately. Otherwise, you think that the direction was wrong, close it, only to see the market goes back in your initial direction. Don’t switch back and forth in your trades and try to stick with them. If you keep changing your positions, they will chip away at your capital, and you’ll end up losing your account.
The reverse is also a problem. Many forex newbies trade on turning points. When they place a trade and see it moves in the wrong direction, not only do they not get out, they add to their position. That’s because they’re sure the trend will turn around. This form of trading will put you in a lot of exposure, and the trade will go negative.
The best thing is to continue trading with the trend. If you predict a change in the direction and want to invest in the new direction, wait until the trend is defined. You need to identify and pick the right directions and pick up the right position. For example, if you want to take a position at the bottom, don’t pick up the bottom in a downtrend but an uptrend.
Buying a System
Some traders try to evade learning and education by relying on forex trading systems sold on the internet. As a forex newbie, you should know that nothing beats knowledge when it comes to trading.
There’s no shortcut to success: you should develop your method and system rather than buying different systems that never pay off. Fundamental and technical analysis, reading market news, and getting help from a tutor is much better than investing in these systems.
3 Things To Do When Market Turns Against You
Seeing your trades go against you truly hurts, but it’s a natural part of forex trading. Even the most experienced traders have their trades go negative. That’s because of the nature of the market, which doesn’t go in a straight line. You should accept it and be prepared for these cases. Here’s what you can do:
Don’t Panic
It may not be as easy as it sounds, seeing your profits turning negative. But it’s the first and most important step. You should stay focused, see the big picture, and try to make logical decisions. Don’t react quickly and wait for the trend to play out. If you have a robust risk management plan, the market going against you shouldn’t make you nervous.
Take a Break
If you see yourself over-analyzing and keep looking at the charts biting your nails, try to get away from everything. You can’t control the market and change its directions, so get away from the crushing stress and the noise. Try to go back to the charts at the end of the trading day and see what you can do, like re-adjusting stops or changing directions.
Learn and Move On
Learn from your mistakes and move on. If you refuse to be wrong, you’ll stick to the same idea and don’t tweak it even if it’s a failing method. If you see there’s nothing you can do to save the trade, dump it. Then try to analyze why you took the wrong direction and don’t repeat it next time.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
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Conclusion
Forex trading isn’t simple. It takes a lot of time to get the hang of the market through studying, learning, and following the news. There’s no way around it, and that’s the main reason forex newbies think the market goes against them.
The market follows its path and doesn’t go against anyone. The culprit is the trader who makes wrong decisions due to a lack of experience, knowledge, and patience.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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