Why most people lose money in the forex market

A friend of mine volunteers on a regular basis to rid his
neighborhood of rodents and animal riff-raff: the woodchucks,
groundhogs, and possums that eat up gardens, attack family pets,
and so on. He sets a trap with ripe fruit or tuna fish. The animal
enters the trap for the food. If the animal can’t find its way out,
it is eventually shot and buried.

In the forex market, sometimes you get the fruit.
Sometimes you get trapped and shot. Why?


Possums are relatively easy to catch. They go for the fruit, they get caught, and then,when the trapper approaches the trap, the possum simply plays dead. It plays dead because that’s the best defense mechanism that it has.A woodchuck is tougher to trap. A big one might enter the trap, eat the fruit, and then rip the trap apart, exit, and wander off looking for more food. Or it might roll the trap along the ground, set it off, and then eat the fruit from the outside.There is a fundamental characteristic of unsuccessful forex traders: they trade forex because it’s exciting, cool, or for its sex appeal. The mystery behind the charts, the notion that profits (although elusive) do really exist, and that money can be made
quickly (but not predictably) all add up to create a romantic fantasy that is too
appealing to avoid. When they start to lose money, they leave their positions open,
close their eyes, and hope that the trap is miraculously opened so they can be free
again. This group – the Possums – is the largest block of forex traders.
There is also a fundamental characteristic of successful forex traders. They trade
forex because it makes them rich. They trade because they know how to do it. They
do not trade for fun. Many of them are unimpressed by their own success.Most of them never share their secrets with anyone. They take a methodical, almost boring, approach to forex trading.They painstakingly build systems that,although simple, may have taken years to perfect. In the end, their lives are actually quite boring – reduced to waiting for predictable signals that are obeyed without question.
This group – the Woodchucks – is the smaller of the two groups. The Possums
outnumber the Woodchucks by a ratio of at least 500:1. For every Woodchuck, there
are 500 Possums. Are you a Woodchuck or a Possum?
Possums don’t want to learn the intricacies of the forex market – the charts,
the signals, the nuts and bolts – because they are afraid that once known, all these
details will ruin the romanticism of the entire adventure. The mystery, the elusive
profits, the unknown, all contribute to create an excitement that would be lost if
too much were discovered. Searching for King Tut or the Titanic was big news.
Finding both was big news. When’s the last time you heard about either? Once found,
the mystery was solved and the public went on to other mysteries.
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Woodchucks want to learn the market.They want to know what signals are most
predictive. They want to know everything they can not only about spot trading, but about their broker, their broker’s practices,the governments involved in currency movement, interest rate changes, and the list goes on and on. Woodchucks want to know
as much as they can. It might destroy the mystery, but they’re not in the forex market for adventure. They’re in it for profit. There is a myth in American culture, and it’s spreading around the world: your job should be fun. You should enjoy what you do for a living. “Do what you love and the money will follow.” And so on. Perhaps
we’ve had too strong of a dose of this doctrine. The truth is that although we are
better off choosing a career that interests us,we’re going to be bored at work if we learn our job really well. The promise is simple: if you become a world-class forex trader, at some point your job will be ho-hum. Not all the time, but it’s not going to be an adventure every day of the week. Sorry.On the other hand, consider that
successful forex traders are some of the most highly paid professionals in the world. If you pay them by the hour, they make thousands and thousands of dollars
for every 60 minute period they spend working. Some of them only trade for a
half day. Some trade for 20 hours a day.
Their jobs aren’t always fun, but they do make a lot of money.
Why be a Woodchuck?
Simply put, if you want to survive, then you need to start thinking like a Woodchuck. If you want to make money, you need to
commit yourself to freeing yourself from the trap and getting the fruit. Or, more
importantly, finding a way to eat the fruit without ever entering the trap in the first place. And therein lies the secret. We’re all
going to get trapped from time to time, but we have a choice of whether to free
ourselves or lay down and let the trapper
shoot us.
I learned my lesson early in my career as a forex trader. Although I had spent four
months creating a trading strategy and system, I occasionally really, really wanted the fruit, so to speak. At those times, when I should have stayed on the sidelines of the market, I would enter trades based on rumor, speculation, or even well-informed opinions – instead of my tried and tested strategy. In other words, I would enter the trap and start eating the fruit, thinking that I could get out of the trap without setting it off.