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Forex Trading - The Deadly Mistake That Brings Inevitable Ruin

May 18, 2008
Most people don't realize the huge mistake they make when beginning their trading career. There are several elements to the mental trap that people get caught in when they first start trading that sets them on the wrong course, but one particular error is the one that virtually guarantees failure, or at least a rather lengthy and loss-filled road in becoming a successful trader.

Luckily, although this situation is one that is hard to see coming and very understandable that it is made, there is a direct and rather simple solution to the issue.

The essence of the trading activity is definitely within the ability of most to grasp, however trading as an occupation does have a substantial body of knowledge to absorb and specific skills that are necessary to trade profitably and consistently. In addition to the fact that most traders are of above average intelligence,this makes for a situation where the success rate should be much higher than it is.

As is with most professions with a substantial body of knowledge, there is a progression to trading.

Here is an analogy to illustrate the problem. Let's take mathematics.

You start with the concept of numbers in general, quantifying items. Next come addition, subtraction, multiplication and division. From there, one moves on to algebra, geometry, and trigonometry. Once that base is developed, then one can comfortably move on to calculus, La Place Transforms, differential equations and other higher math.

When it happens that a person does not fully establish the prerequisites for calculus, such as algebra or trigonometry, the ideas in calculus may be understandable, but working the problems will be a tremendous challenge, if not near impossible to solve. If one were to attempt to go directly from basic mathematics to differential equations, it would be a very long struggle indeed to become proficient at the higher level.

There are in fact documented studies on the obstacles to learning that have found that there are specific physiological reactions when a person encounters this particular phenomenon - that of starting too high up in a learning gradient or missing foundational knowledge while trying to grasp concepts at a given level.

This is the fundamental mistake that many traders make, and they are generally not consciously aware of this particular situation and its ramifications. Many people begin active trading without the foundational knowledge to trade at the level where they become active. When this happens, it creates a considerable obstacle to adequate learning within an efficient time frame. Subsequently, the trader often winds up suffering severe losses, sometimes losing all their capital before they have established a sufficient skill and knowledge base to trade proficiently.

This is not the fault of the individuals. This is a problem of the system which unfortunately most have to endure. There is no mandatory training or certification before a person is allowed to put themselves and their capital at real risk, so the high percentage that fail is simply the result of a lack of warning and preparation for what the business of trading entails.

Those that are fortunate enough to seek out the proper teachings and assistance are the ones that can minimize the effects of this phenomenon which is so prevalent in the trading world. If one can find a mentor that is aware of this particular obstacle and the others that are present in the development of a trader, then odds are greatly improved for a good trading experience. Most however choose to go it alone or simply make it on sheer persistence alone, while learning the lessons of trading the hard way - through personal experience and substantial losses.

Instead of falling prey to this mistake as many do, you have the option to save yourself considerable time, losses and personal grief. The first step is backing up so to speak and making sure that you've got the basics fully covered, and then moving forward with a focus on mastery and development.

This one factor can set your destiny as a trader, so it is well worth acting on.
About the Author
Download your free report "The Seven Traits of Winning Traders" on the trader's mindset. You'll also find the book, "The Subtle Trap of Trading", which fully details this article topic, the trading psychology and much more.
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