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5 Difficulties in Trading and How to Overcome Them

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difficulties in trading

Beginning traders often face hard times when starting to trade. Whether they trade on a live or demo account, the difficulties faced by different new traders are often the same. I’ve made a list of the 5 common difficulties in trading faced by those starting out.

One thing you must know, I went through all of them.

1) Confusion About What To Trade

As traders, there is a huge difference between what we learn and what we really need to know. That’s why confusion is part of the difficulties in trading.

For some, the difficulty is getting overwhelmed by information on Forex, trading strategies, psychology, risk management techniques, and so on.

Following that, those traders can’t apply anything because they don’t know where to start. I’ve been in this situation. As a simple example, you can learn about chart patterns trading, reversal strategies, trend following strategies and scalping.

Then, what do you trade?…

A common characteristic of successful traders, which I got from the book Millionaire Traders, is that some may trade in the opposite direction to each other. However, their success has been created by selecting one way to trade and sticking to it.

As a result, I believe in becoming the “expert” of your own style. No single trading style is better than others. What makes the difference is the person behind it.

For others, the trouble is that they are not learning the right things. You can learn as much as you want but as long as you do not learn what you need to learn, nothing good is going to happen.

That’s why it is crucial to know what you must learn before starting to trade. While trading is a discipline in which you continuously learn, I believe in starting out with just what you need and building on it.

I also know people who do not learn enough. They start, like I did, with zero knowledge and that’s also a problem. Of course, you can learn on-the-way but that makes things much more frustrating and difficult.

In short, get educated by learning the right things and you’ll overcome the first of your difficulties in trading.

2) No Confidence

How often do I hear “among my difficulties in trading is developing confidence!”

The answer is: almost every day.

This parts closely relates to trading beliefs. Not only must you be confident you know your strategy works, you have to be confident in your ability to succeed as a trader.

No matter how hard you try to convince yourself that your strategy and methodology are working, there’s only one way to build up your confidence about them. You have to test and experiment.

What does that mean? It means you will need to:

  • 1) Backtest your trading strategy and ensure it provides an acceptable return
  • 2) Experiment with your lifestyle and habits to see whether they maximize your performance

If you’ve done those two things and still struggle in trading, it means you have to dig deeper and look up your personal beliefs’ impact on your trading. You must ensure that they set you up for success. If not, make an effort to get the right beliefs.

3) Getting Stuck In A Circle

I’ve been there for a long time…

What I mean by getting stuck in a circle is doing the bad things over and over again. That can happen in two ways:

  • 1) Constant search for information
  • 2) Repeating the same trading mistakes

Constant search for information

With all the information today, it is so easy to fall into a circle of “search for information’. That is normal There’s actually a scientific reason behind that. According to research, dopamine makes us seek for stuff. Once we’ve found something, opioid rewards us by providing a feeling of pleasure. The problem here is that we fall into a circle.

As soon as we see that our trading strategy isn’t perfect, we start searching for a new one, until we find the next “best one”. We then feel better but only for a short period of time.

When a couple more losses occur, the process re-starts. Susan Weinschenk, Phd, has written a great article titled Dopamine Makes You Addicted To Seeking Information. I definitely recommend checking that!

I definitely recommend checking that!

Repeating the same trading mistakes

The second way of being stuck in a circle concerns mistakes we make in trading. Now, understand that, as a beginner, it is totally normal and even essential to make mistakes when you trade.

The key lies in not repeating those mistakes over and over again.

The best solution and the one I use in that case is to keep a journal of your mistakes. It doesn’t have to be very complex nor it should be. Simply write down bullet points of your mistakes.

If you’ve already done that, great! But you’ve only applied half of the solution. The next thing to do is to review your mistakes periodically. I review my journal every week.

I found that using a paper journal to write my mistakes down made it easier to remember them.

4) Taking Improper Action In A Trade

One of the major factors in my losses as a beginner in trading was not behaving properly once I took my trades. I could usually, with some exceptions, enter the trade as a pro. However, once I was in the trade, things started getting bad…

What I mean by behaving improperly:

  • 1) Closing a trade too early
  • 2) Not locking-in profit
  • 3) Not placing a stop loss
  • 4) Moving a stop loss

Of course, there are a lot more improper behaviours once you’ve entered a trade. That will depend on your trading strategy.

As mentioned previously, keeping a journal of your mistakes when they occur is a key behavior to have if you want to avoid repeating your mistakes over and over again.

All difficulties in trading can be tackled, but you must first be aware that you experience them.

Another thing that worked for me and many others in trading is meditation. Now, the best person I know to talk about is Yvan Byeajee, He shares his meditation practice in episode 7 of the Desire To Trade Podcast.

Whatever you may think about meditation, research has shown that there are benefits to it. Meditation is known to calm your mind in the moment and help you in stressful situations.

I definitely recommend trying it. I started using Headspace, an app that guides you through short periods of meditation.

5) Having Improper Expectations

I heard something that got stuck in my mind recently:

As a beginner, you should not have the right to expect anything.

One of the guest on the Desire To Trade Podcast (Episode 2), Houston Truong, discussed this idea in an article titled You’re Getting The Results You’re Supposed To Get.

How true is that? Well, it really is.

It is completely inappropriate for traders just starting out to expect a certain money outcome. The only thing you have to do when starting to trade is applying your strategy. That’s it. Then, see what you get and see how you can improve in the future.

I’ve noticed that some traders set the bar too high that makes it harder for them t concentrate on trading. They become more greedy and fail to execute their plan.

In other words, don’t be stressed if you don’t double your account in the first year of live trading. Trade and you’ll get whatever you get.

If you do that, you are better than most traders (the 68% who lost money in each of the past 4 quarters in 2014 according to Bloomberg) because you’re less likely to experience greed and frustration, and more likely to get results.

Now…

I’m curious to know. Have you ever experienced those difficulties in trading? Leave a comment below and let us know how you went through it!

1 Comment

  1. February 26, 2016 at 10:29 am

    An excellent article which summarized a number of key considerations for both experienced investors / traders and people new to the markets. I like point #3 which is an excellent insight into one of the feedback loops that our brains work on. As well, in total agreement with Etienne about the need for each of us to have our personal trading styles, which match our personality temperments, to be successful and comfortable trading in the markets.