Here are the Top Five Challenges that Traders Face. 

Before mastery, a trader’s journey is hardly a smooth one. Well, there are traders that get the right start and are able to overcome the costly mistakes that some traders make. These traders look for reputable mentors, sign up for a course or commit to deep learning and practice that often takes time to be effective. While some traders might be able to get or afford mentors and courses, there are challenges that will always prove hard to overcome unless a trader commits to confronting them. Below are the biggest challenges that traders face.

Confidence

When a trader has evidenced profitability from his or her system, he or she tends to be vulnerable to overconfidence. Euphoria sets in after a few trades and leads a trader to thinking that he or she can outright take superior positions in the market that will guarantee more profitability. The trader goes on to abandon his or her trading rules and takes random trades trying to squeeze the most out of the market. What follows is a series of overtrading with losses here and there, and before the trader realizes, he or she is in heavy losses often referred as drawdown. Overconfidence should be mitigated by one’s trading system, a rules based system is recommended.

On the other side of confidence, is the lack of it. Traders find themselves in uncertain trading situations especially after a few losses or drawdown. The remedy to this is ensuring that one’s system is effective and can guarantee overall profitability. Traders should be able to discern the fact that they can have a 40% win rate and still be profitable, it is all in the risk to reward that one deploys in their system.

Unrealistic Expectations

Traders often have unrealistic expectations that are not consistent with how the markets work. Sometimes the markets are dormant and hardly experience movements that guarantee worthy returns. What is a trader to do during such times? Wait, patience is key, again check what your trading system dictates. One should not put unnecessary strain on unfavorable market conditions by taking random trades. Importantly, traders should not expect big moves in search of great returns on instruments that hardly move. A trader should tell how far his or her position can stretch and bank profits or cut losses when and where necessary.

Emotional Reactions

Trading emotionally sends traders into a rollercoaster that often deprives them of their trading capital. Traders should master their trading psychology and will hence be able to overcome this challenge that has proven to be a struggle for most traders.

Repeating Mistakes

Notable is that most traders often repeat mistakes that they had previously done. Journaling one’s trades helps overcome this challenge. It helps note bad trading habits making it easier for a trader to be aware of his or her challenges hence able to filter them out.

While repeating their trading mistakes, traders often find themselves in constant search for new information. It is quite wrong as there is not a Holy Grail system that works for all traders. A trader ought to work on his or her trading system and understand its intricacies and optimize it for his personality and profitability. For instance, a patient trader can be able to optimize a strategy that is for short term trading alias scalping to suit trading for longer time periods often referred to as intraday or swing trading.

Uncertainty on what to Trade

Trading different instruments is instrumental for diversification. However, traders ought to have a significant understanding of their system and adopt it to their trading assets. A few traders have the expertise to trade several pairs. It is therefore recommended that a trader focuses on one pair before trying new ones. Upon starting to trade new pairs, a trader should start a new account that is separate from the master. This protects proven profitability from unexpected downsides that come with new pairs that haven’t been mastered. It is therefore important for a trader to be certain of the trading instrument that he or she commits to.

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