Top 10 Obstacles All Forex Traders Will Face
Forex Trading is one of the most difficult things someone can attempt to master.
Sooner or later in your trading journey there will be certain obstacles and challenge you will need to overcome.
These obstacles are things all successful and consistent traders had to go through and work through at some point.
Knowing what some of these obstacles are and what to expect from them might help new traders when they encounter them.
In this article, we will take a closer look at the 10 most important obstacles all traders will face eventually.
This is the biggest one of all of them! For this reason, we will spend some more time on this one.
There is no other obstacle which has the ability to wreak such havoc on a trader’s mind and trading like emotions can.
We are emotional beings. Emotions are an essential part of what makes us human. All of our daily decisions are intertwined with emotions.
It is this dependance on emotions that can cause traders to make terrible trading decisions.
One of the most influential emotions in trading is FEAR.
Fear in trading is not the same as being fearful of spiders or snakes or heights. The Fear we are alluding to in trading goes far deeper than a mere superficial fright.
Fear in trading can take many different shapes and forms. When traders experience streaks of losing trades the fear of losing will eventually kick in.
When a perfectly good and acceptable trade presents itself, the trader now start to find excuses not to trade.
The fear of failure is another big one.
Having a fear of losing trades will cause all sorts of issues. This normally causes traders to exit losing trades too late and cutting winners too soon.
These emotions will also cause traders to abandon their risk and money management because they don’t know how to take a loss.
Losing is part of the game in trading. Being able to take a loss well is a very important skill every trader will need to learn.
Another tough emotion to deal with is the fear of missing out
Jumping in when there is no real trade. Seasoned traders have outgrown this fear simply because they have come to grips with the fact that no one trade will every make them or break them.
This challenge is something I struggled with for quite some time in my own trading. It will be different for every trader, but this fear is something I still have challenges with to this day.
Most traders know that there is always an opportunity in the market if you just know where to look. This poses a problem for some because they feel like there is something happening that they are missing out of
Trader who have fully overcome this fear know there will always be more opportunities and thus do not worry about missing out on one trade.
Most beginner traders start their trading journeys with the wrong expectations.
They think they will be a millionaire trader in three months or less by trading. Don’t be silly!
These type of expectations will only cause harm in your trading. It is these type of expectations that cause traders to gravitate towards a gambling mentality in their trading.
You need to have realistic expectations for your trading. Some of the best investment funds in the world are very happy with 20% to 30% returns per year.
So don’t go expecting to make a 100% return every month. It is very naive and very dangerous to think like that in your trading.
Remember, there is a big difference between trading and gambling…
Another damaging expectation some have is that trading is easy. However, trading is not easy!
It takes people many years to become professional, proficient and consistently profitable traders. No one is going to do it in a few months.
It will take time. Trading skills takes time to develop. The markets are complicated, intricate and sometime downright confusing.
You need to allow yourself the time to develop the required skills to make it as a successful trader in the long term.
Don’t expect to get rich quick and don’t expect trading to be easy.
#3 Learning from mistakes
Oh boy! This is another big one. This one sounds simple, but I guarantee you it’s not.
Most people do not take the time to learn from their mistakes. A big obstacle many traders face is they never work at fixing the things they struggle with.
You need to have the discipline to identify your weak points and actively work at fixing them.
This means, taking time out to meditate on your trading results. Taking time to really think about your trading mistakes and actively working at overcoming them.
The problem with this one is that it takes time. It takes energy. It takes will power. More importantly, it takes the willingness to CHANGE!
Most people are not willing to CHANGE. If you are not willing to change, you cannot expect yourself to make progress.
The process of change is something that keeps people away from success in life. Change opens the possibilities for so much more in life.
The willingness to change is an obstacle that might seem silly, but it can mean the difference between success and failure.
There is a big difference between what successful and unsuccessful traders want in trading.
Beginner traders want money, and they want lots of if in the least amount of time.
Contrastingly, successful traders simply want consistency…Think about that for a second.
Majority of retail traders get so distracted by their unquenching desire to make money fast. They don’t bother to focus on the process of trading, they simply want the end result.
This is a major problem for many traders. This is something we still struggle with in our own trading. It’s normal to get carried away by the monetary advantage trading can bring you.
However, focussing on that will never get you to a place of consistency. A consistent trader does not over-leverage their accounts.
Consistent traders are patient enough to allow good trades to come to them. They don’t barge into the market and trade whatever they can find.
Is that even a real thing? Yes, indeed it is. So what on earth is overtrading?
To be honest, overtrading can take a few different shapes.
The first sign of overtrading occurs when a trader spends way too much time in front of the screens each day.
Trading can be very exhausting as it uses up a lot of focus and energy. A likely result of this type of excessive trading hours means that traders normally loses focus of the present.
Traders who experience this becomes numb to the market and often misses clear and obvious trades because they are drained.
Another form of overtrading is when traders absorb too much market information too quickly and end up confused and unsure.
This can be very exhausting and almost always leads to bad trading decisions. It is very important to stay in tune with the market, but don’t overdo it.
#6 Relying too much on Indicators and Robots
Oh boy this is another big one. One of the biggest obstacles traders will face in their trading is learning not to rely on Indicators and trading robots.
The idea of using trading strategies that are full of technical indicators are very tempting for many traders.
The reason why this is so popular is because indicators are mechanical, and traders like the idea of approaching the market in a purely mechanical way.
Most traders find it comforting to know that they have multiple indicators to help them make their trading decisions.
However, the market is not mechanical. The market is driven by actual human beings with actual emotions.
The element that all Technical Indicators lack is the ability to account for the emotions involved in trading.
Another problem facing indicators is that traders place predictive expectations on them.
Thus, traders think using more indicators will result in more success because they will be able to predict where the market will go.
This is so dangerous! No indicator or group of indicators will ever be able to predict market direction. Indicators can only INDICATE!
Placing too much reliance on indicators and robots will only cause frustration in your trading journey.
#7 Reluctance to get help
Another obstacle traders face is their reluctance to get help from experienced traders. There is a growing trend amongst beginner traders that try to educate themselves in trading without the help of professionals.
For some reason, many believe that all the informaiton required to trade the markets successfully is available for free on the internet.
If this was true, why would the top investment banks in the world pay millions of dollars to educate their traders?
It just doesn’t make logical sense. When people want to excel in a particular career they normally start by getting the proper education or training relevant to that career.
It is no different when it comes to trading.
Trading is not easy, and some of the best traders in the world was trained and mentored by other professional traders.
Thinking that a couple of free trading strategies and a couple of free youtube videos will make you a successful trader is naive.
It is true that there are many fraudulent trader trainers in the FX industry. This is also one of the big reasons why so many people prefer to try and teach themselves how to trade.
However, the fake trainers are easy to spot and they should not be used as an excuse not to invest in proper forex education.
#8 Doing system hopping
What is system hopping? Well, basically, system hopping is when traders continuously hop from one trading system to another.
The reasons for why traders do this is quite simple. Firstly, traders continuously trade systems because they are always looking for the holy grail trading system.
They think there is a secret and magical trading system that will make them better traders.
However, there is no such things as a perfect trading system!
Many traders fall into the trap of always thinking that there is something better than they have right now. Traders that think this way is placing their focus on the wrong things.
Success in trading has a lot more to do with your skills that it has with your trading system. With the right trading skills, a trader can trade profitably with the simplest of trading systems.
Another reason why traders want to hop from system to system is because they don’t understand that losing is part of the game.
Every trading system will have losing trades!
Losing is part of the game. All systems will have losing trades, and might even have consecutive strings of losing trades.
Some traders will drop any trading system the moment they experience a few losing trades. This does not mean that a trader should stick with a system that is obviously flawed and consistently loses.
However, most novice traders will not know the difference between a bad system and bad trading skills. This is why experience is so important, and why learning from professionals is crucial to long term success.
#9 Failure to follow proper Risk Management
Most traders never realise the importance of proper Risk Management. So what is Risk Management for those who are not aware?
Basically, risk management is measures that traders take to control, limit and manage the risk to their equity. This can take many forms.
Firstly, traders can limit their risk by reducing their trade size. This means not using excessive leverage.
Secondly, traders can limit their risk by only taking the highest quality trades. This is also where patience comes in.
Taking less trades is sometimes the best thing a trader can do. Focus on those high quality trades and leave out all the rest.
Thirdly, traders can limit their risk by setting strict rules on the percentage of their equity they are willing to risk on each individual trade.
All of these measures are just some of the ways traders can manage their risk properly.
HOWEVER, risk management is largely overlooked by the bulk of the retail trading community.
Until a trader can consistently manage their risk they will not reach a place of consistent success in their trading.
#10 Placing too much emphasis on Technical Analysis
This is another big one! So many traders place all of their trading focus on Technical Analysis and neglect the Fundamentals.
Technical Analysis is only one part of good trading analysis. It should always start with Fundamental Analysis.
The markets are too intricate and too complicated to focus on Technicals alone. This is where Fundamental analysis comes into play.
Fundamental analysis is a methodology used by traders to establish high probability currency directions based on a currency’s underlying economic climate and outlook.
It is the Fundamentals that tells us WHY the market is moving. The Technicals merely tell us HOW the market is moving. There is a big difference!
Only focusing on Technical Analysis means a trader will always be one step behind the market so to speak.
The market is always changing and evolving. For this reason, you can’t rely on purely mechanical trading systems to navigate the markets.
Incorporating the Fundamentals allows traders to anticipate when the market environments is changing and adapt their Technical approach accordingly.
Every trader will experience the above mentioned obstacles in different ways. For this reason, each trader will need to evaluate the obstacles and identify which ones are relevant to them.
Having said that, knowing what the obstacles are is only the first step. Finding the solutions to solve them will be a much harder task.
The good news is that it is possible to overcome all of these obstacles. It won’t be easy, but when has trading ever been easy right?
We wish of you reading this article all the best in your trading journey and hope this article could assist you becoming a better trader.
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