The Top 8 Challenges in Trading

The Top 8 Challenges in Trading

This is a guest post by Sonal Patil of

The Top 8 Challenges in Trading

There are many challenges in trading if you want to achieve success. Many believe that all you need to do is to get onto your laptop and make easy money. You will be rich before you know it.  I wish!!


Trading is like any other business activity:  it doesn’t come easy and there is a lot of hard work, time and more than just a bit of effort involved.  You can’t just spend a few dollars and then wait for all the profits to come in – there is a lot more involved than just that!  If you asked a bunch of traders what their top 8 challenges in trading were, you are sure to get a wide range of answers. For what it’s worth, here are our top 8 trading challenges and how to meet them.


  1. Being Properly Prepared


A lack of preparation is a major reason why traders fail before they get properly started!  Planning is critical, and before you invest anything at all you should take a careful overview of the markets.  Select the companies you want to target, check out their historical data and then determine how they may perform in the future.


Start slowly – set yourself a budget and don’t blow it all on just one trade.  Choose your type of trading (Forex, equities or futures for example) and your time frame. Many suggest starting with shorter time frames. A benefit of choosing short time frames, such as the 5-minute time frame, is that you can risk smaller amounts of money on each trade and learn quickly as you go.


Make sure you choose the correct trending tools for the type of trading you are involved in. Define and limit your risk, and have an exit plan should things go badly. Write down your own rules and stick to them.  #1 rule should be to never chase your losses.  Accept them and learn from them, and expand your knowledge. Planning is essential for even the most experienced trader. Much of the above is expanded in the following sections.


  1. Overtrading: Clicking Without Thought


Some traders believe they must always have something on the go! They’ve always got to have a trade going, and if not they feel that they are missing out on something. They fear that they are missing the big deal – that something that only comes around now and again. This can be a genuine challenge for some people – knowing when to wait; when to stand back and assess the markets.


There is no ‘Big Trade’ that once lost will never return. If you need the adrenalin rush of 10 – 20 trades every day then plan for them. If you are happy with just a few, or even just one or two, then plan for it. Decide if you want most of your capital in one or two trades or if you want a spread over many. Make up your mind what you can afford and then work to that. Overtrading is a big challenge for some people and can cost them too much in the short term.


One way to meet that challenge is to set a trading schedule. Decide how many trades you are happy taking each day, and then split them up into time zones.  Say you want to be involved in 6 trades a day.  Carry out 2 up to 1000 in your time zone, another two up to 1100, trades 5 & 6 to 1200. You can plan for that even if you don’t get involved in all 6. The same applies if you can’t live without 20 trades daily – or even just the one! Set a plan and stick to it.  You have your daily trading plan to keep to without overtrading. Do your own research and make use of the trading statistics data, some may be free and for some you may require to pay a certain amount but never proceed without any research from your end and managing it all with latest technologies involved which helps to manage all your trading operations.


  1. Trading by Emotion


Also known as emotional or revenge trading, this is where you make a loss and immediately try to get your losses back as soon as possible. We touched on this in Section #1. You can avoid this by sticking to a trading plan as outlined above.  Stick to the plan – if you lose with your first trade or two then so what? That’s not a reason to get silly and increase your contracts – either in number or in size.


You will have good days and bad days. Accept the bad days and stick to your trading plan. Allowing your emotions to run your trading is step towards disaster. You can avoid big losses and also react to losses with a proper plan. This would involve:



By sticking to these sums you can budget an entire trading strategy. You have a loss limit, and a level at which you take the profit.  Many wait too long, and you should have a system to work to.  You can’t keep changing the above three parameters and be consistent in your trading.


  1. Get Rich Quick Syndrome


Many people become involved in trading with a view to getting rich quick.  They believe all the hype without knowledge of the reality! Many traders become involved with a $10,000 kitty.  They expect to double this in a fairly quick time. If they have carried out any financial planning at all, they overcook it.


They expect up to 10% and more profit with each trade.  The reality is closer to 1%, and if they worked on that basis they would likely become more successful.  If you work on 1% profit each day, that is $100 a day. You can adjust that figure according to the real results. You should soon be able to plan ahead and estimate what your $10,000 should grow to within a year.  Once you can do that accurately, you will be able to correctly plan your trading over a 12 month period.


  1. Understanding Your Risk Threshold


One of the top 8 challenges in trading is understanding your risk threshold.  Many new to trading run too many trades with too little money. Experienced traders will suggest you need at least $2,500 per contract traded.  In order to run 4 trades you will need a kitty of $10,000.  If you run too many trades with too little cash you will soon lose the lot unless you are very experienced – or extremely lucky!


  1. Trusting in Others Without Proper Cause To Trust Them


If a guy came up to you in a clown suit and promised to make you a fortune trading would you believe him?  What if that guy was wearing a snappy suit?  What if it wasn’t a guy but an attractive young woman promising to make you the earth?  If truth be told, each of these is just as likely as the other to take your cash and run!


That’s the chance you take when you get somebody to help you with your trading. You could be getting lied to by somebody who is out to steal all your money. On the other hand, you might be putting your trading account in the hands of a genuine guy who wants to help you make money – only he (or she) may have better intentions than expertise.


You can easily lose all your money.  It’s better to learn for yourself how to lose your money that let somebody else do it for you!  Never trust anybody with your money unless you have a proper reason to do so.


  1. Inflexibility and Impatience


Two of the top challenges in trading are overcoming inflexibility and impatience.  Refusing to accept that you may be wrong is one fast route to failure. So too is impatience: trading can be a short or a long game.  The market can change very quickly, and you may find it necessary to change your plans at any time. You cannot afford to just wait in the hope it will change back again – it rarely does.  The market will not change with you – you must change with the market.


It is important to keep your eyes open and update your strategy when necessary. Along with inflexibility can come impatience. You want quick results but you may have to wait patiently for the right time to make your move. That’s why you need a trading plan and why you must follow it faithfully.  Admit when you are wrong, and change your plan when necessary – such as when it isn’t working!  In fact that admission is the last of our 8 challenges in trading.


  1. Admitting You Were Wrong


This is the hardest challenge for many people to face.  Admitting they were wrong is not easy for many people, yet sometimes it is essential – particularly if it’s true!  It’s not easy to accept your losses and start again with a different trading strategy, but many people have done so successfully.


One of the biggest mistakes a trader can make is not cutting loses quickly enough.  They cannot admit they were wrong and it doesn’t take much for small losses to turn into disasters.  There is no place for big egos in trading, and those that refuse to admit that they are wrong often end up big losers.  Be honest with yourself if you want to make it as a trader.


The Top 8 Challenges in Trading: Summary


The above top 8 challenges in trading combine a mix of common sense, good market knowledge and an ability to accept your own imperfections. If you can overcome these, then you may have a good future in trading ahead of you.  Most successful traders have met these challenges at one time in their careers, and how you deal with them may well decide whether or not you will be successful.


Description:  The top 8 challenges in trading may not easily be overcome, but if you succeed in doing so then you should succeed in trading.  They involve preparation and planning, understanding the markets, your personal approach to trading and a willingness to learn.   (256 Chars)


Keyword: challenges in trading, Trade, market, Profit, trading plan, strategy


Bio: Sonal Patil is avid reader and loves to experiment new things. She is a business analyst, being which she enjoys to analyze and work on market insights a market research report providing firm in the industry. When I’m not doing all this you will find me traveling and discovering new places.