Trading may seem easy and attractive to those who have never done it before. That is largely the influence of the media, where the image of a trader or an investor is portrayed as highly glamorous. There are numerous movies and shows about it, so even those who already have some trading experience, still treat it like a game or hope that it is an easy way to make money.
However, it is simply not true. Trading implies a lot of challenges and risks that traders face every day. Everyone has to know about them and be prepared to manage them, in order to avoid unexpected disappointment and instead focus on the important things. Today we are breaking down 5 obstacles that traders may face when they start their journey.
Trading requires (a lot of) studying
While it is natural to study when one wants to become a manager, a programmer or a painter, when it comes to trading, satisfying results are often expected without the necessary learning. Truth is, without understanding the trading instruments and the markets it is not possible to improve, even if the trader gets lucky occasionally. Relying on luck is not an effective strategy and will most likely result in losses. In order to grow, it is necessary to keep learning, finding new information, reading books, articles and watching videos.
The markets are always changing
The markets are always fluctuating and it can be difficult to understand what is going on. That is why it is necessary to always stay on top of the latest news, at least in regards to the assets that a trader is concentrating on. Evaluating the asset can be challenging, but it is crucial in order to make informed decisions. The first step is to learn about technical and fundamental analyses, as well as candlestick patterns. A broad knowledge about the possible market analysis tools may help decide on the personal, most effective approach.
Trading is risky
There is a high chance of losing the whole investment when trading and it happens very often. It can be due to many different reasons: incorrect evaluation of the market state, unpredictable price changes, emotional trading and so on. Even the most experienced traders still experience failures from time to time. It can be a real challenge to come up with a well-balanced trading system that takes risks into account.
Emotions interfere with reason
Speaking of emotions, it is an obstacle that traders often don’t expect. It seems that even though a trader can’t control the market, they are definitely capable of controlling their own behavior. Unfortunately, it is not the case for the majority. Trading can cause such emotions as greed and fear. Add excitement to the mix and the recipe for a damaging trading approach is complete. Emotions force traders to make irrational decisions, rushed assumptions and as an outcome – losing their investment. That is why managing emotions is just as important as studying the market.
Uncertainty and impatience
Impatience is not exactly an emotion, but it can do just as much harm. With trading, there are no guarantees and a trader can never know what exactly is going to happen. Nobody likes uncertainty: everyone wants the best outcomes possible, as soon as possible. With trading, a little bit more patience and strategic approach is required.
With all points mentioned, trading cannot be considered “easy”: on the contrary, it entails a lot of risks. Trading implies an elaborate plan that combines studying the market, utilizing analysis tools, implementing risk management techniques, dealing with emotions and managing excitement and impatience.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
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Credit: Tatyana Scherbakova