I’m grateful to be a professional trader every day, but this job doesn’t come without its challenges.
If trading was super easy, everyone would do it.
But it’s not just the charts, the math, and the fundamentals that trip people up…
It’s the emotional and psychological aspects of trading that prevent 90% of people from succeeding at it.
You see, trading the stock market will play psychological tricks on you.
For example:
- A seemingly “perfect” pattern may turn out to be a failed trade…
- You might buy a stock and it drops, only to watch it breakout to the upside the moment you exit…
- You might hesitate to enter a trade, fearing a potential loss, only to see the stock surge after you decide to pass on it…
- After a string of successful trades, you might become overconfident and take on excessive risk, leading to substantial losses.
- A stock might break out of a key resistance level, making you believe a strong uptrend is starting, but then it reverses sharply, trapping you in a losing position…
After doing this for over 25 years, I’ve seen it all. Today, I’ll show you the six biggest challenges new traders face (and how to overcome them)…
Table of Contents
1. The Fear of Losing
Fearing losses can lead to execution hesitancy, missed trades, or premature exits.
And any one of these mistakes can ruin your decision-making and profitability.
If you’re trading scared, you’re setting yourself up for failure.
The fear of losing is a common problem. To overcome it, you’ll need to change your trading mindset.
To avoid trading scared, do the following:
- Plan your trades carefully
- Don’t oversize your positions
- Set stop losses above your maximum loss tolerance
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2. Marrying a Position
Sometimes, traders can become emotionally attached to a position or a stock.
No matter what the fundamentals and technicals are telling them, they won’t sway from their initial trade thesis.
This can cause them to:
- ‘hold and hope’ onto a loser in hopes of a miracle reversal … when they should be cutting the loss immediately
- keep trading the same stock over and over again, even if they’re losing.
You need to be flexible when trading, don’t get stuck on one idea.
I’m a happily married man … to my wife. But I’ll never marry a stock.
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3. Overconfidence and Confirmation Bias
There’s a fine line between confidence and overconfidence.
The former is a virtue you should strive for, while the latter can lead you to take on excessive risk.
Similarly, confirmation bias can make you seek information that confirms your initial idea and ignore signals to the contrary.
My advice? Don’t drink your own Kool-Aid…
Always be questioning your initial convictions, ready to use different strategies when the price action calls for it.
4. Analysis Paralysis
Every morning in Pre-Market Prep, we spend a lot of time marking up charts and identifying important price levels.
However, it’s easy to go overboard on analyzing the stock market…
Too much analysis can result in overthinking, delayed decision-making, or even missed trading opportunities, a.k.a. analysis paralysis.
I recommend doing your technical analysis outside of active trading hours.
That way, you can focus on identifying the most important indicators without the distraction of the market moving.
5. Hindsight Bias
“It’s so obvious in hindsight!”
Have you ever said this about a trade?
If the answer is yes, you’ve experienced hindsight bias — the belief that outcomes were more predictable in hindsight.
But if you think back to the information you had when you put the trade on, you’ll find that the outcome wasn’t obvious.
If it had been, you would’ve traded differently. Don’t let hindsight bias stop you from improving.
Instead of blaming hindsight, ask yourself … Why did I put the wrong trade on? And how can I avoid making similar errors in the future?
6. Herd Mentality
In the age of Twitter/X, Reddit, and StockTwits … herd mentality can be a serious obstacle for traders.
It can be difficult to sort ‘signal’ (valuable information) from ‘noise’ (meaningless chatter) when scanning online message boards.
You can easily get tempted into trading subpar setups pumped by untrustworthy people on social media…
I made this mistake when I was first starting as a trader. I trusted “gurus” with no proven track record, took on trades from sketchy message boards, and paid the price with brutal losses.
This inspired me to build a valuable community of like-minded traders, and now, you have the chance to join us…
Whether you’re just starting or looking to sharpen your edge, our webinars cover everything from fundamental strategies to intricate pattern setups…
Take the first step towards becoming a successful intraday trader and join us in the Daily Income Trader System today.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
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