Last Updated on 10 February, 2024 by Trading System
There probably is not a single profitable trader that will claim that trading is easy. Instead, he or she will most probably say that trading is a tough and competitive industry that requires constant work if you want to stay in the game. So why is trading so hard?
Trading is so hard because there are so many aspects to trading that you need to know. Some of those are the quantity of misleading information out there, your own biases, and the necessity of striking a balance between risk and return.
So, let us have a closer look at the different aspects of trading that makes it so hard, and some tips that you can employ to make trading easier!
The Reasons Why Trading Is So Hard
Trading consists of many small elements, and all have their quirks that you need to know to be able to trade profitably in the long run. To someone new to trading, knowing what to focus on can be hard!
So let us have a look at some of the reasons why trading is so hard!
Much False Information
The Internet is full of trading advice and gurus preaching how indicators should be used and what makes money. The truth is that most of this advice is outright garbage and that knowing what is worthwhile indeed is not an easy task!
In order to not fall victim for false trading advice, it is important that you learn to test everything in a backtesting software before going live! That way you can uncover much of the false trading advice before it is too late!
Here we have gathered some of the best podcasts on trading. We especially recommend the first one on the list! It is filled with great tips and information that is hard to find elsewhere.
You Need to Be Un-Biased
Nearly everyone who enters the world of trading is biased. It could be that you anticipate a certain rate of return, or are convinced that the market behaves in a certain way.
Regardless of what expectations you have with trading, they will most likely be a hindrance rather than a motivator. This is because most traders tend to try to impose their views on the market, which will never end well. Regardless of your view of the market and its behavior, the market will never change.
In fact, most of the information you have read so far is most likely wrong, and will only lead to you holding biases about how things should work! The trading field is littered with false and outdated information, and the only way to be 100% sure is to test for yourself to see!
You Need To Have a Trading Strategy
Having a trading strategy that is tested for robustness is probably the most important aspect there is in trading. Without it, you will fail, even if you learn to master all the other aspects of trading to perfection.
A trading strategy simply is a set of rules that dictate when you should enter and exit a trade, and how much you should buy or sell short. The trading strategy should be clearly defined so that you never hesitate if you need to act quickly. Preferably, it should be written down in coding language so that you could backtest the strategy to see whether it has worked historically or not!
You Need To Understand Risk Management and Position Sizing
Even with the best trading strategy, you could completely wipe out your account if you do not care enough for risk management and position sizing.
Position Sizing is the practice of determining the size of your trade or bet, to maximize your returns while still keeping risk at an acceptable level. Learning to positions size correctly is vital. If you risk too much, you risk blowing up your account complete. On the contrary, if you risk too little, your returns will suffer.
Striking a balance between return and risk is one of the hardest tasks that traders face. Generally, you should not risk more than 2% in each trade. However, that rule only applies at the trade level, and you should have other risk management and position sizing rules that apply to the portfolio as a whole. An example of such a rule could be to stop or restrict all trading activity if the account drops more than x %.
You Need to Be Persistent
One of the hardest things with trading is that it really takes so much time to learn how to do it! Depending on whether you are learning to trade by yourself, or taking a course, it could take several years. And then it is important to remember that still, most traders will NEVER make it.
When you learn to trade, you must be ready to take many hits. Much of what you try will result in dead ends, and you need to just keep going! Eventually, you will find what you are looking for!
Wondering whether taking a trading course is a good idea? Then you should read our article on whether it is possible to learn to trade by yourself!
You Need To Evolve Constantly
This is something that many beginning traders have not understood yet. Many believe that finding a strategy means that you are set for the rest of your trading career! However, that is not true at all! The markets evolve and change all the time, making trading strategies outdated and causing them to stop working.
As a trader, you constantly need to come up with new trading strategies to replace those that fall out of sync with the market. There is nothing like an ever-lasting trading strategy!
Tips to Make Trading Easier
Now that we have gone through some of the things that makes trading so hard, it might be appropriate to touch on a few things that will make trading easier for you!
Make a Trading Plan
Making a trading plan will help you a lot in your trading! You should include things like how much you are allowed to risk, what you are going to trade, what your trading strategy is, or anything else that is related to your trading business. It is paramount that you follow this plan once you have laid it out! Acting on a whim in stressful situations will only cause you harm! In trading, consistency is king!
Keep a Trading Journal
The trading journal is one of those things that is often overlooked by new traders. How unexciting it might sound, trading journals are of great value to every trader, since they enable you to go back and see what you did well, and not that well. In the long run, you will start to see patterns and be able to discern what is holding you back!
Trading journals are invaluable when it comes to developing as a trader!
Here we have listed the top benefits of keeping a trading journal!
Don’t Give Up!
This might not necessarily make trading easier for you, but this point is worth stressing again and again. The only way you can become a profitable trader is through hard work. If someone say something else, they are simply wrong!
Risk Small in the Beginning
As a beginner, you WIll make mistakes, and probably a lot of them. It is essential to ensure that those mistakes do not consume all of your trading capital.
Start on a simulated account, and once you feel ready, you might go on to trading a smaller sum of money!
Summary
Even if many trading marketers want you to believe that trading is easy, that is not the case. Trading requires you to learn many different skills, of which many are difficult to master by themselves. Combine this with a scarcity of good information, and it is not that hard to understand why trading is so hard!
If you enjoyed this article you might also like our other articles answering common questions traders have!