Overconfidence and Underestimation of Risk
One of the biggest problems in trading is that people are led to believe they can make a lot of money quickly when trading. This is absolutely true, but you can also lose a lot of money. In fact, trading is one of the hardest ways to make easy money. The industry is led by many advertising campaigns that make it look easy, when in fact it can be very challenging.
On a personal note, I thought it wouldn’t be too hard either when I first wanted to trade, but having the sense and sensibility to get educated first, I understood that this industry can be very rewarding and can also be very harsh. It is a two-edged knife, and it will cut both ways.
I always recommend traders to start on a demo and work up the account, and then move on to a real account. If you, in all your relaxed mode, cannot make money on a demo, you are in no way going to make it under the pressure of a real account.
I have seen numerous new traders start trading with no education nor experience, open an account and dive in and make a lot of money, only to blow it afterwards. They initially get lucky by entering a trend and they just go with it. Later on, when things start going the other way or get choppy, they blow the account because their initial wins boosted their ego and now they are on top of the world, thinking they got it all figured out.
Later on, when the accounts get blown up, they realize that this is not as easy as it seems.
Overconfidence and underestimation of your opponent is every person’s downfall, as we have witnessed in numerous historical examples.
If you want to be good at anything you are up against, you must learn its nature, its behavior, its habits, and that is going to take time — just like growing up in life takes time. If you rush it, you are going to pay for it. Pace yourself into learning and applying the tools you learned, and make them consistent in a demo and then a small real account, and grow the account as you get better. Journal your trades, learn from them, and amend your ways as necessary.
Recommendation: Understand how the market functions, understand the instruments you are trading, learn how the market works and how to manage your risk. Understand that the market is not against you — you just need to learn how to befriend it with its ups and downs, just like with the people around you with their ups and downs.
Video to the YouTube article: https://youtu.be/p-NBkJdBGl0?si=05fwKlBcul1OSRI5
