Inside the Mind of the Average Trader: Unveiling Common Thoughts and Challenges

By | July 15, 2023 3:31 pm

Who is an  average trader ?

The majority of people fall into this ‘average trader’ category.  Basically, they seem to think that trading is easy and for whatever reason they buy a stock, the stock’s immediately going to go in their favor.  Heaven forbid they actually are successful, because now that reinforces that behavior going forward and it really sets up for a major disaster.  If you’re an average trader, you have no trading plan or view of trading.  It’s just that simple.  Most people treat this as a hobby and they have no trading plan to speak of.  They have absolutely no money management rules.  If you’re sitting here reading this and you have no money management rules whatsoever, don’t worry.  You’re part of the average trader that is out there.

Are you prone to emotional swings?  So, price goes up, you’re immediately happy; if price goes down, you’re trying to jump out of a window.  Those types of emotional swings are typical with average traders.  Are you nervous most of the time when you’re in a trade?  Can you sleep at night?  Average traders don’t have confidence in their system or their plan so they’re usually pretty nervous whenever they’re in a trade.  You quickly give back to the market your recent gains.

Let me know if this sounds familiar:  You make Rs 5000 on a winning trade.  You feel great.  And then on the very next trade you get cocky and, bang, you end up losing Rs 5000 or more and you give back all of those gains that you just made to the market.  This is very common.  It doesn’t mean you’re a failure.  It just means that you’re average.

You try to recoup losses immediately, also known as revenge trading.  Oh, I used to love revenge trading.  Basically, here’s how this goes.  You end up taking a huge loss.  We’ll just pick a number.  Say you lose Rs 1,0000 on a trade.  Now, you’re on a mission.  You immediately go out looking for a trade that you can make so that you can make that Rs1,0000 back.  You end up chasing a bad entry or for whatever reason you end up pushing the pace and get into a wrong stock and you end up losing even more.  Any of these sound familiar so far?  I’m not done yet.

You’re glued to your computer all day long watching every price movement like a hawk.  This goes hand in hand with your emotional swings.  It goes up, you’re happy; it goes down you’re ready to beat your head on the keyboard.  If you’re stuck all day watching prices and you’re constantly on an emotional roller coaster?  Don’t worry.  You’re not alone.

How about this one?  Do you ever review your trade results and follow up on your winners and your losers?  I can guarantee you that professionals definitely follow up on their trades.  And if you’re not following up on your winners – do you think this might be a good idea?  You have a winning trade and you actually look back at it and say “Hmm, what did I do right in this trade?”  How about your losing trades?  How about looking at your mistakes and determining where you’re going wrong over and over again?  Do you think that’s something that might help you improve your trading?  Most people don’t do this and they continue to lose. This is why they’re average traders.

Here’s a really easy one.  Are you losing money in the stock market?  If you are, you’re like the majority of people, which puts you in the average trader category.  I remember reading a quote that if you want to be successful in the markets the easiest way to do that is to “not be average”.

Trading in financial markets can be a highly rewarding and exhilarating endeavor. However, it is also accompanied by various thoughts, emotions, and challenges that traders commonly experience. Understanding the mindset of the average trader can shed light on the psychological factors that influence decision-making and trading outcomes. In this article, we delve into the common thoughts and challenges that often arise in the mind of the average trader.

  1. Fear of Missing Out (FOMO)

Fear of Missing Out, or FOMO, is a prevalent thought among traders. It stems from the desire to participate in potentially profitable trades or market moves and the fear of regret for not taking action. Traders may find themselves chasing after trades, entering positions without proper analysis or risk management, driven solely by the fear of missing out on potential profits. FOMO can lead to impulsive decision-making and increased vulnerability to market volatility.

  1. Greed and Overtrading

Greed is another common emotion that traders encounter. The desire for excessive profits can lead to overtrading, taking on too many positions without proper analysis or consideration of risk. Overtrading can result in a lack of focus, reduced discipline, and increased exposure to market risks. It is essential for traders to maintain a balanced approach and avoid succumbing to the temptation of quick and unsustainable gains.

  1. Managing Losses and Avoiding Regret

Losses are an inherent part of trading, and managing them is a significant challenge for traders. The fear of losses can lead to reluctance in cutting losing positions, as traders hope for a turnaround. This behavior often stems from the desire to avoid regret for taking a loss and missing out on potential profits if the trade eventually recovers. However, holding onto losing positions without a sound strategy can lead to further losses and a negative impact on overall performance.

  1. Analysis Paralysis and Decision-Making

Traders frequently face the challenge of analysis paralysis, where they become overwhelmed by excessive information and struggle to make timely decisions. With an abundance of market data, news, and analysis available, traders may find it challenging to filter out the noise and focus on essential factors. This can lead to hesitation, missed opportunities, and indecisiveness, which can negatively impact trading outcomes.

  1. Emotional Rollercoaster

Trading involves navigating a rollercoaster of emotions. Traders experience euphoria during winning streaks and despair during losing periods. Emotional highs and lows can impair decision-making, as traders may become overconfident, take excessive risks, or become paralyzed by fear. Managing emotions and maintaining emotional stability are crucial for maintaining a disciplined and rational approach to trading.

  1. Patience and Long-Term Perspective

The average trader often struggles with patience and maintaining a long-term perspective. The desire for quick profits can lead to impatience, causing traders to prematurely exit positions or constantly chase after new trades. Developing patience and recognizing that trading is a marathon rather than a sprint is essential for achieving consistent success. It requires discipline to stick to trading plans, allow trades to develop, and avoid succumbing to impulsive actions driven by short-term fluctuations.

  1. Continuous Learning and Adaptation

Traders need to stay ahead of the curve by continuously learning and adapting to changing market dynamics. Markets are dynamic, and strategies that once worked may become less effective over time. The average trader must have a growth mindset, be open to new ideas and strategies, and commit to ongoing education. This adaptability is crucial for navigating evolving market conditions and staying competitive in the trading arena.


The average trader faces a range of common thoughts and challenges in their trading journey. Understanding the psychological factors at play, such as FOMO, greed, fear, analysis paralysis, emotional rollercoaster, impatience, and the need for continuous learning, can help traders develop self-awareness and make informed decisions. By managing these thoughts and challenges effectively, traders can enhance their decision-making process, improve their overall performance, and achieve long-term success in the challenging world of financial markets.

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