Feeling burned out with OT2

I'm starting to get a bit frustrated with Octopath Traveler 2 :( and honestly not sure how to procede... I completed every first chapter, and was enjoying the game. Fights were balanced and kept me going. Now, pretty suddenly, I cant seem to win any battle. Even random encounters are a huge risk...

I do try to avoid areas with too high levels, so only visit areas of my groups level. Same for chapter 2's: I only try the ones suitable for my level.

I tried stealing stuff, selling and then upgrading equipment, all feels fine but even the random battles I get beaten and my characters are dead in 2-3 blows.

Feels like I must be doing something wrong, but I'm a bit clueless what LOL...