TRADING WITH FEAR
In this series we are discussing:
- The fear of losing money.
- The fear of being wrong.
- The fear of missing out (FOMO).
- The fear of leaving money on the table.
“Don’t worry about what the markets are going to do; worry about what you will do in response to the markets.” – Michael Carr
This fear feels deceptively positive, it hides behind words like maximize, squeeze a little bit more but deep down it is the same old fear of missing out but just wearing a different mask. It is the discomfort of making profit and thinking damn, I could have made more, and this is the illusion of control at its finest as we start believing that we can outsmart the market, that we know exactly how far the move will go and we obviously don’t, no one does. This is also known as “dumb shit”.
Studies show that we overestimate our ability to control outcomes especially when we are emotionally invested and this is why casinos love people on winning streaks and why traders blow up on big moves. It is when things go right that our egos take control and we say to ourselves “ it’s going right because we are good, we are awesome, we are making money because we are clever, we are rich, we are incredible and we know exactly what we are doing” opposed to when we are losing money we say “the market is crazy, it is overreacting and the market makers are against me”.
“In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” -Peter Lynch
How do we stop this fear from eating into our profits?
- We need to exit our trades the same way we enter our trades, which is with a plan where the take profit is decided before the trade is taken and then we commit to it.
- If our target is based on a technical level, a structure or a Fibonacci level, stick to it. Don’t negotiate mid trade, that’s not adapting, that is fear pretending to be strategy.
- Something that helps, is to say to yourselves, “this is where I take profit because the move has done its job, we don’t need to catch the top, we don’t need to close at the very high”
- What if the market keeps going up and is running without us? No one cares, let it run because that isn’t our trade anymore, it now belongs to someone else.
We have now investigated the fear of losing money, the fear of being wrong, the fear of missing out and fear of leaving money on the table. They are not random; they are built into how we are wired. The good news is if fear is predictable then so is the response. Every time we act with awareness instead of emotion, we weaken this grip and every time we execute with intention we rewire our brains.
It is not about being fearless, it is about becoming unshakable. We don’t need to be perfect; we just need to be consistent enough to let our edge work. That’s the shift, that’s the goal.
“If you can learn to create a state of mind unaffected by the market’s behavior, the struggle will cease to exist.” – Mark Douglas