TRADING WITH FEAR
There are various forms of fear that traders “battle” with and in many cases, lead to a trader sabotaging themselves.
Markets are full of people losing money, which is not necessarily a lack of technique, information or a lack of study that may result in a trader’s downfall. A trader’s greatest threat is their own fear. That fear consumes most traders, destroys their emotional control and ineffably results in a loss of money.
By recognizing your deepest fears, understanding them and knowing how to fight them will not only improve your results, but will also result in learning to trade professionally , free from stress and emotions.
The various fears that traders may suffer from include:
- The fear of losing money.
- The fear of missing out (FOMO).
- The fear of being wrong.
- The fear of leaving money on the table.
These topics will be discussed individually over the following few newsletter editions.
The fear of losing money.
The fear of losing money results in selling winning positions too early and holding onto losing positions too long.
Let’s stop reducing profits and maximizing losses and learn to increase profits and reduce losses.
Money is only lost when a position is closed so it is easier to dwell on a loss than enjoy the profits so when a trade is profitable the instinct is to sell before it becomes a loss. This thought pattern results in any chance of success being reduced significantly. Finding a solution is not easy as there are many strong psychological issues behind it:
- Checking the trade too frequently results in an increase of anxiety.
- Believing that you can predict the outcome.
Trading only works when you accept the risk before entering the trade. Positive results come from a series of trades and not one trade. If you need this one trade to work you will micromanage it, but when you commit to a series of trades, plans can be executed. Your job is not to predict but to execute your edge and the edge only appears over many trades.
How do you get this fear to stop hijacking your trades?
It starts before clicking the button.
- Look at the chart.
- Define your stop loss level and say to yourself “this is the price I am willing to pay to play this game
and if the trade doesn’t work, I’m ok with that” - The only time a loss is unbearable is when you don’t accept the risk beforehand.
- Once you are in the trade, respect the stop, don’t touch it, move it, don’t widen it to avoid being
wrong. That stop loss level is there for a reason, let it do its job. - Set the take profit level and stick to the plan with regards to trailing stops if applicable.
Stop watching the chart like a hawk, you are not a security guard, stressing over every tick will only trigger your survival instinct, allow the trade to breathe, let it work. If your instinct says close it, take a step back, breathe for ten seconds and remind yourself that I’m not here to avoid discomfort, I’m here to follow a process that works.
Don’t judge results trade by trade, remember the bigger picture.