COMMON TRADING FEARS AND HOW TO DEAL WITH THEM: All the preparation in the world cannot prepare you for what is to come when you start trading in the markets.
It seems as though it is a lose-lose situation at first because if you win money, you feel good, carry on and eventually lose and if you lose money from the start, you feel the need to chase it until it has been won back.
Trading fears can be detrimental when it comes to making and maintaining a profit and it is important to control these fears and ultimately, overcome them. Luckily for you, I’ll share some top tips right here!
Fear #1 – Missing Out
This is possibly the biggest fear that has to be conquered in order to be successful. You correctly predict a price movement but before you can act, it comes to fruition.
Unfortunately, it is completely natural and just a part of what makes us human as it is a form of greed.
However, you must have some self-control because that underpins everything we are trying to do. It is no good spreading your money everywhere in hopes that you don’t ‘miss out’.
Solution – A good solution early on is to write down reasons for your actions; if you find that you have written ‘got too eager, shouldn’t have done it’, you will soon learn to be more self-aware. Also, what are you losing when you miss out on an opportunity? The answer; absolutely nothing. It is better to miss out than to lose; just be glad you predicted it correctly!
Fear #2 – Losing
You have to expect to lose, it is just the nature of the game. The best thing you can do is to remain confident in your strategy and to keep your control. You need to let go of the anxiousness and the pain of losing as this will allow you to make unclouded judgments and to continue without emotion.
Solution – Try to alter your thinking so that you realise losses are bound to happen. If we won all the time, everybody in the world would be doing what we do. However, they don’t because we are the only ones that have the confidence and ability to pull off a successful strategy. Also, think of losses as an ‘expense’ of your business; all businesses need expenses to grow.
Fear #3 – Wrong Decisions
Nobody likes to make bad decisions and if you have lived life making all the right decisions so far, this fear could hit you particularly hard. However, you have to get used to the feeling of making bad decisions because they will happen as they are the cause of the losses. If you get hung up on every bad decision, your judgement will be affected and this will just lead to even more bad decisions and more losses.
Solution – The plan is not to win 100%, the plan is to win more often than you lose. If you have been successful in life, forget about that and try to adopt a fresh stance here. As strange as it may sound, remove any goals you may have whether it is daily or weekly or both. This way, you won’t be upset at not reaching them and you will be less likely to chase.
Fear #4 – Making Losses After Profit
The easiest thing to do after making a profit is to shut up shop in fear of that becoming a loss but this clearly cannot work in the long-term. Remember, you have a strategy and you have to see this strategy through (no matter how unnatural it feels). If you feel as though the market isn’t reacting as you had hoped, that is a good reason to exit a trade but not just because you are in profit so far.
Solution – Just as you did previously, write down the reasons for exiting a trade; if you left because you were in profit, you need to have more self-control in the future. Furthermore, work out a plan beforehand and stick to it so you don’t let emotion cloud your judgment. Finally, keep your mind on the bigger picture, not just on this one trade.
Summary – Once you get over these main fears, you have the right mindset to be successful. The general theme running through all these fears is emotion so if you keep that in check, your decisions will remain logical and fact-based.
Caan Berry – Full Time Trader.
You can see more of Caan’s articles and advice here -> http://caanberry.com
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