4 Common Fears In Trading
The Fear and Greed index on CNN business is at an extreme fear level at the time of writing this (OCT 2022).
Investors are fearful of the market uncertainty and rising prices.
Fear is a big emotion that can be detrimental to a trader’s profitability. The good part about fear is that every. Single. Human. Experiences fear.
Sometimes in the market it can be difficult to tell if you are trading from a place of fear or greed.
There are four major fears that we discuss in this episode when it comes to trading.
1. Fear of being wrong/wanting to be RIGHT. - requires strong mental fortitude and resiliency. As long as your edge has the probability of positive expectancy, there is nothing to worry about. Your proven edge will let you know how often you will be wrong vs right and that alone should be enough to give you a peace of mind. Attaching to that fear state will lead to devastating thoughts that can affect the next trade and the one after that ending with lack of confidence.
Remember: the market is always right.
2. Fear of losing money. Reality check: you WILL LOSE MONEY. It’s a part of trading. Therefore, don’t invest money in the market that you can’t afford to lose. Every single trader, prop firm, or billionaire hedge fund manager, they will all experience losing money in the market. There is no 100% strike rate, sorry “trading gurus”. Learning how to lose is such an important part of trading because that’s the moment where you are most open to change and learning. Be okay with letting the probabilities of your trading plan play out.
- Asses your language about how you view losing money. What are you saying? Is it something that is constructive to your trading or destructive?
- Detach yourself from the dollar amount and look at the percentage or pips. This will help create a gap in your emotions from being attached to the outcome of the trade.
3. Fear of Missing Out. FOMO. Everyone has those times where you miss out on life and in a trade. It happens. The important part of this fear is being aware of when it arises and catching yourself with why you are feeling that way. It can open up a can of worms if you aren't careful with the language you use. Using words like should have, would have, could have, is not owning up to what as already transpired. Don't let a missed opportunity be the reason why you end up losing on your next trade through forcing a trade. Don't let a missed opportunity go to your head where you end up beating yourself up.
4. Fear of leaving money on the table. This fear, if not tamed, will lead into full fledged GREED. Is there room for improvement? yes. But is there a way to accept the win matter how big or small? absolutely. However, there is no reason to beat yourself up because of it and there is no need to close your winning trade prematurely because there will always be more opportunity out there, which is why following your plan is the critical point to this. Accept the current outcome and move on.
To conclude, understanding the over all market sentiment and what cycle it is in can be used as a beneficial tool in capitalizing on wins or saving on losses.
Aloha! We are Glenn & Reid, founders of Hawai'i Trading Academy.
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