Trading Psychology

Trading With Fear vs. Trading Fearlessly 

  • Why it’s impossible to be successful if trading from fear.
  • Overcoming past losses.
  • Having expectations could be detrimental to your trading.

Fear is one of the biggest obstacles traders and investors face. It’s a debilitating force not many know how to deal with. The emotion of fear needs to be comprehended first; then, we can look at practical ways to begin releasing that fear by facing it, not running away from it. This will transmute the fear into a stress-free, calm trading mindset. 

Why do we feel fear as traders?

The answer is simple, it boils down to past experiences and losses we have experienced. Think back to when you first started trading; there was absolutely no fear at all. You traded with freedom, and the winners just seemed to roll in. Once you started trading real capital, things began to change. Suddenly you were unsure of opportunities, full of fear, and trading was done from an emotional and irrational place.

The more trades we lose WITHOUT understanding that losing is part of the game, the harder they become to handle. Only once we can fully and absolutely comprehend that losses exist in every trading system, is when we can begin to accept the ones that do not work out.

Eventually, any trade we take will have no real effect on us. We don’t get euphoric or depressed. We simply trade and get on with it. It’s easier said than done, but it must be perfected. If at any point, we take a position and feel a rush of emotions, we know something is wrong. There really should be no change of state when we place our trades; we should be calm, relaxed, and accepting. That’s when we know we trading correctly!

Expectations lead to disappointments.

This title must not be viewed in the wrong light since it’s important for traders to have “expectations” of what they think the market price may do. However, we must not have expectations of winning or losing. We must not wish for the trade to work out or hope it will be profitable so we can ‘enjoy’ the rest of our day. Doing this engages the emotional center and is unproductive. There is no need to wish for anything in the markets; once you have taken your well-calculated position, let go of it. It’s entirely out of your control, so stop worrying because you can’t do anything about it.

It’s ideal to have stop losses and profit targets predetermined; this way, we do not constantly have to question whether we should get out or let it run. It’s critical to make trading as simple as possible, and having our executions planned in advance is one way of doing that.

How can we release fear from our trading?

Stop desiring for the trade to work out and stop worrying about if it doesn’t; instead, assume that you are already a professional trader. Feel like you are already trading that big account, making withdrawals, and always ask yourself the question before taking any trade, “Would a professional trader take this trade?”