If there’s one thing that hinders our ability to trade and to become a successful trader, it’s the fear of losing. This fear can be all encompassing and can have a disastrous impact on a trading account. This negative emotion can ultimately paralyse us and set up a destructive cycle of inaction and, or, bad timing.
Because trading is attached to one of our primary needs: money; which for most of us equals security, training yourself to look beyond this primal requirement can be difficult. However, if we analyse what’s really going on we find that the fear of losing isn’t entirely associated with money. It’s actually about a complete lack of confidence in what we’re doing and therefore a lack of conviction in our trading ability.
Given that absolute guarantees are in short supply in the markets, the answer to bringing fear under control comes down to a moderately well-known equation; belief equals confidence and confidence equals belief.
By following this credo in our trading, we can then attempt to develop a continuous positive reinforcement of that belief, and would then be less likely to question and deliberate over our trade set ups. Ultimately a higher chance of a successful outcome leads to increased probability. Increased probability is the closest thing to a guarantee a trader can find.
So how do we get to this ideal state of logic overcoming emotion? We do this by converting a concept into tangible actions made up of single steps; our own personal support system.
Here’s an intentionally simplistic starting point:
Acceptance – accept risk and therefore loss as being part of trading. In other words, to be successful we have to have losing trades as they are an inevitable part of every trading strategy.
Education – learn to read and understand charts. There’s no way of avoiding this one, so you may as well get on with it.
Time – take your time to gain experience. Apologies for stating the obvious but usually when we rush something we make mistakes and have to start again. In trading, successive mistakes can lead to incapacitating self-doubt.
Plan – We cannot overestimate the power of logical guidance; our state of mind will change continuously so we need a constant to keep us on track. Above all else, know the below list in advance of trading:
– define your trading strategy by using a simple, repeatable checklist
– identify your trade set ups with both stop loss and profit targets.
– wait for your entry signal.
- how much, what you will risk financially.
Probability – the culmination of points one to four.
In everyday life fear serves a vital purpose of keeping us safe from harm. However, if we let fear dictate our behaviour then eventually we would become too fearful to commit to anything which ultimately means nothing happens, and in trading that really would be a loss!