Do you fear of losing money in the market?
Do you fear of giving back the profits you earned?
Do you have fear of being wrong?
Do you suffer with fear of missing out (FOMO)?
Do you have fear of unknown?
If answer to any of the above is 'Yes', this article will provide you tips that will bring down your fear to zero level. Trust me...
In trading arena, fear is a very common thing and that is the reason, many people do not enter in this field and those who are already in the game, can't take maximum out of it. The reason is; F.E.A.R.
The traders commonly suffer with following fears and we will learn how you can handle them...Right away...
Many people have this fear...of Unknown...This fear haunts because of lack of knowledge. You do not know enough of it and therefore you have fear of it.
Just imagine, you have fear of driving a car because you think that you might meet with an accident. Of course, it has happened with many so you think it can happen to you too. You have this fear because you don't know how to drive a car.
But does that mean that you should not drive a car?
I mean, driving a car in sunny weather and greenery surrounding is so enjoyable.
What should you do? You should learn driving under a trainer. Read the driving manual. Get hands on practice under the expert supervision and then start driving. Isn't it?
The same applies to trading as well. Trading is a very enjoyable and profitable journey but will you not enter this journey just because you have fear of unknown. This fear can be overcome by expanding one's knowledge about trading by taking a course or reading relevant books.
You fear that you will be wrong when you put trades. You feel that market will go down as soon as you buy a stock.
There is no correlation between being right and being profitable
You can be profitable by being wrong in most of the cases.
Don't believe me. Let me give you an example.
You make 10 trades. 8 of them are wrong and only 2 are right.
On wrong trades, you lose 500 each and on right trades, you earn 3000 each.
In total, you lose 4000 and earn 6000. Boom! Overall Profit of 2000.
Wrong but still profitable. You just need to ensure that you are not TOTALLY WRONG. If you focus on building profitable system, this fear will vanish away soon.
The stock is trading at 521, you see a breakout at 525 and want to buy at 527...market breaks out and in front of your eyes, by the time you place the order, reaches to 540 and continues to climb higher...you are waiting for price to come down to 527 which never comes...
Next time when you see a breakout, you will have this fear...FOMO, Fear Of Missing Out...You fear that you will miss the bus and enter the trade too early, too late or when not required...all of these are 'injurious to your wealth'.
I suffered with this fear in initial years of my trading and would like to share you how I overcame it..
There are 2 ways to deal with it...
i) Place a stop loss order (preferably stoploss market order) in advance. This way, you are sure to get the order no matter what. You can remain
assured of getting a fill at around that price.
ii) If due to some reason, you miss the trade, tell this to your self loud and clear
'Hey look...This is not the last day of market. Market is going to open at 0915 sharp everyday for years to come. It is going to give me ample
opportunities to trade. Its ok if I missed this!'
Poof! Your fear will vanish in seconds...
You fear that you will lose a substantial amount of your capital during trading.
That is a very obvious fear with trading...Again I will tell you 2 ways to deal with it
i) Trade with capital which you can afford to lose. Ask yourself. What if I lose THIS entire capital in coming days? Will I still be OK? If
answer is Yes, then go ahead. You can not bring that capital which, if you lose will give you sleepless nights. No. That is not the aim of
trading. You don't want to drive a car at 140 KM/Hr just to get that adrenaline and spend rest of your life on bed.
ii) Use stoploss on each trade. This way, you limit losses on each trade. Preferably, do not lose 1% of trading capital on any of your trade.
You will survive in long run and be in the system to take benefit when things turn your side
5. Fear of giving back profits
You enter in a long trade at 527. 1000 quantities. The stock goes up 50 points. You can see 50000 bucks on the table. What worst can happen?
Eating away all your profits and in most of the cases, giving you a loss...You blame and curse yourself badly...
This fear plagues many of the seasoned traders as well...There are 3 ways to deal with it
i) What I recommend is to develop a trading plan and stick to it...If you do that, all that blame is on the trading system and not on you...
I mean, you followed the system and system gave you a loss...You didn't take it...
ii) Another thing that you can do is to use a trailing stoploss...
So if market moves 50 points in your direction, move your stoploss to say, 20 points profit (giving room of 30 points to go against you)
iii) Third thing that you can do is book partial profit. You book, say 50% of profit and keep rest and move your stoploss to the cost. This way,
a) you are not giving away all the profits
b) you give room for 50% quantities to move in profit
c) even if market tanks, you exit at the cost
No bruises, no regrets, no blamegame...
I hope this article will help you to come out of your fears...
Did you experience any of these fears? Do let me know and also tell how you dealt with it...
If there is any other fear that I didn't cover, do let me know in comment box, I would love to answer them...