All of us are afraid of something. To say or think you are not afraid of anything is self delusion. Lack of fear is not bravery either. Bravery is being afraid and still following through and taking care of the task at hand.
There are two fears we must overcome to be successful traders as these two fears will hinder and handicap your ability to make money while trading markets. These fears can freeze you in your tracks. Not only will they hinder your abilities as a trader but but also handicap you in all other aspects of life as well.
Fear Of Losing: The fear of losing money is a very valid fear, especially if you cannot afford to lose it. "Scared" money and markets do NOT mix. The pure truth of the matter is you will lose money at times, trading. Any trade can turn into a losing trade. In fact each and every trade you take starts out as a losing trade as the cost of doing business (the bid/asked spread and commissions) are realized as soon as you enter a trade.
The fear of losing money will work against you in many ways. It will stop you from entering trades that perhaps you should be in. It will get you out of trades at exactly the wrong time as well. Fear of losing money will hinder your ability to make money as a trader. The hardest trade to manage for many traders is the winning trade. In the winning trade both fear and greed are at work at the same time. The fear of "giving back" some of the realizable gain at that instant and the greed to make more in the trade than what the market is offering at that instant.
Solutions To The Fear Of Losing:
1) Never trade with money that, should you lose it, will adversely impact your lifestyle. Do NOT trade with rent money, mortgage money, food money, etc.
2) Before risking money in a trade, know what the expectancy of a positive outcome is for that trade. Many traders trade with a negative expectancy and do not even realize it. By doing the work on trade expectancy, you can then be prepared for the inevitable draw downs.
3) Always trade by plan. If you are not trading by plan where every possible contingency is well thought out and planned for in advance, you will not be a successful trader. We do not get any smarter when we are in a trade. In fact, we get dumber. Once in a trade, stick to your plan.
4) This one is a bit radical but when all else fails, try it. Lose on purpose! Yes, it will totally suck! But I will guarantee you one thing if you do this, you will actually gain something important: confidence.
Fear Of Success: This one seems counter intuitive. Why on earth would anyone fear success? It goes to the very core of our belief systems. You may need to undertake an examination of your relationship with money itself. Do you believe that it is easier for a camel to pass through the eye of a needle than for a rich man to enter the Kingdom of Heaven? Do you accept the myth that, somehow, wealthy people tend to be "miserable"? Does your inner dialogue contain a "tape" from your childhood that you are a "failure"? Do you honestly believe we live in an abundant universe or one that is "filled" with scarcity?
In other words, do you, deep down in the core of your being, believe you deserve success? This will take very honest and careful self examination. By undertaking this "exercise" you can then confront those things that are a road block to trading success. There are actually funds out there that trade other funds. There is a propensity with some fund managers to reach certain equity levels in the fund they trade and then for that equity level to decline. This is quantifiable. Could it be that those fund managers believe, deep down, that they do not deserve to make the money they have made and then proceed to "give some back?" Could it be that they believe they do not deserve more?
Solutions To The Fear Of Success:
1) Do the critical examination of core beliefs. Confront any negative beliefs you hold and submit them to objective analysis as to the truth or falsehood of those beliefs.
2) In your examination, look back on your life to the concrete examples, in your own experience, that prove the falsehood of any negative beliefs. We have all had some successes in our lives.
3) Review your definition(s) of failure itself. Could it be that a failure is really not a failure but rather a stepping stone to success? After all, you have "discovered" another way not to do something!
4) In the end, if you are afraid of success, go out and start succeeding. Win! Success begets success. Get a taste of it. After a few times, you will no longer fear success, you will crave it more. You will then persevere in the face of adversity. You will get better and better at dealing with adversity in a more calm and logical manner. In the end, with diligence and hard work, whatever you wish to accomplish, you will accomplish.
Conclusion: All of the above goes to the often neglected area of trader psychology. I am of the firm belief that trader psychology is what separates successful traders from failed traders. I find it incredible that most traders do not give this area much thought at all and devote little, if any of their time to it. If you only read one book on this subject, make that book Mark Douglas' Trading In The Zone. Part of my business plan for my trading business (you DO have one of those, right?) is to, once a month, read that book from cover-to-cover again. I am on my third copy having worn out the other two. Hope this helps.
Yours in the never ending search for more trading edges.-The Market Sniper
