FEARS in trading and how to overcome them?

I've discussed with you about FOMO (Fear of Missing Out) on the previous post, but FEAR as a whole is a constant part of a trader's life. While the fear of losing money is quite common, there are a few other main fears : Fear of the unknown, Fear of being wrong, Fear of losses, Fear of giving back profits...

To really understands all the fears that hold us back, we first need to define what fear is.

According to Dictionary.com , fear is a distressing emotion aroused by impending danger, evil, pain etc. whether the threat is real or imagined; the feeling or condition of being afraid.

As trader, one have to understand that it is not possible to eliminate completely the fears in trading. But whether it cripples you or push you to new heights is entirely dependent on you. The only thing you can do is to deal with it.

Here are the 5 most common fears in trading:

1) Fear of being wrong

Right or Wrong, these two words weight a lot in our daily life, in our judgement, on what we should or shouldn't do. Being right affirms and inflates our sense of self-worth. Being wrong often lead us in believing that we failed a task. We grew up learning to avoid the embarrassment of being wrong.

2) Fear of the unknown

The fear of the unknown is mostly due to our lack of a proper trading education.When you don’t know how much you can lose, you are gambling.

The best way to overcome the fear of the unknown is to understand what trading is all about. You can expand your knowledge with a trading coach, by educating yourself, by reading more books and by meeting, exchanging and sharing with other traders.

3) Fear of losses

Human beings are afraid of losing and would do whatever it takes to avoid losses. Loss aversion refers to the tendency for people to prefer avoiding losses than acquiring gains.But avoiding losses leads to poor decisions that are harmful to your trading.

4) Fear of giving back profits

One of the biggest psychological challenge traders are facing is the fear of giving back profits. When we start to make money as traders, we don't want to lose the profits we accumulated. But the fear of giving back profit often pushes us to take profit too quickly, or also to close a losing trade before it hit the stop loss.

The best way to overcome this fear is to detach ourselves from our trading results. If we respect our strategy, that’s a win, if we manage our emotions and our trades effectively, we are on the right path.

We have to understand that it is a norm for to lose money during the initial stages of our trading career, the key is to follow our process, not the money. We have to develop a trading plan that have clearly defined entries and exits, and follow our plan diligently . By having a clearly defined plan, we will be more objective in our trading instead of trading based on emotions.

5) Fear of Missing Out

Discussed in a previous post : What is FOMO in trading.

In conclusion, as traders we need to understand that it is totally normal to have fears in trading, that we won't be able to eliminate it completely and we need to accept it and deal with it. Once you understand the concept of fear in trading, you can work toward dealing with each of them. We need to work on execution, process and following a well define trading strategy, you have to detach yourself from your trading results, these are the best way to deal with fears in trading.

VTL