Are you suffering from Fear of losing in Trading?

By | July 23, 2013

How do you feel when the trade you made went against you and you need to incur loss. The first thought an amateur trader will have is “This was not supposed to happen!”. There was no way it could work against you.

After you have booked loss comes the most testing time for trader:Ideally a  trader Should feel relieved, but Instead, most of traders feel remorseful and sad.This trade was supposed to work out and now you’re stuck.Instead of thinking about the next trade your head is not in a good place, you worry that any further trading will have the same negative outcome.  Your mind is completely twisted.  How can you ever make a trade when you are NOW convinced that next one won’t be a winner?

But the fear of being wrong is a natural defensive response to emotional pain.  Along the spectrum of fear and greed we often find ourselves too fearful and worry about the future. We are programmed from childhood of being Right, If we are not right we are punished and told if you are wrong you are nothing. Now this kind of upbringing from childhood plays a big spoilsport for trader, and if they lose a trade they never have let it go attitude and concentrate on next trade. This is one of the main reason why so many traders are losers in trading.

Nobody likes to be wrong but picking stocks, commodities, futures or options can be as much a guessing game. However, armed with good information, knowledge and tools we can cut down the odds of being wrong (doing your research and homework certainly helps).  But, with all the preparation a trade may still move against you! How do we reconcile this?

As a trader, I expect to be wrong – a lot, I’m okay with that.Infact it took me several years to master this art. In fact, I could lose 30-50% of the time and not even be too concerned.  Why?  Because losses are part of the game, and I accept it.  I will have my share of winners and losers, but  being right or wrong is not the main operative.  My winners may far outweigh the losers, and it only takes a big fat win to turn around your emotions – but you have to willing to take the next trade!

As a trader you will have time when the pressure was so high that you will  break your own risk management rules, trying to force a win or positive outcome.  We know how that ended, right?  Thankfully, I’ve changed my behavior and remain humble.  Being wrong is far different than being reckless.  Recognize that in order to win in trading you need to take some risk, each trade a separate event.

The more trades you take the higher probability that one will go awry.  It is simple math, when the outcome is binary (in this case, right or wrong).  I have never met anyone who has presented a perfect trading record to me over a sustained period of time (not even from a paper trading account).    Trading is not a game of perfect, and while we strive to be right we must accept that a correct outcome is not 100% guaranteed.  But don’t let it stop you – keep trading!  More importantly, LEARN from the trade, and learn about yourself in the process.

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