- Fear of Losing Money
- Fear of Missing Out
- Fear of Being Wrong
From my own trading I contend with the 'Missing Out' more than any other fear. Of course I still have fears of 'Losing Money' and 'Being Wrong' but I believe that with experience I will conquer all 3 of the fears and be the trader I want to become.
Mark Douglas has beautifully written in his book 'Trading in the Zone' that there are 5 Fundamental Truths in Trading:
- Anything can happen.
- You donít need to know what is going to happen next in order to make money.
- There is a random distribution between wins and losses for any given set of variables that define an edge.
- An edge is nothing more than an indication of a higher probability of one thing happening over another.
- Every moment in the market is unique.
If you are able to accept these 5 facts then you are on your way to becoming the trader you want to be - FEARLESS.
Now you may be wondering on the steps I have taken to help me achieve my ultimate goal of eliminating the 3 Fears. I have incorporated rules and guidelines in my trading plan which will help me achieve this goal, they are simple steps but you must never under estimate the power of simplicity.
The Fear of Losing Money - I have set aside some capital for my trading. Of this capital I only risk 1% on any one trade and I set myself a loss of 4% per week before I stop for the week. Just by using this simple money management technique I would have to have 6months of consecutive losses to lose the whole sum of my capital. By looking at my capital in this point of view helps me to maintain focus on my trading and not on losing money as I have a trading strategy that give me positive results over the long run. More importantly I beleive in my strategy with lots of backtesting and prevoius results.
The key to conquering this fear is by setting aside some capital that you are honestly able to accept to lose. This is something only you can decide and only you can set.
Fear of Missing Out - You cannot catch every move and you cannot trade every minute of every day. This is a fact! If you can accept this then you have ultimately accepted that you will miss trades. To be successful in trading you must have a strategy. This strategy gives you an edge in your trading, this strategy identifies when you enter trades, manage stops and manage exits.
I have a strategy that I know in the long-run will return me more winners than losers. This strategy is a trend following strategy. So I WILL miss all the counter trend moves, this is something I have to accept. Yet for my trading w/e 8th Jan I traded the USDJPY against the short term trend. Yes I found myself breaking my own rules, which has left me dissapointed. I was scared on missing the move. I have taken this on board and have said to myself that I will not break this rule again. My motivation to help me get on the path to eliminate this fear is by looking at my weekly results; if I had traded my rules I would have been up 3.65% rather than only 2.2% for the week.
Fear of Being Wrong - If you believe that anything can happen in the market then you conquer this fear. Every time you decide to buy or sell you have essentially tossed your coin (which is weighted to a positive expectancy as your strategy gives you an edge) and all you can do now is wait for you targets to be hit or your stop loss to be hit. No-one, yes n0-one, has a 100% win ratio in trading. You have to remember that this is a zero-sum game. If you have a winning trade then someone else has had a losing trade.
I find this the easiest fear to contend with. I actually do not fear being wrong. To really accept this you must embrace the 5 fundamental truths of trading on a deeper level. By just acknowledging one of the above truths you can start eliminating the fear of being wrong.