After a strong year during which markets were up double digits, many traders are worried. Will 2020 follow up with solid gains or has the window of opportunity closed? No matter what you might be feeling, let’s talk about how to overcome your trading fears.
The Four Fears of Trading
You might have kicked off trading this year with a fresh, positive outlook, which is great. However, your emotions are probably working against you. Try as you might to check emotions at the door, remaining neutral while trading is difficult. When money is on the line, fear and greed sneak in. If you can manage your emotions, you are more likely to succeed as a trader.
But let’s talk about fear now. The late Mark Douglas outlined four stages of fear traders suffer from in his book “Trading in the Zone.” The four fears are Fear of Missing Out (FOMO), Fear of Loss, Fear of Being Wrong and Fear of Letting a Win Turn into a Loss. Conquering these fears is incredibly difficult; managing them is doable.
I’ll cover all four fears of trading in two separate blog posts. Let’s take a look at the first two.
The Fear of Missing Out (FOMO)
FOMO plagues every single trader out there. While nobody wants to miss the party, traders often yield to a fear of taking risks, which leads to eventual regret.
The emotion of regret stings more than anything, especially when traders around you are winning. Nothing is more painful than sitting on the sidelines and missing out on the excitement. “I am supposed to be in the game – why am I not in the game?” Fear of losing is so overwhelming that it will leave you paralyzed.
To manage FOMO, I suggest finding a community of like-minded traders who you can learn from and bounce ideas off of. I’m partial to the Explosive Options chat room, of course, but there are many out there. I suggest finding one that is right for your trading style.
The Fear of Loss
You mourn the loss of loved ones, relationships, and a championship game with different degrees of pain. As a trader, you mourn the loss of money.
Losses are part of the game. Once you accept that, you can rise above this fear. The key is moving on and not reflecting on the loss for too long. There is always another trade around the corner!
In part two, we’ll wrap up our discussion of the four fears of trading when we look at the fear of being wrong and the fear of letting a win turn into a loss. Read Now.