With Halloween around the corner now is the time to talk about fear. In trading, fear is one of the biggest obstacles for consistency. In order to overcome fear, you have to understand what is causing it. Fear in trading typically manifests itself in 3 different ways:
1. Fear of Losing Money
“Scared money doesn’t make money.” One of the biggest problems traders have is ACCEPTING the risk of trading. No trading strategy works 100% of the time, and losses are unavoidable, no matter what strategy you use.
Many traders perceive losing money as a negative event. If you want to become consistently profitable trading stocks, you have to get comfortable losing money. You have to risk it to get the biscuit. This blog series will show you how to get overcome your fear of losing money, and the other two types of fear.
2. Fear of Being Wrong
Fear of being wrong leads to disastrous outcomes in trading. It makes you afraid to take risks and makes you take losing trades way too late. When you don’t cut a loser when you are supposed to, it because you are attached to being right. You hear the old saying “it’s not a loss until you sell”. Many chose to bag hold instead of admitting they are wrong!
The question you have to ask yourself: Do I want to be right, or do I want to make money? A major reason why so many traders fail is that they would rather be right.
3. Fear of Missing Out
FOMO is one of the most powerful emotions in investing. It has been afflicting humans for hundreds of years ever since speculation begin hundreds of years ago. And still today it plagues even the most intelligent investors and causes rash decision making. You cannot let your fear of missing opportunity cause you to behave rashly. If you know how to combat and overcome the fear of missing opportunity, you will put yourself in a great position to become a consistently profitable trader.
Now that you understand the 3 types of fear that will appear in your trading, you will recognize when these emotions start to affect your trading. In tomorrow’s blog, we will talk about how to overcome your fear of losing money.
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