Fear is an inherent human emotion. It is instinctive for humans to be scared of getting hurt or achieving a negative outcome. We carry this innate fear into different activities, and sometimes it prevents us from taking a new step or repeating an old one for fear of ⁰ understanding your type of fear.
The following are the top fears traders have when trading:
Fear of losing
This is the greatest fear of any trader. As a beginner, you will probably experience your first fear of losing money when it’s time to switch from a demo to a live account. You would have encountered losses during your demo trades, but it doesn’t have much effect since it’s not your money.
Even after you started using a live account and made some profit in the past, you wouldn’t want to lose a penny.
The fear of losing your money may prevent you from using enough leverage to increase your trading position.
Fear of being wrong
The fear of being wrong may stem from doubting your market analysis. Imagine spending several days and weeks studying the charts and following important past and forecasted news releases. Finally, you have crafted a strategy that fits your risk appetite and trading style, but you can’t pull the trigger.
The fear of being wrong despite your carefully thought-out situation is holding you back from entering the trade. Even if you eventually gain confidence, your lack of faith in your strategy may influence you to close your position earlier. Lack of confidence in your analysis may also push you to seek third-party opinions and rely on others’ analyses to trade, which may be wrong too.
Fear of missing out (FOMO)
The fear of missing out is another trait that may sabotage your trading success. This fear breeds herd mentality and may lead to a wrong trading decision.
In practice, you may open a trade or close it too early without proper research and analysis because the market is intensely moving in that direction. FOMO can also push you to invest more than you should in a volatile market because you think others are making big profits, and you do not want to miss them.
Common phrases of FOMO traders include:
“Others are doing it; it can’t be that bad.”
“See how much profit they are making; I should have done that too.”
“If I don’t act now, I may miss that opportunity ”
” It seems people are trading AUD/JPY pair, and I should too.”
Fear of not leaving money on the table
This fear can be felt in two ways; the fear of losing your profit after some wins and the fear of taking profit early.
After making a certain level of profit, this fear may push you to take your profit earlier because you are scared of losing your profit if you keep trading and the market moves against you. Such premature trading may lead to making a lower profit.
On the other hand, you may be tempted to leave your position open for a longer period, hoping that the price may increase and lead to a more significant profit. In reality, these may lead to monumental losses if the price moves against your expectation.
How to manage your fear effectively
Learn how to trade
The best way to survive in the trading market is to learn the ropes. Take proper training from experts with a proven track record of success. You should also take advantage of your broker’s learning resources and follow popular trading blogs.
As you learn, practice with a demo account. Even though a demo account does not require real money, you should take it seriously and ensure you master the art before you start live trading.
Reduce the size of your trade
To curb your fear of losing during a live trade, start small. Lower your lot to the amount you can feel comfortable losing. If your trade size is small, you wouldn’t be under too much pressure that can influence you to make a wrong decision.
Have a plan and stick to it
Create a plan before you open a position. Meticulously conduct technical and fundamental market analyses and create a plan that fits your risk appetite. Once you make a plan, be confident and stick to it till the end.
To prevent the fear of putting your money on the table, set a stop loss that helps you automatically close your position when you lose to a certain point. Also, set a take-profit level that allows you to close your trade when you have made a certain profit level. These steps will help you control any greedy tendency or closing trade too early.
Keep a trading journal
Keeping a journal record of all your trades may help you recognise profit and loss patterns. By analysing your past trades, you will identify strategies that are working and not working. Objectively analyse the record and eliminate or adjust the failing strategy. This step will boost your trading confidence and give you certainty.
Trading is an exciting endeavour if you are focused and consistent. The market may not be favourable daily; sometimes you lose, sometimes you gain. The fear of losing shouldn’t hold you back from trading. Just learn how to control your anxiety. Source
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