If you haven't already, create a trading strategy that works. This is perhaps arguably one of the most difficult aspects of trading. Not because a profitable system is rare, but rather that finding a profitable system that is compatible to YOU can be difficult to come by. There are many off the shelf trading systems, some which are very good and work well. However a trading system is not a 'one size fits all' product. What you really need to do, is when you have found a trading style that suits your personality (e.g. scalping, daytrading, swing, position), you need to create or obtain a trading system and personalise it to you! Remember, your mind, your thought patterns, your responses may differ to someone else, and thus even though you are using the same system, you results will vary. So once you have your system, extract all the positive elements of that system that work for you and build on that. By doing this, you will develop confidence in yourself and your system, and this will go a long way to nullifying the feeling of fear when it comes to trading, particularly fear of loss.
The fear of being wrong is a very intriguing one. Since early childhood when we start school, we are basically programmed that we need to be right. If you get an answer right, great. If not, then you got a big red cross in your book. If we got spellings right, there was no reward. But if we got them wrong, the punishment was writing lines over and over, to 'drill' the correct spelling home. Thus the punishment far outweighed the potential (if any) reward. On the other side of the coin, our education system is based fully on textbook learning, which is a simple of case of right or wrong. We are taught that if you study hard, get the right answers in our exams, go to university, get the right marks there, then get a good job and lead a successful life. And if we can't do that, then we will have a tough life. I remember even as a kid when I got my exam results, I was always looking around to see who beat me and by how much, and try to save myself the embarrassment of being well below my peers. Ironically in many instances I was scoring towards the top end of my class, but that fear of being 'wrong' was present from an early age. It is essentially just human nature, we are wired to want to be right - After all, who wants to be wrong?
Unfortunately, within the profession of trading, you will not always be right. You WILL be wrong from time to time. You must remember that the bottom line is about how much money you can make, not how good your strike rate is.
You can potentially have a success rate of 70%, which is extremely good. However, if your risk:reward profile does not match up with your strike rate you can still lose money. For example if you make £5 every time you are right, and you lose £15 every time you are wrong, after 10 trades with a success rate of 70%, you will have made £35 but lost £45, thus net you lose £10!
Conversely, if you are right only 30% of the time, you can still make handsome money. If you make £15 every time you are right, and lose £5 when you are wrong, after 10 trades with a success rate of 30%, you will have made £45 and lost £35, thus you are profitable.
You must understand that to be a successful trader you have to accept and even embrace the fact that you will be wrong. I myself have taken massive hits whereby in an attempt to not take a loss I kept moving my stops again and again, and what was once a small loss turned into a something that caused a devastating impact not only to my equity but also to myself mentally. I have worked with traders who have experienced the exact same thing.
Embrace that you will be wrong, and just focus on being compliant in the execution of your plan. If you keep your losers small, you are already miles ahead of the crowd.
"If you can't take a small loss, sooner or later you will take the mother of all losses". - Ed Seykota
Lastly, remember that you cannot make fear disappear. It will always be there to an extent. All you can do is acknowledge your fear, be aware of it. Ask yourself why is the fear there? Get curious and understand the meaning behind it. Once you know this, it is a lot easier to resist and master.
We hope you enjoyed reading the article and it will benefit you in your trading. If you found it useful, please like, comment and share with your friends!
God bless, and Happy Trading!
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