Fear is an emotional feeling that comes up as a result of failure, rejection or pain. If not controlled, fear can lead into depression, stress or failure.
All traders experience fear at one point in their trading journey. The only difference is how they react in times of fear. If you let fear take control of you, you will not be able to profit from trading.
Most times fear comes as a result of greed after experiencing a big drawdown on your trading account. It can cause panic which leads to wrong decisions.
Let’s have a look at this scenario;
Imagine you are having a buy on USD/CAD and one of your trading partner comes shouting how Crude Oil Inventories are at peak more than ever. Ofcource this favors the CAD. You immediately think about how much money you have lost. If you had a stop loss, it has been hit already and if you had none then your account must be blown.
That’s fear! Being scared is normal but when you let it take control of you, you will only focus on how much you have lost and only have regret. Such regrets and pain are some of the reasons people give up on trading prematurely.
What are some of the common fears experienced by traders?
We shall discuss each briefly and see how to deal with each.
1. Fear of losing on a trade.
The fear of losing a trade can make you miss on potential great opportunities. It brings procrastination within you. You find yourself undecided whether you should enter a position or not. The trade hits your articipated take profit target without you.
This is kind of behavior is common especially in new forex traders and it is mostly after you have suffered a large drawdown than your emotions can handle.
Sometimes you enter a trade and when it has moved a few pips against you, you panic and close it prematurely. This because you are scared of making a large loss again. When this continues can lead to loss of confidence in yourself and you may even start doubting your strategy.
Experiencing losses is normal in forex trading. In probability you have to always expect a win or a loss. When you worry so much about the results you may never take any trade at all.
If you are planning to perform in forex, you have to learn to accept losses as part of trading and stick to your trading plan. Revise your trading journal always and learn from your previous mistakes.
Manage your risk properly so that you don’t get large drawdowns that breed fear!
2. Fear of missing out trades
Forex market offers as many opportunities as possible and you can trade at any time without any kind of limitation. But this doesn’t mean that you have to trade all the setups in the market.
Apart from fearing to enter new trades, some traders want to trade every setup that surfaces in the market and so they fear on missing out. This can also be some sort of greed. You just want to always be in the market trading all the time.
When you see the market rallying up, you just jump in because you don’t want to miss out on that. If it rallies back down you also follow.
You are trading with no plan and discipline just always standing by ready to jump in incase of anything at any time. At the end of the day you will realize that all the trades taken were at a wrong time and the market is always going against you because you are trading with no discipline at all.
3. Fear of not being right.
In trading forex, you don’t need to be that Mr. Perfect. No one is going to blame you whether you are right or wrong. It is only you and the market. What if I tell you no one can tell the market what to do, where to go and not so you dont have to be right all the time to make money!
To be a successful trader, it does not require you to be right all the time but to focus on making money by believing in yourself, your strategy and trading with discipline. If you are to focus on being perfect all the time, you might not be able to last long in the game.
If a trade fails you can’t force it to move according to how you want it. Accept and learn how to cut your losses when still low and wait for another opportunity. Cutting losses is better than waiting on a losing trade and you take a large losse or watch your account blow because of your ego.
You must learn to accept the market and not to take it as a mistake.
4. Fear of letting a profit turn into loss.
This is normally experienced by traders who are afraid to accept losses. They always want to lock in quick profits as a guarantee for their win trades.
By doing so, they don’t give enough space for a trade to breath and their trails are hit on a short notice. So they miss out on the big part of profits and always take small profits. This is so common in traders because they are scared of seeing a trade get in a negative when they have already seen a positive figure.
It is advisable to trail and lock in some profits but it should not be so tight or close the current price of your running trade otherwise you will be stopped out.
How do you know you are under possession of fear?
When you find it hard to enter a new trade because you are scared of losing.
When you always enter trades late because you are not always sure if you should take a trade or not even when it is giving a perfect setup of your trading strategy.
When you realize you always jump out of trade before it hits your take profit target and then the trade continues your direction overtaking your target profit level.
When you realize that you always panic to close your open positions when a trade moves a few pips against your favor.
When you find yourself running after a trade because you cannot afford to miss it.
The best way to overcome fear is to believe in yourself and your trading system.
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...