Fear is a big deal. It can save our lives when we need it most, but also it affects us negatively in situations where it needn’t.
Fear of failure is a pandemic. It ruins the hopes and dreams of so many. It sounds crazy… but is certainly very real to many might have been successful traders and entrepreneurs.
When trading the markets, fear of losing can send a trader of sound mind barmy. When a mild mannered man or woman becomes obsessed with their losing positions it’s often the begging of the end for them.
Sound game plan goes out the window faster than a Tottenham team losing at Chelsea again.
Fear of failure and losing as a trader
The fear of losing is often so great that a trader will close a trade for no other reason other than fear. Their system’s signals or strategies ignored and often only to see the position return to profit sooner rather than later.
This fear fuelled lack of discipline is so intense that any financial loss incurred is accepted almost gracefully rather than stand the pain any longer.
From my experience, if more time was spent on conditioning beginner traders emotionally there’d be far greater numbers of people investing safely and profitably in the financial markets.
Conditioning your mind for financial trading success
Just like a runner will condition their body to accomplish a certain distance or time, the same can be done (in essence) for a financial trader.
A trader should learn how to condition their minds to the inevitable losses that will occur in trading. The fear of losing money is likely induced by common mistakes, misconceptions and even the reality that you can’t afford to lose this money. If you can eliminate these mistakes and problems you can eliminate the fear.
If this is done you will be inclined to make better trading decisions which will then in turn increase profits. You will become fearless of the financial markets.
Now we do not want to confuse being fearless with losing respect. We just don’t want to feel the dread of losing more than you can afford to. Or feel the need to kick yourself hard for making irrational decisions because you were afraid.
What is fear?
We have all felt it at some stage in our lives. The overwhelming panic, the shakes the adrenalin produces, the desire just to run away. Scientists call it fight or flight, yet other scientists disagree.
If you were attacked by a thug for example, this is a real and potentially dangerous situation. Your feeling of fear that you encounter here is correct. You are either going to stand and fight or run. This is fight or flight. You are in fear of being hurt and you recognise danger.
Now, the exact same feelings of fear may be induced by the fear of butterflies (Lepidopterophobia) trying to tell the person with the condition that they are being ridiculous is futile, their fear is real; as real as if they were being attacked by the thug.
The reality is that we know that the person is in no real danger from the butterfly… but they don’t. And this is the same type of fear traders feel when the markets go against them.
Realistically the financial markets are not going to physically hurt you. You are not in any danger. You just think you are.
Fear and emotions almost co-exist here and it is what has led scientists to believe that fear may have evolved into choice.
If we learn to understand that the financial markets are not to be feared and choose not to be fearful of them, and that we simply take or open the right or wrong position, then what is there to fear?
Oh yes loss of money… but that again is not going to cause us any real physical harm. All that is going on is that somehow since we have been evolving, the fear of being attacked by a wild animal and being attacked by a butterfly has become muddled.
When you feel fear of losing money in the markets remind yourself that this is not dangerous, you are not in danger and physical harm will not be encountered.
Essentially then as there is no real fear, you should be able to overcome this false fear indicator.
When trading the markets and you are feeling fearful it is likely to be because…
- You can’t afford to lose money
- Your stakes are too high
- You do not understand that trading is about winning and losing
- You think the markets can hurt you
- You are afraid to fail, fear of failure
All the above are recognizable, but it is Fear of failure that is the real hidden demon here. As a trader, the inability to accept that you are wrong leads many traders on to taking bigger losses. Instead of taking a loss, you are frozen in the stock market headlights praying the markets will turn back round. Fear has paralyzed you. Many traders just don’t even know it.
This hidden fear is basically a fear of failure (atychiphobia), you cannot admit you are wrong, deep down you’re scared to admit it.
Adjusting the errors mentioned above from your trading will certainly help control the fear of loss but there may also be another solution.
How to Overcome Traders Fear of Losing
I read an interesting quote on Quora recently that got me thinking.
The root of all problems is the voice you hear in your head or your thinking mind. This voice is also referred to as ego.
The only way to overcome the ego is through meditation. The scientific fact “that all matter is made of energy” has been the base of meditation since time immemorial.
Meditation allows one to experience this energy and become one with it.
Meditation has now been scientifically proven to beat depression. Since this revelation, it is true to say that meditation as a health benefit is now mainstream. So then maybe this guy’s quote on Quora carries some weight on really how to overcome fear? And overcome fear of failure itself.
I’m not going to give you a spirituality lesson here or start to preach anything to you. My point is that meditation could be the trader’s best friend; maybe everyone’s best friend?
I have meditated for some years; I totally vouch for it improving feelings, emotions and overall wellbeing. You can read more about its benefits here. I have found it stills the mind like nothing else and reduces any stresses amazingly.
In my opinion overcoming fear of the things that are really of no danger to us could give one more freedom in life. Fear of starting a business, fear of failure and fear of public speaking… they may all be manageable or even eliminated by meditation.
If you think that understanding fear is not essential to a trader’s success that’s fine, each to their own. But if you can understand my reasoning then surely meditation is worth a try? It may help you in other areas outside of trading too.
Failure is not all bad
Failure does have its place though. If the likes of Einstein or Edison never failed the world today could be an entirely different place today… So in essence failure can also breed success.
Sometimes by losing a battle you find a new way to win the war. Donald Trump