Fear of Losing – the Traders Biggest Hurdle

Fear of losing

It’s easy to trade the markets for a living… or at least that is what most sales pages confess to being able to teach you.

And yes it is, mostly… but that is only once you have learnt the right route to take to get you there.

However, after years of learning to trade… the biggest tip I can give to any new trader is this ‘learn to lose gracefully.

I’m a notoriously bad loser. I’m ultra-competitive… be it a board game or team sport, losing is not an option… I like to win!

So learning to lose was something of a hurdle to overcome when I started out.

Also you have to remember the style of trading that Vince Stanzione has taught me added to my predicament. Vince trades long term as you know. So holding a trade open for months at a time to then close for a loss was hugely frustrating.

But over the space of a year or so, after all the worrying and stress, I was in profit.

Fear of Losing

Now, the point is this, even though I had been biting my nails on many occasions during my initiation, guess what? It didn’t change my results.

The amount of times I questioned Vince’s selections and advice was/is probably legendry. But once I stood back and took in the view, I realised that this game is all about doing and forgetting. Not doing and praying to the trading gods for luck.

On average, what I began to see was a pattern of trades that looked something like this.

I had open, at any one time, a dozen trades or so.

Roughly 4-6 of these trades resulted in a loss, 2-4 may do nothing and trade in a range… 4 absolutely flew.

The losses were always smaller than the wins. The sideways positions were closed for small losses or minuscule gains and funds reinvested. The winners were rolled over again and again.

Once again, there is no amount of worrying that could have impacted these results.

I relied on someone’s expertise [Vince’s trade selections] and I had to roll with that.

In hindsight I didn’t have to be concerned at all… but at the time the fear of losing was very real. I was literally scared of it.

 

Take it Easy

If you learn from my advice and remember that trading is just a game that over time will return a positive [wins] over [negative] losses [if obviously you are using a reliable strategy], you’ll then be able to sleep at night.

No amount of worry will change the direction of a position.

So just follow the signals that you are using and walk away.

You can use the alert service on IG to notify you of your indicator alerts. So if you get a message you can take the necessary action on the position.

Do you think that Vince Stanzione, George Soros or Warren Buffet lay awake at night, sweating and worrying about their open positions? It’s quite a comical thought, but I really doubt that they do.

Your Fear of losing is imaginary.

Your actual fear of losing is self-inflicted. You are worrying about something that hasn’t yet happened.

When your position is open, whether it is in profit or not, you have not won or lost at that moment in time.

If you close your position for a loss, then it is a loss. There is no longer any fear of losing in itself. Are you frightened of the loss once it arrives? Do you call your friend, wife or mother and say “I’m really scared, there is a loss on my trading account… it’s really frightening me”. ??? Of course you don’t. They’d have no idea of what you were talking about and are more likely to come rushing round to see if you still have all your marbles in place.

So, when you are afraid of losing you are only beating yourself up. Because once you have lost [if you lose] there is no more fear. You may be upset about the loss, but you will not be in fear of it.

Try this Trading Test

Select any 6 shares, currencies, indices at random.  You can use the charts beneath that I have chosen if you prefer.

Add this exponential moving average [EMA] to the charts 10/50

Set the time frame of the candles to 1 Day

Now, paper trade and work out your profits over the last year.

I have randomly chosen the shares that are listed in position 1, 6, 12, 18, 24, 30 from the Dow Jones

So I have…

  • 3m Co
  • Chevron
  • Goldman Sachs
  • McDonalds
  • Travelers Companies INC
  • Walt Disney

 

Here are their charts from the last year with moving averages added. 

Fear of losing

NYSE-CVX

 

 

NYSE-GS

NYSE-MCD

NYSE-TRV

NYSE-DIS

Now work out overall how many points profit you’d have made overall just trading the crossover signals. Buying and selling.

Be brutal… Really give the charts a conservative hammering.

Could you have made a profit over the last year, just buying and selling on the crossovers?

It’s plain to see. Of course you could have.

Not only could have you made a profit, the actual amount of profit is in the £1000s even trading at .50p a point.

There were thousands upon thousands of points profits to be made.

In hindsight then… was there any fear of losing when looking at the above charts and results? So why be in fear of losing when actually trading?

 

Why Fear Stops Traders Making Money

It boils down to a few key areas although not limited to these that I am identifying here. However, one way or another they all point back to fear.

  • To bigger size stakes for bank size. So when a trade goes against you the loss seems magnified and you panic and close the trade early.
  • Using stop losses and setting stop losses to close to market You are using a stop loss because you are afraid of losing.  Stop losses are a pain in the rear. If you really want to use them make sure that they are set at the correct distance. 25 day highs and lows are a good place to start.
  • The money is in the waiting, some people just can’t wait it out. Impatience normally comes from the fear of losing the profits that you have already made. So you close the position too early.
  • No faith in the strategy you are using. When you start trading and encounter losing streaks it is [of course] the strategy or system that you are using that are at fault. So, in fear losing your bank and wasting your money, you stop using the system and buy into something else.

Everyone is Unique

Ultimately everyone sees things from their own angle when looking at a chart and deciding on a trade.

If you are struggling to make trading pay, identify your fears, as this will probably help you to rectify at least some off your negative trading.

Also learning to trade with someone that actually walks the walk can pay back hugely. Someone that understands what trading is and what you need to do to get things right… having a good mentor in these situations is invaluable.

Take a look at Vince Stanziones course, it’s how I started out and I can’t recommend it enough for newbies.

If spread betting is a bit too adventurous at the moment, you can learn how to make money trading binary options with my course here.

In Conclusion

Trading can be easy, but it is the fear of losing that is the biggest hurdle to overcome for almost all traders. Manage your fears and the rest will fall into place.