The Real Fear Factor

In reality, nothing moves markets as fiercely as the fear of a loss or the fear of being left out of some trading opportunity. It is one of the most deadly emotions to experience in Forex as well as commodities or equities. Thus, this psychological side of trading should be examined in great detail. Here are some of its results:

Fearing the loss, you might not put on a trade although your system is clearly indicting you should. Regret over missing on a winning trade usually people carry down the line when they try to compensate for it by over-trading and suffering unnecessary losses.

Fearing to take the loss, many traders just can’t place their stop loss orders. Here they risk complete account annihilation if the market moves significantly against them. And sooner or later, it always does.

Afraid of not making money (that happens to a lot of people whose emotional and financial state badly depends on producing fast profits) will make people pre jump in a trade. They will not wait for the system’s signal, but will rush in just to “beat the market”. Sometimes that can result in a small additional gain, but most likely will produce unplanned loss that can take away even more than those tiny “cheating” gains.

When in winning trade, many might still tremble at the thought of that trade turning swiftly to a loser. Thus, they will cut their profits way too fast.
Some may think that fears are reasonable and are put in place to protect us from doing harm to ourselves. If that is so in trading, then your fear of market is preventing you to work with the market. So, you either have to confront it, or let it dominate you in which case you better stay out of the market.

Overcoming your fear may be difficult, but it certainly becomes the crucial quest on a way of becoming a great trader. You can conquer it by taking controllable small losses so that every loss you take does inflict neither emotional pain nor financial strain on your well being. And when something does not hurt anymore, you just slowly stop fearing it.

Once you accomplish this task, you can then concentrate your whole energy on being objective and not protective.

Sometime during your transformation you will actually realize that it was not the market that presented a threat, but rather it was you and your own actions you were so uncertain off to the point of being illogically scared. And that is an issue anyone can and should deal with.