With more than 64% of Americans living paycheck to paycheck, the need to develop a skill like trading has never been greater.
If there’s one thing that sets them apart from the majority of traders who lose money is that they’ve figured out how to manage fear.
You see, many newbies who get into trading believe it’s all about learning the mechanics of trading: setups, patterns, and catalysts.
And while those are all vital…mastering the mental game of trading will determine whether you make a few bucks or life-changing wealth.
If you’re held back by:
- The threat of embarrassment
- Second-guessing your decisions
- Overthinking your trades
- Not trusting your gut
- Getting into good setups because you’re afraid to lose
Then it’s likely that fear is robbing you of your true potential.
If you want to be my next millionaire student, you must learn how to overcome fear in your trading.
After 20+ years of trading, here are my best strategies for overcoming fear.
The First Step To Eliminating Fear
The first step you must take if you want to eliminate fear from trading is recognition.
While that might sound obvious to some, I can’t tell you how many newbie traders fail to take responsibility for their shortcomings.
They would rather come up with excuses like their small account limits their ability to trade properly, they don’t have the right setup or tools, and the market is trying to screw them over.
Once you take responsibility and realize that fear is holding you back, you must dig deeper to discover what triggers your fear.
- Watching a trade move against you. Every good trading plan should have at least two targets. A profit target and a stop-loss target. Even though I win more than 75% of my trades, I know there’s a possibility I can be wrong, and I need to be ready for that. However, I see a lot of newbie traders freeze up and abandon their trade plans once a position starts moving against them. Being a consistently profitable trader requires discipline. That’s why it’s essential to stick to your trading plan. If you’re following your trading plan and losing money, it’s time to go back to the drawing board and figure out where it’s failing you.
- Worried about what people think. It takes a lot of guts to open a trading account. After all, the odds are stacked against you. Most people would rather keep their money in a savings account because they are too scared to lose money in the market. That’s why when you tell your friends and family about your trading ambitions, they’ll likely discourage you. This can create pressure on you because you’ve been “warned” about the dangers of trading.
- Concerned about losing money. It’s okay to be scared to lose money. I use fear to keep me disciplined. However, I don’t let fear hold me back from taking good setups. If you’re worried about losing money, it’s likely due to your lack of skills. You gain confidence by studying patterns, charts, catalysts, and good setups. Your confidence builds through repetition and experience.
- Seeing negative PnL in the beginning. Many of my most successful students were not profitable right away. In fact, they struggled for several months, some a few years before turning the corner. Sticking with something is hard, especially when investing time and energy and not seeing results. That’s why your focus, in the beginning, should be on learning and developing your skills. Your goals should be geared towards that and not toward monetary goals. Tim Grittani, my most profitable student, has made over eight figures in trading profits. But many people don’t know he blew up his trading account within the first three months of his studying. He overcame his early failure by focusing on the process and two years later became a millionaire.
How To Eliminate Fear From Your Trading
From my experience, I’ve found that most traders crippled by fear are struggling with uncertainty.
There’s no magic formula for getting rich in the stock market. However, you can pick up on trends and patterns by studying the past and what’s working now.
Preparation and repetition will help you build confidence over time.
To stay on top of your game, you must journal daily. After 20+ years, you can still find me journaling my trades on Profit.ly.
Journaling allows you to playback your trades, look into your decision-making, and help you make adjustments.
When reviewing your trades, here are some things to consider: entry and exit price, target and stop, position size, the thesis behind the trade, strategy or setup you are trading, and date and time of trades.
By doing this daily, you’ll get closer to identifying your strengths and weaknesses. For example, you might be putting on the right trades at the right time, but you’re oversizing your positions and getting spooked out of trades early because you’re scared of losing.
Many newbie traders give up before they have their breakthroughs because they underestimate how long it will take them to be profitable.
Fear seeps in when you’re unprepared and haven’t put enough reps in. You become fixated on money rather than the process. Having a little bit of fear is a good thing because it can keep you disciplined. However, if you let fear impair your decision-making, it can be damaging.
Follow the steps outlined in this post to reduce fear’s role in your trading.
If you’re searching for a reliable pattern to help build your consistency, I invite you to check this out.