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Is Fear Robbing You Of Your Trading Potential?

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Written by Timothy Sykes
Updated 2/20/2023 6 min read

With more than 64% of Americans living paycheck to paycheck, the need to develop a skill like trading has never been greater.

I’ve mentored 32 of my students into millionaires.

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

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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

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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.

Bottom Line

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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.


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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (205) 851-0506 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”