Traders have many challenges, but of all of them, fear is
one of the greatest. Here are three of the biggies.
The first is fear of loss. It doesn’t take long in one’s
trading career before this gets re-phrased to “Fear of
another loss”. The losses that come in trading can be
very hard to deal with.
Right along with the fear of loss is the fear of the
unknown. The fact that the markets are not predictable
fill most days in trading with extreme anxiety for many
traders.
Fear of Failure. Because they’ve been let down by their
systems in the past (or so it seems), many traders also
develop the fear of failure to stick to their system. Most
call it a lack of discipline, but it is really the fear
that their system will not do its job of providing the
proper direction on what to do.
Most fears come from a lack of confidence, and fortunately
these can be alleviated rather easily.
The fear of loss comes from lacking the confidence that
you can adequately handle a trade that goes against you.
This is what your system is supposed to do – provide good
trading opportunities, but more importantly protect you from
large losses.
This is why having a proven trading system is so important,
plus knowing the strengths and weaknesses of the system
that you’re working with.
The fear of the unknown is also best dealt with through
having a robust trading system. Now just knowing that the
system is “proven” based on the claims of someone else will
likely leave you still open to the fear of the unknown.
You have to prove the system to yourself through proper
system analysis such as back-testing and forward-testing
and looking at the aspects of the system that make it
reliable. This establishes the baseline of what you can
expect that system to produce for you.
The fear of failure in particular comes from a lack of
confidence in your system. If you’ve analyzed the metrics
of your system and proven it to yourself with real market
data, then you can much more easily have the discipline to
stick with it, even through one or more losing trades.
When you have a system that you’ve analyzed and proven to
yourself, you give yourself the knowledge to minimize and
possibly eliminate the three biggest fears that keep you
from reaching your goal of consistently profitable trading.
A good trading system will protect you from large losses
if used properly and if you’ll follow it. Your job is to
stick to the system. This becomes easy once you’ve
demonstrated its strengths and weaknesses with real market
data through analysis of the critical metrics.
By knowing the metrics that make your trading system a
winner and one you can count on, your fears and discipline
issues will go away.
Once you’ve eliminated your fears in your trading, the next
step is to track your metrics and make calculated and
measured improvements to your system to further increase
your profits.
Here’s what I use ==> The Trading Performance Analyzer
It gives me a crystal clear look at my trading system so that
I can be confident and have peace of mind, plus it makes it
easy to track all my critical metrics over a year to make sure
I’m always improving.
To see videos on how user-friendly this is, go to
https://insideouttrading.com/tpa/
I hope this post has helped you understand some of your
challenges better and shown you a simple step you can take
to alleviate your stress.
Cheers
Brian
P.S. I almost forgot, there’s a powerful report that comes with
the Analyzer that gives you a very specific method for dealing
with the uncertainty of the markets. I haven’t seen this solution
presented ANYWHERE in all the material I’ve read on trading.