Master the Four Fears of Trading - Part 2

Last week we discussed two of the four fears of trading, specifically the 'fear of missing out' and the 'fear of loss', today we'll discuss the 'fear of being wrong' and the 'fear of letting a gain turn into a loss'.  Famed trader psychologist Mark Douglas talked about these fears in his stellar book 'Trading in the Zone'.  As traders and investors we all become gripped by the violent reactions of our own emotions.

There is nobody who is immune to emotional responses to changes in wealth.  We are all wired the same, competitive animal spirits to accumulate as much as we can, lose as little as possible.  We live on the spectrum of fear and greed.  On the one end, we fear losing our money/capital to forces we can/cannot control.  Yet, we are all greedy when it comes to accumulation opportunities, we want more and are never satisfied, or say 'enough'. 

Conquering the four fears is a monumental task that takes learning, discipline, repetition and focus.  Many investors find themselves swirling in a vortex of negativity and are gripped by fear, often forgetting what is the right thing to do.  This will cost you dearly: Your capital and opportunity, which are few/far between.  Let's see how we can understand fears of being wrong and letting a gain turn into a loss and turn the tables of fear into acceptance.

Fear of being wrong creates a crisis in confidence.  While we like to preach 'trading is not a game of perfect', let's all understand we cannot actually grow our accounts if we are always wrong.  If our system of trading or investing is not working then we have to change, find a new one or style that will work.  Have you found yourself in a bad trade and cannot seem to get out of it?  Been there, done that so don't think you are alone.  Being wrong is not all that bad, but staying wrong is a problem.

The joy of winning is like no other, yet we have all experienced how it feels to have the rug pulled out from under us.  The fear of turning a win into a loss creates a feeling of devastation and despair in our minds.  Nevermind the fear of loss - this one fear can paralyze our minds into a state where we just want to give up entirely.  The mind influentially powerful, but it works both ways.  Be wrong - it's quite alright, but take the next trade and make adjustments.

This fear can be conquered quite easily but the focus on past results often get in the way of good judgment.  We always talk about taking profits regularly when you have them.  No matter how big or small, take some winners off the table.  This creates an empowering feel for trading success, which compounds onto the next trade, and the next one. Soon you will find yourself on the winning side of the trade far more often than not - and your account will be growing, your focus in full motion.  

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