The four main fears of a trader or the best traders are not afraid!
What is your mood today? Are you happy or are you sad? Maybe someone has made you sad or happy? Have you ever considered that your emotions can have a serious impact on your trading success?
The last question should be considered more closely. Of course, excellent execution of your trading strategy plan and competent money management are essential aspects of successful trading. However, to work out profitably, you need an appropriate psychological mindset. Of course, you can know a lot about trading and markets, be expert in technical and fundamental analysis, have a good intuition of quotes movements that is inherent to many successful traders.
However, even the most intelligent, competent, interested traders can fail or go bankrupt if they do not take into account emotional signals, warning that certain trading decisions carry risks.
For example, holding positions too long during trading, exiting too early or entering too late is a sign that a market participant has the wrong mental attitude to trade. So let us consider with what kind of mental attitude a trader can succeed?
Mark Douglas's book "Trading in the Zone" talks about "the four primary fears of trading", which are responsible for most trading mistakes: first fear of making a mistake, second fear of losing money, third fear of missing a trade, and fourth fear of not taking a profit.
The author believes that a significant difference between consistent winners and consistent losers in trading is a kind of motto "The best traders are not afraid"!
How, then, do you conquer the fear that most of us naturally come to the markets with? There are a number of recommendations:
1. When analyzing each potential trade, ask yourself what exactly you did to limit the possible risks as much as possible? That risk fuels a sense of apprehension is normal, and there are many ways to reduce it. First, you should make sure that your entry price is the best available price in the last market movement where you are currently trading. For example, if your trades are on a level breakout, you should make sure you set your stop loss outside the potential return limit. If there is a return, wait to receive confirmation of that return. Of course, using a reasonable stop loss is an essential part of any risk management plan.
2. Avoid overweighting any position: your account should provide for several positions that you intend to hold at a time. If any setbacks occur, it is worth reducing this number.
3. You should also avoid trading altogether if you are currently upset or angry, have financial problems or debts, do not feel physically well, are not 100% sure about the direction of the market, or feel like a "victim" of the market.
4. Before you start trading, you need to repeat a simple, but very valuable rule: "Trade according to a plan, and plan your trade. Keep a trading journal, where you can analytically plan new trades before you execute them, with a parallel description of risks and profits. These entries should be updated at the end of each day. Your targets and stops should be adjusted accordingly. As a rule, markets are very flexible and their evolution has to be constantly monitored to avoid unpleasant surprises.