One of my favorite bits of trading advice was given 85 years ago by Jesse Livermore in Reminiscences of a Stock Operator: 

“The speculator’s chief enemies are always boring from within.

“It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day and you lose more than you should had you not listened to hope… to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out too soon. Fear keeps you from making as much money as you ought to.

The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.”

For traders, fear is an emotional extension of the negative definitions of risk.  Anxiety is the operative portion of fear and gets in the way of taking risk.  Fear blinds you to opportunity, just as greed blinds you to danger.

So how do you tackle this ever-looming force of fear?

Have a plan, trade your plan, honor stops, execute ruthlessly.

Plan, strategize, and practice. Then practice some more. Feel the emotions but do not allow yourself to be controlled by them.  That’s it.  It’s so totally simple and really is the answer to putting your fear in front of you. By doing this, fear no longer chases you. You chase it.  Fear is no longer the predator.  YOU prey on fear, not the other way around.

Practice, practice, practice so that you act in an almost automatic and flowing manner.  Some people call this being in “the zone.”  Your system says get in, so you get in.  Your system says get out, so you get out.  Your system says to stay out, so you go to the gym, go fishing or do yoga.  The emotions are there, but they do not rule your actions or thoughts. You embrace and manage risk by thinking and feeling in probabilities. You become comfortable in an environment of unlimited freedom and choices – comfortable with uncertainty, knowing that anything can happen at any time and that every moment in the markets is unique.  You are like a surfer riding the waves effortlessly.  If you fall, you get up on the board and get going again. You truly, madly and deeply understand that risk is the intersection of danger and opportunity and feel natural in that environment because of consistent mental, emotional and physical discipline.

You replace fear ( which is false evidence appearing real) with faith: Faith in your trading system, faith in your ability to execute, faith in self-knowledge and faith that no matter what happens, you are in a constant state of learning and evolution to higher self.  You feel relaxed, your breathing is slow deep from the abdomen, you feel part of the ocean waves and one with whatever is going on at that time.  You know that there will always be opportunities and that patience is a virtue in trading.  Slowly, steadily, you find that you are rising to new levels of competence in trading.  You never get overconfident, but you feel more in the flow and are not troubled when a position goes against you because you know what to do.  You learn more about yourself each day and really like the person you are becoming.  You are now trading the truth within you because you are unafraid to be authentic.

by Janice Dorn, M.D., Ph.D.