There is no more certain recipe for losing than having a fear of losing. If you can’t stand taking losses, you will either end up taking large losses or missing great trading opportunities … either flaw is sufficient to sink any chance for success.
Archives of “fear” tag
rssControl in Trading
New traders may get lucky for awhile and bad traders may win big in the short term but in the long term the market gives every trader exactly what they have earned. While traders can win in the long term with many different types of robust trading methods a trader with no self control will not even survive long, they will not be able to make a plan and follow it, they will let fear and greed over take their mind and end up with large losses and the belief “trading is just too hard” but trading is not hard what is hard is self control, discipline, focus, and keeping the ego in check.
What a trader can control:
- Their entry.
- Their exit.
- Their trading plan.
- Their emotions.
- Their ego.
- Their method.
- Their position size.
- Whether to trade or not to trade.
- How much you are willing to risk per trade.
- Themselves.
What a trader can not control.
- Market movements.
- Volatility.
- The trend.
- Whip saws.
- Political decisions.
- News Headlines.
- Macro economics.
- Every other traders decisions.
- The future.
- The past.
One key to trading is to only focus on what you can control, do not worry and stress about what you can not control, and most importantly, be able to know the difference.
Four Fears
| Most often, traders have four fears. There’s the fear of being wrong, the fear of losing money, the fear of missing out and the fear of leaving money on the table. I found that basically, those four fears accounted for probably 90% to 95% of the trading errors that we make. Let’s put it this way: If you can recognize opportunity, what’s going to prevent you from executing your trades properly? Your fear. Your fears immobilize you. Your fears distort your perception of market information in ways that don’t allow you to utilize what you know.” |
Visualizing The World's Greatest Fears
What are the greatest fears by country? Throughout the world, people are concerned about very different things – from inequality to AIDS and from nuclear war to religious hatred…
By region, North Americans and Europeans are generally most fearful of inequality. However, each other region had their own number one perceived fear. Africans, not surprisingly, were most afraid of AIDS and other diseases. South Americans were most afraid of nuclear warfare and Asians were most afraid of pollution and environmental concerns. Lastly, people in the Middle East were most concerned about religious and ethnic hatred.
Culture and history also makes the fears of specific countries to be more heightened. More than half of Lebanese people (58%) fear religious and ethnic hatred the most. 49% of Japanese people most fear nuclear weapons. In Spain, where 51.4% of youth are unemployed, it is not surprising that 54% of Spanish people fear inequality the most. Spain is also where the fear of inequality has grown the fastest – it has increased 27% in the last seven years. (more…)
The Secret
What’s the secret of successful traders and how did they make the transition from clueless learner to consistent pro?When the same tools are available to anyone, why do some people out perform others?
The successful traders have discovered The Secret.
It is not the latest indicator, program or hot tipster. It is something that everyone has inside them already.
The Secret is believing in your method and trading it. Believing to the point of having it ingrained into your brain so that it becomes as automatic as breathing. If the charts do this, then I will do that. Trading your plan means cutting losers, riding winners, managing money and risk well. When you arrive at the point of realizing that your self-discipline can only get you so far and that the next step should be reflex trading then you will have found The Secret.
Having to exercise self- discipline to me means that there is still something inside you that you must fight to control. If emotions are still in control of your trading then you must find a way to turn that fear and greed into a move productive energy. Trading your method as a reflex means that there is no struggle to control wayward thoughts. (more…)
Kung Fu vs. Trading
You can learn a lot on trading by watching Kung Fu. Sounds crazy? Let me explain by the following video.
The first scene is where the market offers you an opportunity for a duel. Your opponent seems strong and fierce, but it’s not just about muscles and brute force.
– Bruce Lee shows respect for his opponent in the first scene. This is very important. Never understimate the market and always be nimble.
– When his opponent tries to scare him by breaking a wooden board, Bruce Lee does not show fear. You should never fear the market. Always have a clear mind but be watchful at all times. The market will test you. It will find your weak spots.
– It is okay to test the waters with small positions if you are not sure. As Bruce Lee shows by striking the first two blows, he is just testing his opponent’s speed. Checking to see if the water is safe to jump into.
– When Bruce Lee does a backflip kick, he shows his flexibility. The market might sneak up on you with a move you did not expect. It is your job to be prepared for anything and move as flexible as you can.
– Sometimes the market will go bezerk on you, trying to grab you by the balls. Again, you have to play tight defense at all times so you will not get hurt.
– Bruce Lee shows his amazing talent by performing a backturn kick onto his opponent. This is a highly effective and powerful strategy. Once you have developed a system that works for you, don’t try to change it for the sake of entertainment. It if works, it works! And that is great!
– From time to time you will make a great trade. Like when Bruce Lee kicks his opponent into the crowd. Don’t let this get into your head by thinking you own the market! Always stay nimble and be ready to strike again.
– You may think a fight is over. You may turn your back on a position thinking you have won. If you are up nice on a position and trade without a stop, you can still get hurt. Always play with stops. The market may sneak up from behind and pull a big gap down on you! Don’t let this happen. Always stay watchful and never trade without stops.
– Bruce Lee decides to end the fight finally. Don’t overstay your welcome in a trade. If you are up nicely and can take profits do so. We are not investors. We are traders. Finish the fight now and then and take profits. If you never finish a fight you will never take profits. If you never take profits you will never make money.
What’s Wrong with Capitalism? Too Much “i”
The reality is fear and greed are part of the human condition. There are however times when it appears that the greed factor is dominating — I have not yet figured out if this is a cyclical phenomena or something more insidious.
Regardless, I found this amusing:
This explains almost everything…
Are we addicted to being right? Is being thought of as being right more important to us than actually being right?
You tell me…
From the Harvard Business Review:
In situations of high stress, fear or distrust, the hormone and neurotransmitter cortisol floods the brain. Executive functions that help us with advanced thought processes like strategy, trust building, and compassion shut down. And the amygdala, our instinctive brain, takes over. The body makes a chemical choice about how best to protect itself — in this case from the shame and loss of power associated with being wrong — and as a result is unable to regulate its emotions or handle the gaps between expectations and reality. So we default to one of four responses: fight (keep arguing the point), flight (revert to, and hide behind, group consensus), freeze (disengage from the argument by shutting up) or appease (make nice with your adversary by simply agreeing with him).
All are harmful because they prevent the honest and productive sharing of information and opinion. But, as a consultant who has spent decades working with executives on their communication skills, I can tell you that the fight response is by far the most damaging to work relationships. It is also, unfortunately, the most common.
The Pain is Unjustified
I’ve always said, you don’t have to blow out an entire account before we figure out the significance of being disciplined. You don’t need to feel pain to learn that lesson. You just have to commit to the process of becoming disciplined. It poses a more fundamental question, are you willing to do what it takes to become consistently profitable?
How do we overcome this pain and impulsiveness? Through belief in a system, and a full understanding of the probabilities. You MUST embrace loss as a part of this profession, if you don’t you are in the wrong industry. Do not place another trade. This belief comes with repetitions. The belief has to be earned through proof and practice.
Before you proceed with your next trade, I want you to think about the power of your MIND. (more…)
Great Quotes of Mark Douglas
“I know it may sound strange to many readers, but there is an inverse relationship between analysis and trading results. More analysis or being able to make distinctions in the market’s behavior will not produce better trading results. There are many traders who find themselves caught in this exasperating loop, thinking that more or better analysis is going to give them the confidence they need to do what needs to be done to achieve success. It’s what I call a trading paradox that most traders find difficult, if not impossible to reconcile, until they realize you can’t use analysis to overcome fear of being wrong or losing money. It just doesn’t work!”
-Mark Douglas
“There is a random distribution between wins and losses for any given set of variables that defines an edge. In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like “right” and “wrong” or “win” and “lose” no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.”
-Mark Douglas (more…)