Fear is, without a doubt, the most important emotion for traders. Many traders battle with fear, and it might prevent you from putting your hard-won technical talents to use. Trading losses of this magnitude frequently result in emotional discomfort and turmoil. If not addressed, the trader may be forced to relive those traumatic memories in future deals. A trader may become paralyzed as a result of excruciating losses, unable to enter the transaction, or behave in other fear-based ways. After all, traders are human, and they are inherently afraid of pain. The temptation to trade may be strong, but the mental response to fear may be even stronger.
When an investor misinterprets arousal as fear or worry, his or her performance is likely to suffer. A trader tends to freeze. There are four key concerns about trading. We’ll talk about them here, as well as how to deal with them.
Fear of Failure
When it comes to trading, the fear of losing can have several negative implications. A timer’s fear of losing tends to make him or her cautious to carry out their timing scheme. This frequently results in an inability to initiate new entries as well as exits.
As a market timer, you understand the importance of being decisive when your plan calls for a new entry or exit, so when fear of loss prevents you from acting, you lose faith in your ability to execute your timing strategy. This undermines your confidence in the approach, and, more significantly, your ability to execute future signals.
The dread of Being Left Out
Every trend has its detractors. Skeptics will gradually become converts as the trend continues owing to the fear of missing out on rewards or the pain of losing money if they bet against it. Fear of missing out can also be classified as greed, because an investor is not acting out of any desire to acquire the stock or mutual fund other than the fact that it is increasing in value without him on board.
This concern is typically driven by out-of-control booms, such as the late-1990s technology and Internet bubble, when investors overheard their peers boasting about their newfound fortunes. For those who wished to feel the same thrill, the fear of missing out came into play.
The Fear of a Profit Turning Into a Loss
Unfortunately, the majority of market timers (and traders) do the exact opposite of “letting your profits run and cutting your losses short.” Instead, they benefit quickly while allowing losers to spiral out of hand.
Why would a timer do anything like this? Many traders mistakenly believe that their net worth equals their self-worth. They want to ensure that they feel like winners by locking in a quick profit.
What is the best way to make profits? We stick with a transaction once it starts trending until we have adequate information that it has reversed. We leave the situation only after that. If the trend signal fails, this might be days or months.
Fear of Being Incorrect
Too many market timers are concerned with being proven correct in their analysis on each transaction, rather than viewing timing as a probabilistic game in which they will be correct and incorrect on individual deals. To put it another way, we achieve favorable results over time by following the timing approach.
The urge to be correct rather than make money is a function of an individual’s ego, and to be successful, you must trade without ego at any cost. Ego causes the timer to equate his net worth with his self-esteem, leading to a temptation to seize victories too early and sit on losers in the often-misguided hope of breaking even.
Conclusion:
As a market timer, you must transition from a terrified to a confident mindset. You must have faith in your ability to execute each trade, regardless of market conditions (which is often at odds with the trade). Knowing that your timing approach will be profitable in the long run gives you the confidence to take all of the trades. It also makes it easier to keep making new trades after a series of tiny losses.
Many people will pull the plug at this moment psychologically because they are too susceptible to emotions rather than the longer-term mechanics of their time approach. The type of broker plays an important role in overcoming risks, so trust a trustworthy and loyal broker, go for PFH Markets.
