How To Conquer Your Trading Fear

I talk to a lot of new traders who are just getting into the game, and there’s one thing that nearly all of them have in common: a gut-wrenching hesitation when it's time to hitting the buy button. I would normally say buy or sell button, but for new traders I strongly suggest you only enter long positions until you're well seasoned.

Whether it's a simple, longer term trade or a shorter term swing trade, there's just something about putting yourself [and your money] on the line that terrifies many [most?] people.

So trust me on this - you're definitely not alone.

Many new traders struggle with this issue, and it holds them back from reaching their full potential… and profitability.

You absolutely have to tackle this "taking action fear" head-on.

So let's start with why it's so important to overcome.

The Cost

The first problem with letting fear hold you back is it prevents you from making any money… that’s the obvious one. The whole point of engaging with financial markets is to allow your activity to deliver money into your trading account. If fear prevents you from engaging at all, then there’s no way for you to get to the taking profits stage.

The 2nd important reason you must overcome your trading fear is that if you can’t move beyond it and take your trades, you won’t learn anything. By taking trades you’ll experience the losses associated with every trading strategy and from those losses you will learn. And by the way… It’s not your wins that teach you lessons, but rather your losses. So you’ll learn more about your strategy and more about yourself as a trader. If you never trade, you’ll never lose and get the feedback that will teach you the lessons that can only be learned at a core level by taking losses.

And for the record, feedback (both good and bad) will be the foundation of your growth and development as a trader… especially in the early days.

Every trade that fits your strategy that you don’t take is a missed opportunity to learn, develop, and, ultimately, grow your account. And even though each trade is incredibly small at the beginning, the missed opportunities really add up.

The more you miss, the less you learn and grow.

The Frustration

The truth is, the fear of trading can be paralyzing. You might spend hours researching and/or evaluating a trade opportunity, only to second-guess yourself and never hit "buy."

This can become an endless cycle of self-doubt and stand squarely in the way of you achieving your goals.

Fear is a roadblock, period.

But there are some solid ways to break free from this cycle and start taking your trades with confidence.

Here are three simple things I did once upon a time to overcome my own fear of hitting the buy button:

#1 I Practiced Without Risking A Cent
There are lots of opinions about trading without risking money... through paper and simulated trading. The purported reason that many are against no risk practice is because riskless trading is very different from trading real money.

And it is.

But it’s hard for me to put a value on how helpful riskless trading was in my development. It’s the best way to get a real handle on how your strategy works in real time.

And that’s just paper trading.

When I moved to the next step of riskless trading and started using a simulator, my trading strategy became my own. Simulated trading also had the added benefit of allowing me to really learn how my trading platform worked rather than learning via costly mistakes in real time trading.

#2: I Started Small
Having worked on an institutional [Wall Street] trading desk, I was accustomed to entering trades in 10 and 100 thousand share blocks. Even in my personal trading account I normally traded multiple option contracts at a time that gave me exposure to 100 shares for every contract.

So when I went off on my own to trade, it was natural for me to continue trading in relatively large blocks. But the blocks were too large for a trader still developing his strategy. Each loss took a much bigger bite from my account than I wanted… or could afford. Worse, each relatively large loss took an even bigger bite out of my trading confidence.

So what did I do?

Instead of aiming for big trading wins, I started by building a habit.

I focused on smaller trades that were easy to take and analyze.

I even went down to 1 option [and later futures] contract at a time to take my per trade risk down to the lowest level possible.

It changed my trading.

Of course, I was able to grow my trade size through profitable trades, but as a staring point, you can’t beat small. If the size of the loss is the absolute smallest you can make it, it frees you up mentally.

#3: I Embraced Imperfection
I’ve accepted the fact that every trade I take has the potential to be a masterpiece or a complete dud… and I have zero control over the upside [if any] of the trade. “Control” of the downside is a different story, but that’s for a different post.

And it's totally okay if some trades don't perform as well as you’d like. Remember, every time you take a trade, you have the opportunity to grow… either the profits in your account, or the arguably more valuable lessons you can take from small losses.

Both outcomes have happened to me plenty of times. And guess what? As long as I adhere to my strategy [and as long as my results deliver the expected consistency I will] my results are all but guaranteed.

Yours will be as well.

The Takeaway

If you implement these three steps, you'll start to see a shift in your mindset, your trading, and your profitability.

You'll begin to view your trades as an essential and exciting part of growing your account, rather than something to fear.

So next time you're hovering over that "buy" button, minimize your risk, take a deep breath, remember these tips, and just press the button.

Risk is why the trading gods created stop losses.

Hope it helps.