Trading advice for conquering the fear of losing

Here’s a blog post with guidance about one of the most debilitating emotions for a struggling trader - the fear of losing. Sometimes its there from the start and sometimes it develops as you go through a period of losses. It leads to other issues like an inability to pull the trigger, getting out of trades too early, and can create other distortions in your judgement.

Now obviously there is a healthy aspect to fear of losing that you don’t want to get rid of. You want to maintain a healthy regard for the risks of trading to prevent you from becoming stupid. However in my own experience doing stupid things when you are trading is even more likely when you have an unhealthy fear of losing, because it affects the clarity of mind that you need for decision making.

Here are some ways to overcome the fear of losing by automating certain decisions:

Set a maximum loss limit for the day

I’ve found it essential to have a limit to the amount I’m able to lose on any given day. This is something that you can ask your broker to program into your account so that it happens automatically - and so that you can’t change your mind when you’re feeling emotional. How many times have traders taken a loss, become emotional, tried to win the money back with an emotional trade and then lost even more! Its a common pitfall.

Having the loss limit not only protects you, but psychologically it gives you a reassurance that nothing too crazy can happen. I had a few experiences in the early days of forgetting to cancel an order, getting filled and losing thousands of dollars before I even realized it. It shook me up so badly that it took me a while to clear out the fear that it had caused. A loss limit gives you peace of mind.

Trade the appropriate size to your account

Don’t trade more contracts than you can afford. Ideally your trade size should be such that you can set a stop loss for no more than 1 or 2% of your account. This will give you the peace of mind that any single trade can’t hurt you.

Find a method that you can be confident in

The best method for a new or struggling trader is one that has very clear rules that you can hang your hat on, and that doesn’t require much in the way of discretionary thinking. The pressure of trading for a new or struggling trader is not the ideal scenrio for a clear mind. Sure when you have been consitently profitable for a while and can relax more, then you can add some discretion but to start with I highly recommend a method that gives you clarity on when to get in and out.

There are two methods I can recommend. One is MarketClub and the other is a cycle trading method.

Are you looking for a consistently profitable trading system? Check out our preferred cycle trading system: