FEARS OF TRADING AND HOW TO OVERCOME THEM

While some traders are more likely to fall victim to greed ("How much could I make?!"), others have experienced loss in the market to the point where all they can see is the fear and anxiety ("How much could I lose?" or "How much could the market take away from me?").

Let's look at some resources to help us cope with these fears.

I recommend beginning with article " Fears of Trading" which lists and explains each type of fear - it's more than just being afraid to lose money. lists the fears as the following:

1.Fear of Losing Money

2.Fear of Missing Out (on a Move)

3.Profit Turn into a Loss

4.Fear of Being Wrong (or not being right)

1. Fear of Losing Money: The fear of losing when making a trade often has several consequences. Fear of loss tends to make a timer hesitant to execute his or her timing strategy. This can often lead to an inability to pull the trigger on new entries as well as on new exits. As a market timer, you know that you need to be decisive in taking action when your strategy dictates a new entry or exit, so when fear of loss holds you back from taking action; you also lose confidence in your ability to execute your timing strategy. This causes a lack of trust in the strategy, or more importantly, in your own ability to execute future signals.

2. Fear of Missing Out (on a Move): Every trend always has its doubters. As the trend progresses, skeptics will slowly become converts due to the fear of missing out on profits or the pain of losses in betting against that trend. The fear of missing out can also be characterized as greed of sorts, for an investor is not acting based on some desire to own the stock or mutual fund. Other than the fact that it is going up without him on board. This fear is often furled during runaway booms like the technology and Internet bubble of the late-1990s, as investors heard their friends talking about new found riches. The fear of missing out came into play for those who wanted to experience the same type of euphoria.

3. Profit Turn into a Loss: Unfortunately, most market traders do the opposite of "let your profits run and cut your losses short." Instead, they take quick profits while letting losers get out of control. Why would a timer do this? Too many traders tend to equate their net worth with their self-worth. They want to lock in a quick profit to guarantee that they feel like a winner. How should you take profits? Once a trend begins, we stay with that trade until we have enough evidence that the trend has reversed. Only then do we exit the position. This could be days if the trend signal fails or months if it is a successful trend. Does this sometimes result in small losses? Yes. If we have a false signal to start with, it can. But we must look at market history to understand this trading concept. History tells us that while there are times when the markets trade sideways or make failed moves, once a real trend begins, it usually lasts much longer than anyone expects. That means for the few failed trends, the real ones last a very long time and generate huge profits. But because no one knows ahead of time which signal is the start of the next big trend, we must trade them all. What happens in the short term can be accepted because we are assured of profits in the long term as long as we stay with our timing strategy. We do not try to quickly lock in profits. We stay with the trend until the trend changes. This way we obtain every bit of profit that the markets will give us. And. we do not have to worry about locking in gains. We let the markets themselves tell us when to do it.

 4. Fear of Being Wrong (or not being right): Too many market traders care too much about being proven right in their analysis on each trade, as opposed to looking at timing as a probability game in which they will be both right and wrong on individual trades. In other words, by following the timing strategy, we create positive results over time. The desire to focus on being right instead of making money is a function of the individual's ego, and to be successful, you must trade without ego at all costs. Ego leads to equating the timer's net worth with his self-worth, which results in the desire to take winners too quickly and sit on losers in often-misguided hopes of exiting at break-even. Timing results are often a mirror for where you are in your life. If you feel any sort of conflict internally with making money or feel the need to be perfect in everything you do, you will not be able to stay with the timing strategy, but instead will allow your emotions to step into the timing process. The ego's need to protect its version of the self must be let go in order to rid ourselves of the potential for self-sabotage. If you have a perfectionist mentality when trading, you are really setting yourself up for failure because it is a given that you will experience losses along the way in timing, as in any trading. You can't be a perfectionist and expect to be a great market trader. If you cannot take a loss when it is small because of the need to be perfect, then the loss will often times grow to a much larger loss, causing further pain? The objective should be excellence in timing, not perfection. You should strive for excellence over a sustained period, as opposed to judging that each buy or sell signal must be perfect. The great timers make losing trades, but they are able to keep the impact of those losses small. For the market trader who is dealing with excessive ego challenges, this is one of the strongest arguments for mechanical systems. With mechanical systems, you grade yourself not on whether your trade analysis was right or wrong. Instead, you judge yourself based on how effectively you execute your system's entry and exit signals.

Conclusion
As a market timer, you must move from a fearful mindset to a mental state of confidence. You have to believe in your ability to execute every trade; regardless of the current market sentiment (which is often at odds with the trade).Knowing that the timing strategy you are following will be profitable over time builds the confidence needed to take all of the trades. It also makes it easier to continue to execute new trades after a string of small losing ones. Psychologically, this is the critical point where many individuals will pull the plug, because they are too reactive to emotions as opposed to the longer-term mechanics of their timing strategy. And typically, when traders pull the plug and exit their strategy, it is exactly at that time that the next profitable trend begins. Too many investors have an "all-or-nothing" mentality. They're either going to get rich quick or blow out trying. You want to take the opposite mentality: one that signals that you are in this for the long haul. As you focus on the execution of your timing strategy, while managing fear, you realize that   giving up is the only way you can truly lose. You will win as you conquer the four major fears, gain confidence in your timing strategy and over time, and become successful (profitable) market traders.