How do you eliminate fear from trading?

Fear is one of the most difficult obstacles in trading.  Fear of losing money.  Fear of the unknown.  Fear of missing out.  it is the root cause of self loathe, self doubt and self sabotage.

I don’t really know if one can ever trade without ‘some’ element of fear - the key is controlling and channeling this strong emotion to become a consistently successful trader.

Discipline brings confidence.  Confidence overcomes fear.  But over-confidence destroys your account.  It’s a vicious cycle.

Some successful traders learned the business from the very best tutors and mentors.  So, they know what they have works and it reduces the ‘fear’ emotion.

Other traders have been trading for a long time and have had the financial means to sustain their ‘education’ of trading and have gained the proper knowledge and experience to overcome fear.

But what do you do if you are just starting out?  With a limited account?  You’ve purchased or discovered the best trading system and now it’s time to put it in action.  You’ve created a demo account and have been successfully paper trading for a while.  Now it’s time to go live.

After your first trade or two, you quickly discover things about yourself you never knew.  It’s not quite the same, is it?

Here are some tips that I think can help a trader overcome fear of trading:

1. Perhaps the most important factor: Accept the fact that you might lose on any particular trade.  Embrace the risk – if you do not (or cannot), then trading is not for you.
2. Start with small amounts, gain the confidence in your system and move your way up to larger positions.
3. Know your risk: Do not enter a trade without know EXACTLY where your risk is (stop).
4. Have an EXIT strategy: Not only do you need to know your risk, but what is the goal of a trade – Profit targets.
5. Do not trade with money you cannot afford to lose (like rent or mortgage money).
6. Once in a trade – do not change the rules.  I’ve mentioned this before, but it is amazing how many traders deviate from their plan once things do not go right (or even if they do go right).
7. Work in a stress free environment where you cannot be easily distracted during trading hours.  Causes mistakes and mental errors.
8. Never be afraid to take the next trade.  After a couple of losses you might be scared to take the next trade (unless your plan dictates you stop after X losing trades or $).
9. If you are unsure of the market or it’s direction, not taking a trade is not a bad idea.  Sometime the best trade is the one you did not take.
10. Never be afraid to ask for advice.  There are hundreds of awesome traders on Stocktwits who gladly make their time available to help and assist other traders.

As always, please make sure you have a plan and are following it properly.  It is the founding cornerstone of your trading career.

Stick to the plan and you’ll be alright.

Have a great weekend.