Markets are driven by fear and greed. When money is at risk and you can lose the fear of these losses of course. When the masses see any sign that the current price goes against their trading plan, there is a strong desire to escape quickly.
But experienced traders rarely operate under the influence of fear. With experience comes the ability to manage them. After working in this direction and that with effort You can control your fears if this is a problem for You.
What is fear? Fear is an emotion that warns of impending doom. When the human soul feels threatened, mobilize psychological and physical reserves. The tendency to experience fear has a biological and genetic basis. Fear is adaptive for survival and is associated with the answer to the question is to fight or flee. This is the basic choice that animals do to survive in a wild environment, and it’s controlled by very primitive parts of the brain. When there is a danger that a wild animal must mobilize resources and to quickly make a decision or to fight the enemy or run away to a safe place. All energy is focused on the threat. Fear is almost instinctive and if left without control, it can disrupt even a very good trading plan.
Scared hard to concentrate. All the attention is mobilized and focused on the threat. Scared almost impossible to focus on watching all the possible options for the development of the transaction. That is why it is vital to take the fear under control and stop him to derail a good plan. Fortunately, there are several key strategies that can be effectively controlled fear.
Manage your risk: it is very difficult to control fear, when in fact a lot of money. That is why most of the traders try to risk a relatively small amount of money in a private deal; and they use protective stops and a clearly defined exit strategy. The insertion of a smaller amount of money in a single trade is an effective way to reduce the fear of loss. Similarly, it is important to trade only with money You can afford to lose. If You are trading on the money set aside for the payment of living expenses, You will have a strong reason to fear losses. It is difficult to deceive ourselves, so don’t even try. If You can’t afford to lose invested in the deal, step aside aside and build the account up to until will not be able to invest without thinking about the horrible consequences of possible losses.
Acknowledge your fears: some, like children, trying to hide his fear, pretending I was brave in the face of adversity. But trying to hide his fear often makes it worse controlled. It is better to admit that You are afraid, and admit that actually have a chance of losing money on your trades. You will find that once You admit the possibility of losses, You will feel much better and to manage the fears will become easier. In his book “Trading to Win,” Dr. Ari Kiev proposed a fast and highly effective way of controlling fear: Acknowledge that You are afraid and the feeling will pass. Refuse the recognition of fear, and it will remain forever. Admit that You are afraid, and fear will dissipate.
Know your personality: Humans differ in their ability to control the “fight or flight”. Some scare easily. Their nervous system quickly excited and difficult to calm. Others fearless. They will remain calm in different situations, even those that would frighten most people. Much effort is required to excite the nervous system. It is important to know where You are on the scale of tolerance to fear. If your tolerance for fear is low, you will be harder to control with fear than others, and You’ll be doing yourself a disservice by acting as if problems don’t exist. Have to Have a specific plan for managing fears. People with a low tolerance for dangerous situations you may need to trade on paper until they cope with their fears. Others may look for a professional who will help you learn structural techniques, like systematic desensitization. Someone might need to adjust my trading strategy. You can be so prone to fear, what will make only long term investments, where quick decision making is less important. Regardless, it is crucial to measure the tolerance to fear and to take appropriate steps to compensate.