We talk a lot of keeping trading mechanical, keeping emotions out of our trading. That’s a huge challenge; as we’re built to have emotions both protect us and give us pleasures. Emotions send us messages:
- Sadness: We have lost something important to us.
- Anger: Something has been taken from us.
- Shame: Something is wrong with who we are or what we have done.
- Fear: We are being threatened.
- Joy: We’re pleased with what has happened and who we are.
In my experience, though all of these emotions come into play, fear is the most common and most influential. While fear has great value in guiding us to see when there is a threat, it’s often a contaminant to our trading. So what are the signs or “red flags?”
- Changes in our body (Sweating – loss of focus)
- Over-analyzing (Review – review – review; fixated with getting it “right”!)
- Slow to act when there is a problem (Hesitancy – trades get away)
- Slow to act when there is an opportunity (Does every element fit? Does it have to?)
- Underutilizing capital (Very few positions on – low returns)
- Focus on account balance (Watching balances every minute, causing distraction)
- Focus on money (Versus trading in plan and method)
- Overtrading (Thrashing – desperation to get losses back)
- Taking excess risk (Positions too big or suicide trading from desperation)
- Taking profits too fast (I can’t let this profit become a loss! – I would be bad!)
- Moving into a trade late (I better not wait and let another one get away)
- Trading news after it’s out and security already moved (I missed another one!)
- Large percentage of losing trades vs. winners (Noise in the market takes you out)
- Poor win loss ratio (Loses bigger than profits because of fear and not waiting for target)
While those are signs of fear coming into your trading, there are other signs away from trading that are important to notice. Are you into addictive or numbing activity after trading? This is a sign you do not want to feel. And you can’t numb selectively. You’ll be numbing your consciousness and intentions around trading also. Or are you afraid to share your trading activity or results with people around you, or do you lie about it? This is a big red flag; fear you’ll be discovered; the negative belief you have about yourself.
Here are some tips of how to move out of fear and into a more centered and productive mindset:
- Ask yourself this: Is the threat real?
- Take a breath and tell yourself you WILL survive, no matter what.
- Know your losses are acceptable; you can and will act to control risk and stay on plan.
- Stay in the present and out of the past and away from associations to old negative beliefs and events.
- And know that no matter what, you are the greatness of who you are, even if not a trader.