Hello comrades! Today, once again touch on the psychology of stock trading is very interesting area. What if the fear of losing trade is deeply stuck in your head, how to beat it? How to reliably determine if you are afraid of losing trades? The answers to these questions below.
Today, walking on the world wide web, accidentally went to the blog Neil Fuller (Nial Fuller). The site is very much, the main thing - a lot of useful material! Neil - the practitioner and the trader has been learning the trade. I could not resist and decided to translate an article for their readers.
Why chose the "fear of committing a losing trade?" I just like this article. In addition, recently published a post: "As a trader to fix your mistakes? Effective ways to improve results. ", Which partly dealt with this subject. Today, the topic will be disclosed more details!
Transfer.
How to get rid of the fear of losing money when you open a deal?
If you want to be a professional trader, you get used to the idea that at some point will lose money. If you still want to learn how to open only profitable trades, or are searching for the "Holy Grail" with 75% of profitable positions, then forget about it right now. Remember, losing some transactions is a prerequisite for the final trader win, loss and profit are inseparable. If you are not correctly perceive the loss, you will never learn how to consistently make money on the stock exchange.
In real trade all traders make losing trades, but they understand that it's part of the "game". Unfortunately, for many of each transaction is accompanied by a great fear of losing money, sometimes other psychological problems ( "16 traders system error.").
Let's look at the key reasons why traders are so afraid of losing trades:
1. They do not understand that you can lose the majority of transactions, but to make more profitable and remain in the final black. Simple math proves it.
2. They are simply afraid of losing all the money.
3. They open the very large positions, the risk of too many in a single transaction. It creates fear, stress and sleepless nights.
The remainder of this article I will try to tell you how to overcome fear of losing trades. It is a powerful method that will lead to the result, so make sure you are fully aware of the writing. If necessary, re-read the article. What you will learn below, will provide an opportunity to effectively deal with their fears and emotional development as a trader.
Fear of losing the deal - this is a good natural instinct, but we have to change its action.
Fear of losing a great deal of emotion in many areas of our lives, if it was not, then chaos would be actively present in the world and the markets. People protect their savings and assets, it is true, they have spent a lot of effort.
Nevertheless, in stock trading, this natural energy to protect their savings, to be transformed and sent to another mental state. . .
Instead of being afraid to make a losing trade, focus on controlling risk in this transaction. How? Stop Loss level and the size of the position - the most effective ways (more experienced speculators use hedging (not discussed here)). These risk management tools should be mandatory for you to trade. And instead of being afraid of losing money, feel good about yourself because you are using these tools, you can calculate the potential loss before opening the transaction.
But I will note that the above is not always enough to completely get rid of the fear of loss.
Ask yourself a few serious questions.
If you feel fear, when you open a deal, shake, and ask yourself the following (answer honestly):
1. Did I have the knowledge and confidence to work with real money?
Suppose that you are trading on the money earned by their own labor, but you do not know the consequences of your trading, and you do not have 100% confidence in their ability to analyze the markets. . . In this case it is necessary to abandon the trade. One of the main reasons that traders are afraid of losing trades, this lack of confidence in the success! It sounds silly, I know, but things are actually many traders simply do not have a trading strategy, do not have a plan for trading, trade magazine, etc. They're just not willing to risk real money on the markets. Thus, they feel fear when trading.
2. How to open this volume deal, would not exceed the risk comfort level for me?
If you do not know and comfortable for themselves the level of risk, then it is necessary to understand it in the first place. This level can be estimated in dollars, how much you can afford to lose, but to stay completely quiet? Remember that every transaction could be losing up to its discovery it is impossible to predict the outcome. You need to evaluate your financial situation and then determine what the money are willing to risk in trading. Everyone should think of themselves as risk manager and a manager of assets, we can not perceive himself as a small boy who hopes only on luck. Your thinking directly affects your results. (That's more about psychology, art improves trader efficiency)
3. Do I understand the "trade math?"
When I mention "Trade math", I mean the risk / profit and the percentage of winning trades. Of the 20 new positions can get at least 35% losing trades, most traders lose 50%, and some even 60%. But considering the risk / profit, you can lose the majority of transactions, but ultimately to make money. We will examine this below.
Realize that losing trades is normal.
Well, if you suppress your losses quickly and realize that by doing so you just keep capital that your winning trades will be compensated these losses. This is possible because of the risk / profit, where profit potential is greater than the potential loss.
Even the most successful traders usually lose more time than win. To prove my point, let's consider the 14 transactions, of which only 43% of winning. 57% - losing trades, believe me, to make money, you should not always be right, and constantly open only profitable positions.
This table shows that it is possible to lose the majority of transactions, but at the same time earn. Therefore, losing trade should not negatively affect you.
Trust your trading strategy and mathematics.
As shown above, even with 57% loss trades retaining / risk ratio at least ½ profit and greater profit can be obtained. It is worth noting that some transactions have a ratio of 1 / 1.5, this sometimes makes sense, depending on market conditions. In our example, the average ratio of reward to risk ratio was 1 to 1.75. Thus, the more potential profit than the potential loss will lead to the desired results in the long term.
If you follow a trading plan or system, then take a losing trade much easier. If you have a plan, then your actions seem more logical for the brain, so you can avoid many of the concerns and fears.
Test "sleepless night".
Everything that we have said above is accurate and necessary information. But there is one very simple "test for fear of" suitable for most traders. Test: vote, how do you feel in the evening, when you go to bed at a time when you still have open positions. If you find that you can not stop thinking about trading, or you glued to the monitor when the dreams have to look, you still afraid of losing trades.
So, if you can not bear to fall asleep in the evening, ...
1. Either you open the large volume of transactions, or put the stop loss too far.
2. You do not understand what you are doing. No confidence in the trader's profession.
Conclusion.
Fear of losing money or losing trade can bring a lot of harm to the trader, causing skip lucrative position, constantly harass yourself, even bad sleep. If you want to succeed in trading, you must defeat this fear. It is best to start with an understanding and recognition of the fact that the losing trades and losses will still, as if we did not try to avoid them. Thus, there is no point in trying to open only profitable positions, instead you need to learn to accept losing and controlling them. How to do this already discussed above, now briefly recall the main:
1. Follow the trading strategy and trust her.
2. Competent money management, clearly using risk management. This means that you can not exceed a pre-determined risk in the transaction, and to strive for exemplary risk / profit = ½ or more.
3. Believe in trade math. Remembering the above example, understand that only 40% of winning trades can bring good earnings.
