Take the fear out of day trading. I wish it was as easy as saying it! Trading with an emotional response, fear specifically, can be costly to a trader’s profit goals. Feeling fear is a huge obstacle to individuals that aspire to learn how to trade stocks. Most don’t experience the agonizing panic attack nor can pre-identify what their common fear triggers are until they have started trading with a live account. Overcoming day trading fear will keep you from making costly emotional based decisions while in a day trade.
Self-doubt or persistent fear can prevent a trader from taking a trade, not adhering to their entry and exit plans, losing money, and some may even give up due to the frustrating emotion. Do you find yourself hesitating upon entering the market? Do you get out of a trade super quick ignoring your take profit goals or do you negate your stop loss plan? Do you physically sweat, get nervous, or feel heightened anxiety when you trade? Do you feel like your blood pressure goes up? Guess what, you’re trading scared!
Why Do We Experience Fear?
Fear is mostly a learned emotion. While specific fears seem innate, some research suggests we are not born with fear. Throughout our life, we have experiences that build core memories attached to feelings. Fear is a highly charged, powerful emotion that was created through a past physical or emotionally painful, traumatic, or disappointing circumstance. If we experience anything similar to that past event, our brain reverts to that fearful state to trigger us to be cautious or even avoid the situation in an attempt to protect us.
Say you’re in a hurry, you start to run up a flight of stairs and you trip and fall busting your lip and chipping a tooth. The experience is physically painful, to say the least. Next time you see a flight of stairs, what are you going to do? You will be more careful, slow down, hold onto the hand railing, or even consider taking the elevator! Another example is a dog bite. I think all of us have met someone in our life that has been bitten by a dog. When they see or meet a new dog, they may try to avoid the animal. Even though the new cute pup had nothing to do with their awful experience, they still are scared, cautious, and hesitant to engage with the furry canine.
Fear can also be attached strictly to an emotional incident as well. Say you are on a basketball team, and you went undefeated in your season. You get to the playoffs and find yourself in the championship game. What an amazing feeling! Then you lose the game. All that hard work, the fact that you had such a stellar season, is almost meaningless because the loss is so disappointing. Even though you did not get hurt physically, you may have physical symptoms. You may cry, punch a wall out of anger, blame the referees and talk poorly of teammates that let you down. You definitely will be affected emotionally. It will hurt so much that later in life, you could experience fear and anxiety playing basketball because you dread losing.
It is important to understand this concept of where fear is born because past experiences can predict our future behavior. When our brain is conditioned to think or feel fearfully, it will be triggered anytime we feel anxious or unsure even if we are in no real danger. Being afraid can make us avoid situations and affect our personalities. We learn to cope by becoming procrastinators, perfectionists, and overthinkers. These feelings will transfer into future life endeavors such as day trading if we allow it.
Fear Is a Choice
If fear is built over time by life circumstances, and new situations tap into previous pain and disappointments, how do we get over experiencing fear? You have two choices.
F.E.A.R.
1) Forget Everything and Run
2) Face Everything and Rise
-Zig Ziglar
If we choose to run when we feel fearful, we will develop poor coping methods that will hinder our short/long term personal growth, never achieving the things we set out to accomplish.
If we choose to rise above our fear, we will develop a strong mental fortitude that will allow us to achieve the goals we desire over time through hard work and effort.
Which do you choose? If you choose to rise above and resolve your fears, to gain more professional self-confidence, read on.
3 Effective Tactics to Resolve Fear
If starting a trading journey is a goal, you must first overcome any fear of day trading and resolve your fears while performing the work. You must identify the fears related to your trading, write them down in your trading journal, and devise a way to conquer them. Acknowledging the negative thoughts and where they may stem from is necessary.
Tactic 1:
To stop fear from taking over, to be less emotional while trading, try calming techniques and tap into motivations that are stronger than the things that scare you. Take deep breaths and focus on why you started your investment journey in the first place. Your desire to learn to trade, have more free time with family, and have financial freedom should be enough meaningful motivation. The desire to grow into a successful trader and make a profession out of it, and be your own boss, should be clear incentives as well. This motivation should provoke a strong desire to change your tentative mindset, correct your behavior, and persevere.
Tactic 2:
A second way to tackle the fear monster is to create situations that you can practice resolving. Generating gradual smaller experiences of success will improve your faith and chase the fright out of your processes. If this means paper-trading for a while or trading with a smaller contract size until you have a higher win ratio and some profit to match it, then do it. Small wins can foster big confidence. You may find out that the perceived threat was just an opportunity in disguise.
Tactic 3:
Exposure is a third way of battling fear. Put yourself in the situation over and over again. This may seem like a painful way to resolve your terror but at one point, you will get so sick of your poor reaction, and your mistakes, that you will want to change the way you behave. For example, some people have a habit of ignoring their mental stop loss. They are fearful of losing money yet ignore it hoping the trade will retrace and be profitable. Some just desire to be right and let pride get in the way. Remove the emotions by placing a stop order on every trade. Not a mental one. An actual stop. Do it over and over until you can go back to making it an option if you desire.
What Fear Says vs a Professional Trader
To help you further, we will go over the difference between what fear may say to you versus what you need to think when you trade. Stay with me. This is important.
I am unsure and maybe I shouldn’t enter this trade.
Vs.
My edge gives me an advantage. Does it meet my entry criteria?
My trade is going against me, I should get out now!
Vs.
Has my trade hit my stop loss? What is price action doing?
I lost! Let me get in an opposite position and try to recover my loss.
Vs.
I lost. Let me look at my entry and exit. Did I make a mistake? Or was this a natural loss of the strategy?
I am not sure if I will win this trade. I lost the last one!
Vs.
My strategy gives me a high win ratio over a series of trades. Let me verify the setup.
Dang, I hesitated! Let me hurry up and get in before I miss out!
Vs.
I hesitated. Why? Let me document this to review and wait for another proper trade setup.
My win ratio is poor. I can’t do this.
Vs.
My win ratio isn’t where it needs to be. Am I adhering to my strategy? Do I need to backtest and practice more?
My trade is up, I need to get out now!
Vs.
My trade is profitable. How close is it to my profit target? Is it struggling? Let me look at possible resistance obstacles I may have missed, verify trend direction, price action, and volume. I could take the current profit and choose to be thankful or let the next candle tell me the story.
My trade alarm went off. I feel so anxious I am sweating and shaking!
Vs.
Oh, trade alarm! Looks like a good setup. I am feeling nervous. Let me take a deep breath and calm myself before I possibly enter.
You get the idea. The fear response is an emotional response. Successful traders do not discount fear and anxiety, they just have worked past it enough to think logically and remove such fears from their thinking and behavior.
Summary: Overcoming Day Trade Fear
For every fear, there can be a fight or flight reaction. Take note when you feel fear and document it in your trading journal. Fear is a residual emotion of a past event and a choice to be applied to a new, similar circumstance. If you remain calm, identify you are operating under fright, and take immediate steps to counteract it with positive and reasonable thoughts, you can master being a very profitable trader and overcome your day trade fear. Our past associated with present experiences can tap us into a state of terror where we act unreasonably out of fright. We want to be calm, focused, and read the story the chart tells us. Not react using our emotions.
Fear can be a serious roadblock in your trading regimen and it is imperative that you overcome your day trading fear. It is the emotion behind all emotions. Master trading psychology and remove your fears! You will be a better trader for it!
Check Out These Resources:
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
https://en.m.wikipedia.org/wiki/Fear
YouTube: Maurice Kenny How To Overcome FOMO When Day Trading
Book: DAY TRADE LIKE A MILLIONAIRE by Maurice Kenny (FREE download)
Book: Enhancing Trading Performance by Brett N. Steenbarger
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