Fear of losing money is a part of our trading, but balancing between fear and trading is the trick which every trader should learn with yourself.
The main source of fear is an untrustworthy strategy.
Once your strategy is optimized to the point that you trust it, fear and breaking the rules will be a result of boredom and childish gambling. Things that are much easier to overcome than a suboptimal strategy.
The question is how long it takes to find such a strategy, optimize it and learn to trust it. By the time some people achieve that theyāve lost hope it will work.
1 Like
Yea thats the psychological issue. You must be able to objectively gauge progress. Something to fuel your confidence which leads to persistence.
Progress gauging fuels confidence for persistence during development and an optimized strategy fuels confidence for persistence during execution.
I agree. How do you gauge progress for yourself, if you donāt mind me asking?
We all know the abilities required to trade. For example if you were able to accurately predict trend direction consistently during backtesting, then the process you have developed to do so has come a long way. The more consistent during backtesting the more progress youāve made. If you are not seeing increase in consistency then you may be lacking creativity or work ethic. Gauging consistency is an objective task. If you are having difficulty gauging it then I cant help you there.
Self honesty is not something I can teach. Some people are so used to lying to themselves to make themselves feel better that they can no longer tell the difference between when they are actually seeing improvement vs when they are just telling themselves they are. Not being able to trust your own senses is a dangerous place to be. I would say just stop lying to yourself but that would mean accepting that you are actually doing so, something the ego will have a hard time doing.
This is the difference between someone with potential and someone with potential plus heart.
John
We donāt count on luck.
1 Like
I really couldnāt have put it better. Self-awareness is vital for any new skill one is trying to master and Forex trading is not any different. If anything in this case self-awareness is even more vital than usual.
Whether or not you are profitable, that is the only gauge to progress. Which is why I prefer A. Elder to M Douglas. Elder is an MD Psychiatry, and his concepts delve in who and what we are. I do find his trading concepts a bit, well, complex for me, but I trade a hodge podge of Fundy, Pattern Recognition, Levels, and Simple TA.
So yeah, Alpha is the gauge.
The Ever Hodge Podge VIPER
By the same token one must understand when they ARE making progress. Some people donāt believe their senses in this way too. I think its due to an underlying belief that its impossible. Whether thats a technique to make themselves feel better about not having made it yet. Or it may be an excuse to not have to make the necessary sacrifices for breakthroughs. Iām not sure.
I suffered from both of these forms of self dishonesty. It took a big loss to start being honest with myself on both fronts. After 6 months in the game I started being honest with myself and have not had doubts or false positive progression since. Humility and confidence is a tricky balance, one that must be mastered, humility to keep an open mind and confidence to trust your core strategy to date.
We donāt count on luck.
I wouldnāt say the optimal strategy is found. It needs to be developed from scratch. Its a simplification process, summarizing through abstract thinking. A one sentence hack is the goal.
We donāt count on luck.
Would you recommend any particular book titles? (I am assuming the two names you cited are book authors?)
Hey Ml, I started with āTrading For A Livingā by A. Elder. Then everything else he has written. Also check out the M. Douglas book, āTrading In The Zoneā I didnāt really get that much out of it, but, Iām kinda damaged so maybe someone more āNormalā might get more out of it. Also for technical analysis all of Perry J. Kaufmans recent work.
The Ever Recommending VIPER
1 Like
The fight against the fear of losing money can be not a psychological problem, but a moral one or a principle one. First you need to understand the cause of fear before you start fighting it.
True, to fight with fear we have to make our mind strong so that we can trade with a skilled mind which can be strong during the trading period.
Thank you so much for the recommendations, I will look those titles up and I will probably begin reading them one by one. I really need to read something on the matter.
Standard reply would be that you have invested too heavily on this one trade, therefore you are fearful.
But hey, everyone wants to make the maximum profit with the capital that we have, therefore ALL IN!!!
And if they go all in and lose their account, then what?
I mean, I understand your sentiment, but I am not sure how prudent it is.
Fear can be fear of missing possible profit but the more debilitating kind of fear for traders is fear of losing money.
I wish we had a different term than loss or loser or losing - these have so many negative connotations from previous teaching and experience in life that its no surprise they can have an emotional impact on traders.
Another way of looking at your losses is they are just bills - like utility bills or the cost of updated IT equipment or the local property taxes on your house/office. If you have a profitable system, it will feature some trades which do not generate a profit. But that is inevitable, these are not avoidable losses, you cannot control which trades make a profit and which donāt. So these are just overheads you have to pay on any business. Donāt think of them as losses.
Real losses are those which you can accept tor refuse - such as the trade that broke your set-up rules, or the stop that you widened as price went against you, or the trade that you doubled up to get a previous loss back.
But donāt feel guilty if youāve done nothing wrong.
2 Likes
It had never occurred to me to look at losses that way. That is actually a very positive, very helpful approach. Thank you for the idea, Tommor.
When you put your money into any investment, you put your heart into it as well. So, where your money is, there your heart will be. The best way to control emotions during trading is to use proper risk management system. Know how much you want to invest in every trade and prepare you heart for any possible loss. When you prepare your heart, you will guide against any form of revenge trading.