There are very few humans in the history of trading who have TRULY mastered fear. Fortunately, it is not needed to be perfect beings to overcome it.
As traders, we have very often the opportunity to face this emotion and to see the results of its destructive nature.
Our duty is to analyze and understand fear, to be conscious of our craft, and reach our goals.
But remember: Knowledge has to be applied. Mere superficial understanding is never profitable, in any case.
By exploring some of its facets, we set ourselves in the way to overcome the most influential, thus the most disruptive emotion of them all, firstly as humans, then as traders.
Identify fear as what it really is
A lot of “science-based” gurus talk about fear as a defense mechanism of our brain. If this would be true, this emotion would contribute to an enhanced analytical capability and responsiveness, resulting in a temporary clearer state of mind.
Can anyone think about one single episode of one’s life that, INTERPRETED CORRECTLY, is proof that fear can save from danger?
Fear only has the sole consequence of clouding the mind and preventing it to analyze reality as it is and find efficient solutions.
Let’s bring some examples.
There is a guy who is terrified of heights, and a guy who has mastered his dizziness. Who do you think is going to fall from the cliff?
A guy who is scared by diseases is the one who is going to get them.
A guy chased by a killer who can’t think of anything other than his fear is going to be murdered.
A guy terrified to speak to his crush is not being saved from any danger.
A guy scared of making something wrong on his first day at work, is going to make the most stupid thing he is able to.
A trader who is constantly scared of losing money is going to wipe out every penny.
A trader victim of his FOMO will mistake any opportunity he could be in front of.
Why? Because fear distorts reality as well as one’s capacity for analysis.
Seeing it as what it really is, i.e. a dangerous weakness, will help the trader obtain success every day of his career.
First concentrate on YOUR fear, then OTHERS’ fear
How can anyone understand others when he/she doesn’t even know himself?
A lot of traders make the mistake of trying to be ready when fear comes in other people, before being ready when fear comes into them.
Therefore, it is almost sure that they will not be able to grasp the opportunity as they should.
Every trader must first give priority to his own fear instinct and conquer it. Only after this process, it is possible to constantly profit from fearful markets. Making some gain out of a random dump gives no rights in this matter.
Fear is the same for everyone. By learning how to deal with fear inside yourself, it will be easy for you to predict the movements of those who can’t deal with it.
The fortune hides behind this concept: the majority of people cannot sustain fear.
One of the reasons why there is so much capital in the hands of so few people is because they are not part of that majority. To become masters of fearful markets, they had to firstly concentrate on their own fear. Thanks to this they can think clearly during hard times and be uninfluenced by external sentiments.
Firstly overcome what’s inside of you, then you can handle what’s outside of you.
Learn how to recognize your fear
The secret with fear is learning to recognize it. Every trader seems to know that fear is a bad thing. Then why do they keep on making decisions because of it?
Most of the time, we fall into the temptation of fear because it makes us forget what we know of it. This dynamic happens when the emotional impulse becomes stronger than the trader’s wisdom and consciousness.
This helps us understand that our knowledge and strategy are not powerful enough to beat the emotional impulse, or either the latter is just too predominant.
Recognizing fear means to welcome it consciously and choose to not follow it.
“Thanks for coming, but I already know what you are. Therefore I will keep my sight clear”
Always choose your wisdom over fear impulses. Rest assured that at some point it will stop knocking on the door. Being untouchable by its clouding ability will permit you to give more and more importance to knowledge and strategy, as a natural outcome.
The goal is to keep transferring weight to the wisdom plate until there’s no more in the fear one.
When this ability is well settled in the mindset of the trader, he knows one thing: To do exactly NOTHING of what fear is telling to do, and politely refusing.
Increase your professionalism
Giving extreme priority to ‘trading wisdom’ over fear is the crucial ability, but to make that true it’s obviously needed to actually have trading wisdom. If the trader’s knowledge of his craft is not enough, he may have overcome fear but losses are still behind the corner.
Being fearless and having prosperous knowledge are complementary concepts.
There is no such thing as a fearless but ignorant profitable trader.
The weight of your wisdom is the sum of your consideration plus its objective value. Having a huge amount of information and experience to rely on is a great support that makes it easier to overcome fear efficiently.
Being professional means being wealthy in knowledge and discipline.
Discipline in trading includes complete control over fear. Mastery in trading implies absolute detachment from fear and any other emotional impulse.
To obtain any of that, it is needed to have a base of professionalism that is indispensable.
Be fearless AND prudent
The obvious goal for a trader is to become fearless and indifferent while trading. But being fearless does not mean being imprudent.
Prudence and fear are two very different things. The first is a conscious attitude, the second is an involuntary impulse. Induced reactions are what make us animals, consciousness is what makes us men and women.
Traders who are vastly induced by external sentiments and factors are those who are fearful and unprofitable, for this they are imprudent in their fear.
Conscious traders, who do not respond to any influence other than their knowledge, discipline, and strategies, are fearless and prudent, and for this they are profitable.
Being prudent means having the capability of evaluating correctly risk and danger, and acting based on that clear analysis. No one can evaluate anything if his state of mind is corrupted by emotions, especially fear.
Imprudence is the result of uncertainty. Traders who make decisions imprudently are responding to a weakness, either coming from an emotional state or from ignorance, and they cannot foresee the consequences. This has nothing to do with being fearless. On the contrary, it has everything to do with emotions.
The imprudent trader is looking for luck, while the conscious trader doesn’t need luck.
Treat money as an instrument
The very reason because one is fearful of losing money is that one misinterprets it. Money itself is not the purpose. It is just a powerful instrument, to obtain wealth or success.
Imagine that you want to build a very large house, and you will need a lot of hammers. You use the one single hammer you have to fabricate other hammers, so you can utilize them to finish your building. You perfectly know that some hammers are going to break in the process, but you don’t mind because your purpose is to build the house, not to avoid breaking hammers.
Building wealth with money is the same exact thing. Losing money is just a part of the process. It is inevitable. Of course you want and need to break as few hammers as possible, but you must accept that these events cannot be totally avoided.
By accepting losses as a healthy part of the process, the trader starts to see money as an instrument and decreases consistently the impact of fear on his trading.
With this attitude he will also benefit from a natural instinct of cutting his losses: he will not be incentivized to maintain a losing position in the hope of eventually turning green and avoiding the loss.
Knowing that losses can’t be avoided, he will be much more interested in minimizing them.
In conclusion
Control over fear is one of the most important things for a trader. Fear is the most powerful obstacle between the mind and conscious thinking.
Every single day in the world people lose opportunities because of fear.
As traders, we are among those who are continually subjected to this weakness. Winning over it is the key to success.
These are some of the ways a trader can develop his strength and protect his knowledge from involuntary, disruptive impulses.
Managing fear can keep you prudent and self-confident as a trader and therefore can become a tool.
Do not let it become the principal source of losses like it is for almost all traders: Distinguish yourself by achieving what the majority cannot achieve.
Everything described in this article has the sole purpose of being informative and providing general information. The author has no intention of providing any financial advice, legal advice, or tax advice. Do not rely on this article to make investment decisions. Seek professional help before making any such decision. The author does not take any responsibility for loss or damage of any nature. The use you make of the information contained in this article is your sole responsibility.