Tuesday, August 20, 2013

Fear of Being Wrong.

This can be a devastating problem.

If you fear being wrong, you will almost certainly do two things.

1) take profits too early all the time
2) hold losers too long to avoid admitting losses.
3) not take a clear pattern entry because it might lose

This is a psychological issue.  You are afraid deep down of being wrong.  Because in your mindset, every loser is an admission of failure.  But we know that failing regularly is part of trading. 

Traders make money over time.  The win percentage may vary but no matter how a person trades, each individual trade is mostly meaningless unless we give it power. 

Fear of being wrong means every trade is viewed as another final exam of whether we are smarter than the market.

Being smart is not an asset, it's a liability. 

The best trader sticks to a process and takes the small losses. 

But how does one overcome obsession fear of failure?

The first step:

1) Reduce size to reduce fear.

You have to do your trading plan without any fear so do it with smaller size.  You need to win and boost your confidence but more importantly, develop the identity of a CP trader.  If you don't think you can succeed, you won't.  So start with a small win.

2) Review each trade.  Look back and see where you started feeling anxious. Then, when you are actually making a trade, you can identify the moment of anxiety and take a new action.  Stand up from your chair, talk to yourself out loud about how you feel.  Remind yourself that the anxiety is just an emotion that you can control.   You cannot change a habit until you can identify it when it is happening and break the routine with a new action.

3) Breathe.  I wouldn't be surprised if many traders exhibit a lot of physical tension during these moments.  Physically relaxing your body will help you mind shift.  You don't need to eliminate the anxiety, you just need to change your behavior and not fall back on old patterns (taking profits too quick, not taking losses). 

This is just a brief beginning.  But first, you have to be honest with what's holding you back.

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