Delving into trading psychology: How to prevent fear from holding you back

Julie Brownlee, Fsp Invest, 21 May. 2015

Tags: fear, psychology, trading, trading psychology, emotions, overcoming fear,



When it comes to the emotions that can influence your trading, fear sits alongside greed at the top of the list.

The underlying psychology at work here can stop you from ever putting on a trade.

So what influence can fear have on your trading? And how can you prevent fear from interfering with your trading?

Read on to find out…



A trader’s biggest fear


Fear goes hand-in-hand with worry. And every trader and investor will experience fear on their stock market journey.

The biggest fear you’ll experience when trading is the fear of losing money:

  • What if your trade goes against you?
  • What if you pick the wrong time to enter a trade?
  • What if you take your profits too early?

The list is endless.

One way to combat fear is to follow a solid trading strategy. A good strategy takes into account risk and reward. As long as you stick with your strategy, you know if a trade doesn’t work out, how much money is at risk.

Fear is also a good emotion to feel as a trader. It means you have a respect for the markets and for trading. But if you’re too fearful, you’re bound to miss out on great trading opportunities.


The fear of missing out


When you begin trading, it’s easy to think that other traders are making bags of money and you’re losing out. This can lead you to enter trades without following a solid strategy.

Acting on fear isn’t a good plan to follow. You’re increasing the risks you take on and the chance of making losses.

Even when you’re in a trade, fear isn’t likely to go away. It can lead you to spend too much time watching your trades.

Again, the best course of action is to stick with your strategy. You can load your stop loss and take profit levels and unless something fundamental changes, you should go with your trade.

And remember, never trade with money that you’re not prepared to lose. Don’t start putting money into trades that you can’t afford to lose.

So there you have it. How to prevent fear from holding you back.

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