How to be a fearless trader
Trading is like a roller-coaster ride. When you see the market working to your advantage you feel a rush of adrenaline, similar to the one you experience when your ride is slowly reaching the top. But then, a few moments later, when you are rushing down at a high speed, you are overwhelmed with fear and nausea. In the same way, nothing can prepare you for the emotional hurricane that will hit you when you experience your first trade loss. And that first loss will come, no matter what you do.
There’s a statistic which says that on average 96% of traders end up quitting after losing money. Most of them simply cannot handle the consequences. And it isn’t just the financial ones we’re talking about, but also the emotional ones. When you start trading, you don’t realise the risks you are dealing with straight away. Sometimes it almost seems like a game. Click a few buttons here and there, invest a little bit on this and that, and then simply sit and wait for the money to start flowing in.
It’s only when you lose for the first time, that you suddenly realise that the Forex industry isn’t all butterflies and rainbows. Now if you were careful enough to not lose too much, you might shrug and move on. But what if that first loss is a big one? Well, chances are that you will never invest in another trade again.
The unexpectedness of trading can easily frighten you and cause you to start second-guessing each trade you make. Eventually, you might even find that you are stopping yourself from getting more wins, simply because you no longer feel confident enough to take the risk. The important thing to remember here is that even the best of traders lose and get affected by unforeseen events. It’s just something you have to accept and move on from. After all, a good trader is a fearless one.
To be fearless, you need to remember the 3 ground rules: Prepare, Analyse and React.
Being prepared means being thorough. Search the market, follow the trends, learn from previous experiences. Analyse what happened to cause the loss. Understand what you could have done differently to have a different outcome. Learn to envision events. Observe the changes in the market and if they catch you by surprise, try to pull yourself together and keep your cool to react with proper damage control actions. Control your emotions, so that they don’t affect your judgement and decision making.
This does not mean that will suddenly become a magical unicorn able to predict the future. You will, however, learn to be quick on your feet and maybe even keep your losses to a minimum. The better you strategise your risk management, the easier you will handle difficult situations.
Author: Nadia Ivanova, PR & Digital Marketing Manager at Qobo Group Ltd