Natural evolution created an emotion of fear as a universal protective mechanism in response to an alleged threat. The goal is to ensure the survival of a living being in an aggressive natural environment or in the process of competition.
It is interesting that the so-called limbic system, mechanism of which is considered to be the simplest, answers for the sense of fear in the human brain.
By the way, fear is one of the numerous emotional and psychological “traps” waiting for the trader on the way to profits. Check the rest of them here.
Your trading strategy should take into account the risks associated with your personal Forex Fears. All «fears» (human, financial, technical) are dangerous and interrelated with each other. We offer to analyze the Forex Fears as a mental illness − individual and massive at the same time, as a result of which the patient can either become chronically ill or acquire persistent immunity.
Let’s get to the point.
…it is recommended to read to everyone who respect their work and their money.
Forex Fears as a serious market factor must be taken into account by everyone - from beginners to billionaires because the result of the greed’s victory over logic is the loss of money and health.
So, the main source of the problems in the trading of newcomers who perceive the financial market as a banal casino is ...
Symptoms: A nervous breakdown due to an active conflict between the possibility of profit and the threat of ruin. Regardless of the size of the loss, there is a steady sense of guilt, and the panic attempts to «return» losses only worsen the result. Logical connection with the real market is lost, any analysis is excluded from the trading process. The loss in each transaction is held to a critical level (see 4 Trading Fears and How to Overcome Them).
How to cure?
All these «Forex Fears» refer to the category of the future events, so they may not happen. Return to the demo account and conduct a detailed analysis of the trading strategy.
Do not constantly monitor the transaction (and worry about the result!) − the level of loss should be controlled by your money management system. Reduce your «appetite» for profit, StopLoss levels and number of deals. Enter the market if the estimated probability of a profit is greater than the probability of loss not less than 2-3 times. If you receive a loss at the acceptable risk level, close the deal.
Symptoms: The need to open transactions causes nervous «paralysis», the omission of the trade signals, the violation of trading plan. There is a strange desire to leave the terminal at a key moment. Each transaction turns into a moral feat, the strength of which is constantly lacking.
You miss 100% of the shots you don't take.
How to cure?
Look at it this way: do you really want money? But they can only be obtained as a result of the real transactions. Then do not waste your trading time.
Work according to the plan, do not try to complicate the analysis of the situation before each transaction, or postpone the entry until the next, «more convenient» for you signal. If you are right − get a profit, if not − a rewarding experience.
Symptoms: Money management is not strictly followed, and the failure is due solely to the lack of the trading resources. Transactions are carried out with too large lot, with a very close StopLoss and far TakeProfit. Simultaneous trading of multiple assets without monitoring the current load on deposit.
You lack time, strength, and money to analyze the market. Typically, these games quickly end and the trader just does not have time to understand the true reason of his losses.
Our fear of a catastrophe only increases probability.
How to cure?
Trade with no more than two assets, and only after a full analysis of the situation. Even after making a profit − in no case do not increase the load on the deposit. When receiving losses − reduce the trading lot, go to the cent account, reduce the number of transactions, use more «cheap» trading assets (with a smaller collateral value).
Learn to count profit in points, not in money, practice the trading strategy on what is.
Symptoms: After each entrance to the market − around-the-clock «vigil» near the terminal. Constant panic even with a small market movement against the deal. The idea of closing the position conflicts with a sense of greed. Absolute certainty, that even a minute loss of control will lead to disaster. As a result − a decrease in attention, chronic stress, fatigue and frequent losses in standard situations.
How to cure?
Leave an open deal in peace, you must believe in yourself and in your decisions. Do not overwork.
Open deals strictly on the strategy, leave the «psychological» range of motion for the price. If you are sure of the calculations − do not allow panic when you roll back the price, but do not trust the closing of the transaction of your personal reaction, TakeProfit/StopLoss − are mandatory.
Symptoms: A lot of small transactions, without serious analysis and calculation, which are closed quickly on several points of profit or simply to zero. Chronic fatigue from constant fuss, but small profits gradually kill the desire to trade.
How to cure?
You need to get rid of the hobby of scalping. Do not forget: you pay the broker a spread or a commission from each transaction. Why feed a broker if you do not get a decent profit?
However, in no case do not raise the trading lot to increase the final result from several price points. For each transaction, there must be a mandatory minimum profit (in points or in the amount), which you will gradually increase.
Appreciate your time and health spent on making a decision.
Symptoms: Despite the training, insecurity and lack of knowledge pressure on the psyche, any movement in the price seems completely illogical, a misunderstanding of the situation causes a steady loss and panic at every subsequent entry to the market.
It's not enough that we do our best; sometimes we have to do what's required.
How to cure?
You need to constantly study the market (technique, foundation, modern technology), as well as the properties of the assets that you trade: various parameters, conditions, situations, and correlations, including, and between different types of markets.
Do not allow transactions in incomprehensible conditions for yourself, until you can steadily profit in standard situations. Misunderstanding of the market can be overcomed by the constant work on mistakes (see here Fear, Greed & The Graceful Exit Technique).
Symptoms: There is no clear scheme of actions for solving the trading situation in the case of technical failures. Even with a slight hint of problems with equipment or communication systems, you have a panic, more reminiscent of hysterics.
How to cure?
The presence of power backup and communication channels backup is mandatory. We need a reliable broker, modern and sufficiently powerful equipment, spare options for access to the trading terminal, it is recommended to use VPS and VPN services.
Your personal level of technical training should be above the average («household»), in addition, it is always necessary to have the possibility of receiving the urgent assistance of a specialist in the reserve, or at least consultations.
Symptoms: Loss is perceived as a tragedy. Personal self-esteem is catastrophically reduced. Fear of being untenable pressures on the results of trading. Emotional dependence on external opinion influences decision making and transaction support. There are a chronic uncertainty and a painful need for psychological stimuli (see How to control fear and greed when trading the Forex).
How to cure?
Reduce personal «stellar» goals and do not forget that you are, above all, a person and only then − a trader (investor, analyst, etc.).
Trading is a normal workflow and the amount of profit should not be the main factor in assessing your personality or your achievements. Exclude from constant communication people who do not believe in your success, and from the working environment − any negative and psychological «interference».
From personal experience: whenever possible, do not devote the closest people to the details of your trade. As a rule, the pressure of the opinions of the family, friends, colleagues, students on the process of your work affects negatively. But if close people absolutely believe and trust you, consider that you are very lucky!
Fear helps to develop a trading «flair»: TakeProfit / StopLoss has not yet worked, and the trader already understands that the situation is developing incorrectly. Sometimes the thought of «losing more» is much more useful than the expectation that «the market will unfold. »
For those who does not believe − read the useful book of David Kohan Fear, Greed & Panic: The Psychology of the Stock Market.
The fear of market is the beginning of path to winsdom. Fear will save you if you act quickly when you realize that you made a mistake.
But here’s the problem: how to trade, so as not to let yourself be devoured?
The human instinct of self-preservation is usually expressed in two forms: either «struggle» or «flight».
If, despite everything, you do not psychologically tolerate even small losses − reconsider your attitude to the market. Nerves and health are more valuable than potential profits. Most likely, this business is not for you.
If you choose «fight», then you have to turn your transaction fear − into earning capacity, fear of loss − into calculation and caution, fear of error − in the ability to draw the right conclusions. Then Forex Fears will become for you another profitable asset that will help both to save and earn.
Trading psychology is one of the essential pillars of the Forex success, so even if you are an experienced trader, you shouldn’t dismiss a trading psychology advice.
Do you need a comfortable space in order to take control over your emotions and get prepared to the live trading?
Simply download Forex Tester for free. In addition, you will receive 20 years of free historical data (easily downloadable straight from the software).
Grow your patience, boost your trading skills, learn to avoid psychological traps without drawing your live account.
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