Trading is a mind game: controlling fear

In my trading course I was told that as a woman I would struggle to succeed because my decision-process was mainly driven by intuition and emotion.

I was also told that because my area is marketing I was proficient in creativity not in pragmatism. And finally, because I was used to working 10-12 hours a day, I would be constantly doing overtrading and consequently multiplying my chances of loosing money.

Yes, sadly it is true someone said that to me... With such a welcome you might wonder why I decided to give up a successful career as a Sales & Marketing Manager to focus exclusively in trading. The answer is simple: being a professional and trained coach I know that trading is a mind game. Anyone can succeed in trading (or in any other activity) regardless the gender, previous experience or personality traits. You obviously need to develop your technical skills but the most important skill of all is emotion control.

Fear is your most dangerous threat.

This applies to life in general and has to do with each person's fight-or-flight response, also known as acute stress response. It is natural to feel scared when your money is at risk but when you are a trader you will look at your account and inevitably find deals that have a negative outcome. You can close them to avoid further losses but if you always quit deals that have a negative performance you will be consistently loosing money.

To become a trader you must find a way to live with fear.

You should not lose it, because fear will help you to keep grounded, but you must tame it and you will develop your mental strength along the way.

Prices move up and down and sometimes they fall hard before they gain impulse for a higher climb (or go up before diving low). You must take a deep breath and learn to accept up and down movements as natural market moves. These fluctuations correspond to the price action and they are absolutely normal.

F.O.M.O. (fear of missing out) is the fear variant that causes the highest amount of losses.

I’ve seen this happening a lot, specially in the past weeks with the extraordinary price escalations in commodities. For instance, oil hit record highs but also had significant drawbacks. If you see prices rising, you might feel tempted to buy (everyone is making profit and I'm not in this trade!!!). Eventually you will earn money if the trend continues. But it can also happen that you are entering in the deal already too late. Unfortunately, what goes up must come down, so any trend will always reverse and you can potentially lose money.

It is humbleness not courage that will help you overcome fear vulnerabilities.

Sometimes you must accept you were sloppy in identifying a trend so you lost the momentum to invest. Other times you have to accept you misunderstood the signs and you were wrong in your investment decision.

You cannot control market moves but you can always control the way those moves affect you.

This control comes from having objective criteria for market entry and for market exit. You will never know how price evolves but you should know, for each trade, what is your profit target and your loss limit.? A trader must have honest and feasible risk-reward guidelines to assure decisions are made before emotions get in the way of the day-to-day required assessment. If you stick to your rules you are in control.

A pragmatic set of guidelines is the best way to overcome the psychological crunch.

This applies to trading but of course you should also have rules for other aspects in your life namely maintaining a healthy work-life balance.