Are you tired of leaving money on the table due to the fear of losing?
As a trader, it’s common to experience the psychological hurdle of being too afraid to pull the trigger or hold your position, even when the setup is screaming “winner!”
I field questions from students all the time about this particular problem. And I get it. We’ve all been there…
You see the pattern forming, but something stops you from finding the conviction to put your money where your mind is…
Even if you have an incredible win rate, the fear of losing can occasionally pull you out of a winning setup.
But you must work your hardest to avoid this. Trading scared is a surefire way to set yourself up for failure.
The best traders are fearless in the face of a great setup — they trust their gut and stick to their game plans no matter what the market throws at them.
That’s why it’s crucial to change your trading mindset and overcome the fear of losing.
With that in mind, keep reading and I’ll show you a few steps you can take toward becoming a fearless trader.
Make a Game Plan Before Every Trade
A lot of trader fear comes down to a lack of planning…
Traders enter setups without knowing exactly what their game plan is for every possible scenario, causing them to scramble when the market throws a curve ball at them.
But if you form an airtight game plan prior to entering your trades, you should have nothing to be afraid of.
So, what should you include in your trading game plan?
Here are some important factors to consider before entering any options trades:
- If you’re thinking about buying puts, consider whether there’s a major support level near the current share price. If there is, you may wanna wait to see the stock lose that level before buying puts.
- The inverse is true if you’re buying calls. Check to see if there’s a level of strong overhead resistance to worry about and if so, wait for the stock to crack that level before buying the calls.
- Watch the price of contracts throughout the day, noting their high and low points. This will give you an accurate gauge of the range the premiums are trading within. That way, you don’t have to guess what a good fill is … you’ll know you’re buying near the low of the day.
- Determine your ideal entry and exit points. Use limit orders. Don’t enter (or exit) the trade until you get the fill you want.
Size Your Positions Carefully
One of the easiest ways to get more comfortable entering plays is to lower the size of your positions.
If you’re finding yourself fearful of pulling the trigger … you may be risking too much on a trade.
I notice this in my own trading. If I oversize my positions, it can be really difficult to hold the trade through wild volatility.
On the other hand, if I size my trades to perfectly match my risk tolerance … I’m never afraid to pull the trigger.
Position size has a massive effect on trader psychology. If your mindset is struggling, size down.
Don’t go for grand slams or home runs. Hit single after single. Find consistency…
Once you’ve strung dozens of winning trades together, only then should you consider increasing your position sizes.
REMEMBER: It’s always easier to add to a winner than to trim a loser.
Focus on the Process, Not the Outcome
That said, if you’re too focused on your PnL, you’ll likely miss important parts of the process of learning to trade.
Even more importantly, worrying too much about your performance is the root cause of trader fear.
If you shift your goals from performance-based to knowledge-based, you’ll be a much happier trader.
And by simply gaining all of that knowledge, your performance will likely improve.
Think of your first few years in the market as practice for the big game — you should be prioritizing your education over your results.
By doing so, you can work toad your trading goals without letting the fear of losing hold your mindset hostage.
By taking these three steps, you can potentially overcome the fear of losing and become a more confident, less scared trader.
Don’t let fear hold you back from achieving your goals.
Take action today and start trading fearlessly.