Avoiding fear based decisions

Trading is often about how to take the appropriate risk without exposing yourself to very human flaws.
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abgespaced
Posts: 168
Joined: Sun Aug 23, 2020 2:25 am
Location: Australia

marksmeets302 wrote:
Fri Jan 15, 2021 10:34 am
I've often found that the moments where I almost want to puke because everything is going against me are the ones that provide the biggest opportunity. I think really good traders recognize those situations and are able to stay the course. My trick is to close the position which allows me to think clearly again. If I come to the conclusion the position is right I just get right back in.
Great tip. Yes, I have often found that closing a position frees up some critical thinking capacity that allows me re-stake based on the current conditions.

An re: positions that make you want to puke. It is these moments that the weaker trader will close out in order to mitigate a loss, whereas the stronger trader will know that these moments are likely where things will swing back in their direction. I have experienced this moment many times and the better I get at trading the more money I make off these moments.
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abgespaced
Posts: 168
Joined: Sun Aug 23, 2020 2:25 am
Location: Australia

Another fear that cannot be avoided simply by lowering stakes is fear of missing out - FOMO.

FOMO occurs when we believe something is about to happen in the market and we don't have a position. No position means FOMO is independent of stake size.

I have been caught up in FOMO many times. Eg. knowing that the market could continue its direction towards an extremely obviously entry point, but not waiting for it because at any second the market could change course and I would miss out.

In this scenario you would be taking the wrong price, or at least a sub-optimal price. Or a price that could easily go one way of the other. In any case, it is a position taken not rationally but out of fear.

I cannot see how lowering stakes would help anyone avoid these fear based decisions. In fact, I can see how using lower stakes would have the potential to create bad habits of entering positions willy nilly just because they look semi-attractive, rather than waiting for the most opportune moments. In other words, just scattering trades about because you are unsure where your entry point should be.

One method I have started using to combat FOMO is asking myself, if I could only enter the market once, where/when would I enter? I have found that this question allows me to think about the market rationally and independently of irrelevant details. Granted, I am not always able to execute it perfectly, but it does help mitigate some of those fear based decisions before they start to manifest themselves.

I am curious as to other people's experience with this.
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