Overcoming the Fear of Losing

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Shlekht

2. See a psychologist. This one was speculative and I'm not sure how viable it is but maybe a psychologist could help me get to the bottom of my fear of losing.

I was wondering if any more experienced traders have gone through the same struggles I am right now and what helped you hurdle the mental roadblock that I am dealing with right now. Any insight would be greatly appreciated!

Save yourself time and money and buy the Sedona Method (the book). It will help you to process all that.

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chipwitch

Stay away from the prop firms. They offer little if any benefit that you can't achieve on your own account. Tax rate is higher in the US (depending on your bracket), they keep some of your earnings, the transaction fees are higher, you aren't actually trading real dollars until you're "funded" (paper trading), and you will be considered a "pro" and have to pay a premium for your live data. If you need rules, follow their rules if it helps you. But you absolutely can achieve the same results with probably less money.

As somebody who actually traded for a prop firm, I couldn't disagree more. Good prop firm will give you enough great support and coaching that will outweigh any downsides.

Having said that, the online 'prop firms' that are interested only in your money do not qualify.

kevinkdog · (login for full post details)

Anagami

As somebody who actually traded for a prop firm, I couldn't disagree more. Good prop firm will give you enough great support and coaching that will outweigh any downsides.

Having said that, the online 'prop firms' that are interested only in your money do not qualify.

I'm glad someone else sees that. Somehow these "pay to sim trade" firms are being referred to as "prop firms" - when they are not really at all like what traditionally have been called prop firms.

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Fear is a good thing .......... it's evolutionary as a protective mechanism. It keeps us away from dangerous cliffs with unstable ledges! It's irrational fear that needs to harnessed and managed. F-E-A-R ... False Expectations Appearing Real. The more I trade my system the less fear I have- the less doubt- the less uncertainty. Some traders talk of sample size- the only way to mimic your back tested results is to get to a large sample size and the way there is to take the trade, it's a must. If you have an edge the only way to exploit that edge is to take the trade, every trade. If you trade a system, discretionarily taking trades is a system killer. Good luck.

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Would you rather win 70% w/1:1 reward to risk
or
Would you rather win 60% w/1.5:1 reward to risk
or
Would you rather win 45% w/2:1 reward to risk
or
Would you rather win 35% w/2.5 to 3 reward to risk
---------------------
When it comes to risk and outcomes - when are you at your most relaxed & not too stressed out? All of the above are positive expectations but vastly different day to day & week to week results over time.

At what win% are you still motivated to trade after 6 months - 2 years - 5 years? I think alot of traders do NOT nearly pay enough attention to the 'grind' of stats over time w/a less than 60% win rate.

Depends on what type of person you are too - money risk per trade shouldn't even be a factor 'cause any money in a margin account (not total risk funds - just $ you are risking as margin) should be thought of as 'lost' before you even begin.

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researcher247

Would you rather win 70% w/1:1 reward to risk
or
Would you rather win 60% w/1.5:1 reward to risk
or
Would you rather win 45% w/2:1 reward to risk
or
Would you rather win 35% w/2.5 to 3 reward to risk
---------------------
When it comes to risk and outcomes - when are you at your most relaxed & not too stressed out? All of the above are positive expectations

Not all of them. I think you meant 2.5:1?

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ZviTradingCoach

2 thoughts on the subject:

1. This first idea is not originally mine, but I've heard it from someone and it struck me as very true ever since, and if it resonates with you - great.

In many traders, the real fear is not of losing. It's only disguised as such.
What they really fear is failing as a trader.

Notice: Most people experience a "fear of losing/missing out" almost identical to that of real trading - WHEN THEY ARE TRADING ON SIM!!
They make the very same stupid mistakes, have the very same elevated stress levels etc. - even when NOTHING is on the line.
Why? because there is something on the line: their self-value, self-confidece, ego etc. THAT is what they fear losing, more than money.

Every losing streak (or every miss out on opportunity) sounds inside like "DAMN, IF THIS GOES ON I'LL NEVER MAKE IT. ALL MY DREAMS DOWN THE DRAIN".

And even more than that - It's fear of change: fear of of the realization that "I", as "I" currently am, am not making it and probably won't make it without changing something very fundemental in "myself" and how I do things. And that's a very scary realization, and hard on the ego - yet one necessary for success.

This is why "Scaling down to micros" doesn't solve your problem. Nor does sim. Nor will a funded trader program, likely. I'm yet to see a trader have fear problems when trading live, go back to sim/micros, have it "miraculously go away" and then just back to live and make it - without ever tackling the gooey stuff inside head-on and working on it.
I'm all for scaling down (no use throwing money away when things are'nt working), but that alone doesn't solve the problem, and if not done properly - may even hinder the solution.

2. The solution to trading fears is to face them head-on. ALL trading problems are in some way or other fear-based. And just like other fears in life - be it darkness, dogs or whatever - you have to do what needs to be done to get over them. No use trying to get around.

There are various techniques for this, but ultimately it's continuous self mindwork (either guided by someone experienced in both trading and mindwork, or by yourself). It requires working on your mental state AS AND WHILE you trade, as well as in REFLECTION after your trading. By working properly on identifying mind issues that arise - they may be faced for what they are and cleared. It's messy, unpleasant sometimes, painful sometimes - but worth it.

good luck!

That's some good food for thought, thanks!

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Shlekht

I was wondering if any more experienced traders have gone through the same struggles I am right now and what helped you hurdle the mental roadblock that I am dealing with right now. Any insight would be greatly appreciated!

I would suggest changing your focus.
Stop looking at losing and winning in dollar terms.
Consider a trade a win if you followed your plan.
A trade with a loss that you planned for should be considered a win.

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To add a slightly different slant to the excellent comments.... re-define the object of your fear. As you say you have a large enough pot to play with so monetary loss is not likely the cause of your fear but then it must be something else. The fear of being wrong has been mentioned by several responders and this is the most likely candidate but this can also be re-shaped with a more realistic understanding of the process of trading.

It is not possible to have a long string of consecutive winners. You are going to have a certain percentage of losing trades and that you take a hit does not necessarily mean you are doomed to fail. It is just statistics catching up with you. Early in ( or even throughout) a trading career there will understandably be insecurities and this can give an honest loss ( true to your methods) more significance than it merits.

It has been mentioned that a loss can be informative and even helpful. My methods focus on identifying a time and place where I expect a change of trend. I attempt to recognize the support or resistance developing that will turn price and often this process will take longer or be more complex than my itchy trigger finger is willing to tolerate and I get in early and take a hit. Knowing that this is a characteristic of my particular approach, the loss will give me more confidence that the event is soon to occur. I have a mantra that helps me with these trades: " If it isn't the one you think it is ( the trade opportunity setup ) , it will be the next one." There are of course trades when I am flat out wrong but those "own goals" are viewed as acceptable because they are an unavoidable part of being a discretionary trader who is an imperfect human. Discretionary trading for most of us is always a work in progress.

So, if you can re-define your expectation of what it means to be a successful trader in a way which recognizes that taking a loss is inevitable but that it is not also a commentary on your abilities as a trader, you might remove some of the edge off your fear.

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Symple

This topic is an oldie when it comes to trading, but current at any given time for many traders. Thus: Very good and always interesting topic..

What I am about to say now will probably not suit everyone and is only one aspect of the whole universe of how we humans can perceive losses and how we have to deal with them afterwards. Both statements are mainly from the psycho logic universe.

Two statements about this that I have taken with me in the past:

First statement was from a trader from Asia he once told me when it came to this topic:

"Love it or look at it positively to lose and then you have no more pain with it. However, you must then also do your homework and analyze where the mistake was."

The second came from an inventor of games. His statement was the following:

"Whenever I win a game it's great, but in most cases I learn less than when I lose a game. When I lose a game, however, the learning effect is the greatest and that's why he was never disappointed when he lost a game."

Symple

Yes, I agree with this. it's just a matter of changing the way you think.