In his book "Trading in the Zone" Mark Douglas says that 95% of the trading errors traders are likely to make stem from four fears.
The first and most common fear most traders are familiar with is the fear of…
Missing Out
The fear of missing out (FOMO) causes you to get into stocks early before your signal for a trade is a hit, or before a pattern presents itself.
It often hits when you see a massive runner and you just want to catch a piece of the move…
But that can lead to buying the top of a spike, entering a position without a plan, or holding and hoping for more upside when you should just cut a loser.
The only way to overcome the fear of missing out is with sheer discipline and self-control.
You have to be okay with missing a trade.
That's easier to do when you accept that there will always be another trade opportunity. It might not look exactly like the one you want to jump into, but there will be another one.
But if you blow up chasing a big runner, you might not be around to take advantage of it.
Being Wrong
The fear of being wrong is another common problem for new traders. It's what causes traders to hold and hope or add to losers.
They just can't accept that the trade isn't working or doing what they expect. They want to be right and they're willing to hold until they are.
The problem here is that holding a losing position doesn't make you right. You were wrong, you just haven't accepted that you're wrong.
Either way, you're losing money. How much you lose is up to you…
Remember, it's okay to be wrong, just don't stay wrong.
Learn to accept when you're wrong and don't take market moves personally. Just move on to the next trade.
Another reason traders hold and hope or add to losers is because they have a fear of…
Losing Money
If you find yourself in losing trades and struggle to cut losses when your stop is hit, you're probably scared to lose money.
You might have too big of a size and the loss will be too big for your account size.
Or maybe your risk level was too far from your entry and you didn't expect the stock to pull back — you thought you'd be right about the trade...
But being wrong and losing money is part of the trading game.
That's why you should never trade with money that you can't afford to lose.
Start with a small account and position sizes so that when you lose, it's not hard to cut the loss.
After a string of losses, Millionaire trader Bryce Tuohey went down to tiny position sizes and only risked $2 per trade until he gained consistency. Then he scaled up from there.
That can help you build discipline to cut losses without emotions about being wrong or losing money creeping in and tempting you to hold.
Another big fear for new traders is…
Leaving Money On The Table
New traders think that successful traders are nailing the bottoms and tops of every move — they're not.
Your goal isn't to be perfect.
Have a trading process and system that helps you capture a piece of a volatile move, take your profits when you have them, and move on.
You're not going to become a millionaire trader with one trade.
It takes years of disciplined trades and small gains to grow your account over time.
And like I always say, "You won't go broke taking profits."
Get my five tips to manage your profits when in a trade here.
It might feel like you're the only one who struggles with these fears and emotions…
Especially when you see other traders sharing screenshots of big gains on social media. But the reality is that emotions hit every trader — you just have to learn how to control them.
It might look different for everyone.
One way to get help with emotions is to join a trading community. Reach out to other new traders to hold each other accountable and come up with solutions to problems.
You can join one of the best communities I know here. I'll see you inside.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
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