In This Episode
- Why being afraid to pull the trigger is not about personality
- How our friend Alex developed almost perfect trade execution
- The biggest reason that people are afraid to enter a trade
What to do if You're Afraid to Trade
Some traders hesitate before entering a trade.
Why?
In this episode, we break down the reasons for this and how to overcome them. We also talk about misconceptions that traders attribute to not being able to pull the trigger.
Read the Transcript:
Hugh: Alright Walter, here’s a classic one. If you are entering a trade, some people are afraid to pull the trigger. What are some of the psychological things you see behind that and some fixes?
Walter: Well, it’s kind of like how I think about sports, specifically coaches. I like to watch the NFL. What’s interesting in the Gridironist, they call it here in Australia. Gridironist, sounds so much more manly, Gridiron.
The coaches are always talking in the NFL about how being prepared and even the players will talk about when they move from one team to another, “Wow, things are different here. Everything is so accounted for and they’ve considered every scenario”.
I think that’s kind of the way what coaches are meant to do. It’s to provide this framework for the players. So no matter what happens they’ll know what to do, sort of thing.
In trading, it is the same way because if you are not prepared, that is when you feel uneasy. So you tell me, if I ask: if you are to take a strategy and Strategy A: you’ve back test it. You’ve taken nine hundred trades in it. You know the numbers and you go, “Okay, I am going live today.”
Versus, you have a strategy where you’re kind of just messing around with something in the last couple of hours. Looks pretty good on the charts, let’s go for it. Do you know what I mean? Which one are you going to stick with after you’ve had nine losing trades in a row? It’s obvious.
Hugh: It’s like watching YouTube videos on how to ride a bike for the first time then you go ride the bike and then you go fall on your ass.
Walter: It’s so funny you said that.
Hugh: At least you’ve gained confidence.
Walter: Of course. That is exactly what I did last week. I was with my daughter actually. We were looking at YouTube on how to do, how to roller skate because I didn’t know how to teach her. I just fell on my butt as a kid like everyone.
Hugh: Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.
At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.
So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.
Walter: She’s really keen on the road. She’s been talking about it constantly. So I said, “Okay, we’ll go to an empty parking structure where there’s no cars or anything with a nice smooth pavement.”
She was having trouble and so I said, “Let’s YouTube it”. So we YouTube it. We’ve got a couple of tips but you’re right. We were still falling all over the place. It was still so terrible. Of course, that is the same thing with trading.
So the goal really I think as a trader is like in sports or in battle. I kind of hate the battle analogy because it’s so different but real life is different so like you know going into war or something. I know people say that with trading and businesses and stuff but it’s not to me.
It’s totally different but anyway, if you are so prepared, you’ve got your numbers, you’ve got that experienced, you’ve traded in sideways markets, up markets, down markets all that stuff, you are actually getting a half a bit more of stamina than that trader who’ve just kind of pull that stuff out of his behind, last afternoon.
So that is under your control. It is not like a personality dimension where you say, some people are very conscientious and everything has to have its place. Other people are open minded and can experience new things and other people are closed minded and want to have a routine.
It is not like that. It’s the thing that is up to you like you decide. How experienced are you going to be in your strategy before you risk real money and how much do you know about it?
Do you know what the probability is at nine losing trades in a row? Do you know what that is for your strategy? If you do not know that you have a twenty-nine percent chance of having nine losing trades in a row then you might think that something is broken.
So there’s a lot that goes into being prepared. To me, that’s why you would be fearful. The reason why you have fear of taking a new trade even though you have a solid signal is because you are afraid of what is going to happen.
Why are you afraid of what is going to happen? Well, because of what happened in the past. I have a bunch of losers in the past. So the question is, do you know this is normal based on your preparation? Or, do you just think you are not prepared enough. So you don’t know. You think, this is it. It’s broken.
Hugh: I think it’s also worth mentioning sometimes when you go live with it, maybe you’re taking too big of a position size. If you just scale the back a little bit sure you won’t make as much but then you won’t actually take that signal or anything, right?
Walter: Yeah and that’s how our friend Alex in the UK, that’s how he got really good at trading. He just risked a really, really tiny amount. He’s like, “Dude, I had a perfect execution”. He never had any problems. He literally trained himself to execute a strategy flawlessly because he’s like I’m risking a quarter of one percent. What can possibly go wrong.
Hugh: That’s a good point. Thanks, Walter.
Walter: See you.
Hugh: All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.
Enter the Monthly Contest
We give away a trading prize every month, so be sure to enter to win.
You can win by doing one or more of the following:
Each action counts for one entry in the month that it was posted. We will pick a winner at random from the entries that month.
The giveaways can include books, coaching sessions, trading tools, or surprise gifts.
It will usually be something that will help you improve your trading psychology.
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