How to Overcome Your Hesitation to Enter Trades // Ep. 54

In This Episode

• The only cause of fear
• Simple steps to overcome your fears
• How partially automated trading can help overcome fear

Afraid of Pulling the Trigger?

We sit down to answer a listener question about overcoming the fear of taking a trade. If you're having this challenge, find out our best tips for overcoming your fear and taking a trade very time your strategy gives a signal.

Read the Transcript:

Walter:    Hi, Hugh. We have a question here, a trader has written and said, “I really would like to get to the point where I am making consistent profits and yet I am very fearful of taking a trade”. So that is the question.

My thoughts on this, I like to get your thoughts as well. When you are at a point of fear, what is fear? It is just anticipating the unknown because you don’t know what may happen. You are concerned and you might think the worst. What could be the worst possible outcome of a trade?

It could be that you lose or probably that you’ll lose more than you anticipated. You say, “I am going to put my stop loss at two hundred fifty dollars but actually I lose you know three hundred and seventy-five” or something like that. So that could be like the worst case scenario.

The antidote for fear is preparation. So that means running through your simulator Forex Tester doing your back test, making sure that you know what is likely and what is not. Looking at all that stuff and mapping it out because once you map it out guess what? It’s totally easy. Now, you know.

There’s really no unknown, once you get enough trades under your belt with the strategy, it really should not be unknown. It should be, “Well, I have a sixty-one percent chance of making a profit here. Thirty-nine percent chance of getting stopped out and around you know zero-point-five percent at a time, the market may gap over my stop loss. I’ll lose a little bit more than I had anticipated in terms of my risk.”

So those are the sorts of  situations that preparations can help you with. If I hear from a trader say that they are fearful, it probably means that they are not prepared and they do not really know what to expect. You can help that with back testing.

It also probably means that in the past you’ve had a lot of losing and why is that? Is that because you are risking too much on your trades? So even a “normal” loss is really painful. You really need to look at what your position sizing is.

If you are just fearful in general of taking a trade no matter the size, it just means that you are not prepared yet. You need to go back and you need to work through a Forex Tester. Find out what your numbers are in terms of average win, average loss, win rate, loss rate.

You need to figure all that stuff out. What your likelihood of certain draw downs are, all that stuff can be found just by preparing. So that would be my suggestion to the trader who has the fear of pulling the trigger. It could be that you have done all that and you have a low win rate, sometimes that’ll happen.

You’ve worked it all out but you have a twenty-nine percent win rate system, in those cases I’ve seen some trades successfully automate that. So that the entry is automated so that they don’t have to keep hitting the button knowing that you know they’ve got a seven out of ten chance of losing again because that can be a difficult thing to do. So those are the things that I would say about that. What are your thoughts?

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.

Hugh:     Yeah, cool. I think with what you’ve just said we cover about ninety or ninety-five percent of the fear of losing. There is a small population of traders who also have this fear of just you know, the system is not going to translate to live markets. I think those are really risk averse people in life and in trading.

To overcome that another thing to do is just take some trades like bring the risk weight down and just take trades, take trades and take trades. I think that just kind of like ripping the band aid. You just kind of go and do it otherwise you are just in your head. Saying you know, “Oh, is this going to work? Is it really going to work?” Doing weight with it is actually going and taking a trade.

Walter:    Yes, you can do that over and over again with a small account. So you have a hundred dollar account or whatever just boom, boom, boom. That is great. It is like a muscle, you are only exercising that muscle. You are taking a trade everyday or whatever and you are just risking twenty percent or whatever but you are doing it. Like you are saying, you are doing it and it is totally different when it is real money. All that is absolutely true.

Hugh:    Yeah and it is kind of like hunting or skip shooting. It might be a little intimidating to shoot a shotgun but then once you do it a few times and you’re, “Okay, I can shoot in clear vision” or whatever. I think it is just a matter of repetition.

Walter:    Have you ever done that by the way?

Hugh:    Yeah.

Walter:    It hurts when you shoot a shotgun. I was just a kid. I didn’t even know, I was like ten years old or something. The kick was crazy.

Hugh:    Once you get over it , you’ll get used to it or whatever.

Walter:    I only did it once like I said, I was only a kid and I was like I am not expecting that. I knew it would be loud but it was the kick and the thing that was itchy right here in the chest,  the shoulders you know it is crazy. It is kind of fun though. It is kind of fun actually to shoot clay pigeons.

Hugh:    I am anti violence obviously but it is kind of fun.

Walter:    It was pretty fun.

Hugh:    Alright, cool. 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.

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