Defeating Fear in Trading and in Life
A Step-by-Step Guide to Stop Fear From Deciding For You
Fear dominates traders.
It’s responsible for all the toxic habits in the markets.
Anger, frustration, resentment, guilt, a lack of confidence… are all emotions that come from fear.
If you wanna stop fear from deciding for you, you need to understand its origin.
Fear is the defense of the ego. Your ego is nothing more than your beliefs about yourself.
There are beliefs that are stronger to you than others.
For example, you might not hold a strong belief about what’s the best technique to tie your shoes but maybe you have a strong belief about how one should behave to become highly successful.
The stronger beliefs are the ones that most define you.
Every time someone questions one of your beliefs, your identity is put into question. This triggers fear of death - fear of losing your identity.
You might be thinking this is too extreme so let’s take a deeper look:
The major human instinct is the survival instinct. In every life situation we decide according to it - will I be safe or not? It’s easier to walk through the safest path - the path of certainty.
Because your beliefs build your reality, when they get challenged, you feel like your life is in danger.
I delve deeper into the Ego-Fear connection in my E-Book: Building The Mindset Of a Trader”.
Think of the last time you overreacted toward someone or something.
You do it when one of your beliefs gets threatened.
Imagine a trader becoming extremely angry after three losses in a row.
On the first loss, he was able to remain calm but the third one pushed his buttons.
Why?
The first loss was still tolerable by his belief system. It didn’t threaten his ability to be the trader he wants. However, the more losses he has the more his belief “I’m a good trader” gets put in danger.
After the third loss in a row, he gets more convicted about his trading idea and ends up oversizing. This is an attempt to mitigate the pain of his belief being corrupted. It’s like fighting reality. How many times didn’t you do this?
When an outside fact doesn’t fit your belief system, you’ll do everything to distort it. The conviction is a way you find to renounce the facts and protect your identity! It’s a defense mechanism!
So how can you deal with the fear?
In this article, I present you with a step-by-step guide to not letting fear interfere with your trading decisions.
You’ll finish this article knowing exactly what to do the next time you face fear in trading.
Let’s go for it!
Step 1: Detach From Your Mind
When you merge your sense of identity with your beliefs, thoughts, and emotions, you’re creating the best environment for fear to survive and dominate your actions.
When the price goes against your trade, you feel it’s going against you.
When you start to feel angry you see yourself as an angry person, so you act like one by revenge trading;
When you lose in the markets, you feel like a loser so you keep making mistakes that lead you to more losers;
It’s a negative circle: you believe your thoughts are You so they become your reality!
The trader who understands that these are only transitory states of mind is a confident person.
And in confidence, fear can’t survive.
Your emotions, thoughts, and self-talk are not you! This is the first law to overcome fear. Observe your thoughts from an observer's perspective and see them as temporary states of mind as they are. Don’t let them construct your identity.
Be the observer the next time you find yourself overreacting to a trading situation.
Your job is to get curious about your mind and connect the dots.
Step 2: Listen To The Fear
What is the fear telling you to do?
There is always more than one option available to choose from.
The problem is that traders only tend to see the option guided by their emotions. This leads to a victim’s mindset: “At the time, I couldn’t help myself but do that”; “My emotions took the best of me”.
But there’s also a second choice: the one guided by your deepest values. Most of the time, this option doesn’t agree with the emotions we’re experiencing at the moment.
Above all else, you always have more than one path. Engraining this belief helps you take responsibility and be in control in every situation.
Once you do this, you win.
Step 3: Act In The Present
Fear only exists when we let ourselves worry about the future or be affected by the past.
You act based on fear when you’re too fixed on past mistakes or events - a loss, a missed trade…
You also act on fear when you’re painting an expectation for your future and you feel the pressure to keep up with it. It happens very often when traders set money goals. Fear kicks in and leads them to make mistakes. After the mistake, they feel angry and guilty which leads to revenge trading. These traders might blame anger and might even say they suffer from tilt but in fact, it all started with a fear of under-achievement.
If you’re present and mindful, fear will dissipate because you understand that the whole purpose is in the moment of now.
This is when you go from self-centered: “How can I meet my emotional needs through this trade?” to market-centered: “What is the market telling me right now?
Learn to live the present moment outside of the charts, and you’re more prone to trade the market in front of you, not your emotions.
Your emotional flaws were already there long ago before you started your trading journey. Trading just revealed them. So it’s outside of trading that you have to start working.
Start practicing meditation.
If you’re not a fan of it, here’s an alternative I describe in this short article.
Step 4: Building a New You
Given that fear exists to protect our ego, how can you trade egoless?
As much as you want to remove your ego from the markets, you need an ego to trade.
You’re a person and you can’t disassociate from it.
But, you don’t need to remove your ego from trading when you can widen your sense of identity.
What about creating a new belief stating that nothing is yours? In the sense that your mind material is not fixed nor does it define you!
When you build this belief, there’s no opinion, trade result, or market move that can hurt your ego.
Notice that your range of possibilities increases.
Even if you lose, you’ll be safe because you’re more than a loss.
Even if you have a losing streak, you feel safe because it doesn’t define you as a trader.
Even if you’re wrong, it’s fine because one trade doesn’t define your abilities.
You start to be okay with what used to make you overreact.
This is not because you’re removing your ego from the game but because your ego is expanded.
*Your overreaction to certain situations in trading comes from past events similar to those you experience in the market. These events had a big negative emotional charge and cause you pain. You end up repeating the same trading mistakes as an attempt of your body to recall the old situation so it has an opportunity to experience the pain again and heal itself.
Practical Activity: Expanding Your Identity
So now, as always, I have a challenge for you:
Write down on a piece of paper 50 sentences starting with “I am” and then complete them. Only choose positive affirmations.
Once you get your list done, add the word “because” at the end of every sentence.
Then, add a piece of logic to complete your sentence: an event of your life that proves that what you wrote is true.
For example:
I am brave because last week I stood up in the middle of a group of people and disagreed with their opinion and explained why.
I am confident because I know what I want - being a profitable trader - and I do what it takes to get there.
I am curious because I’m always interested in knowing others’ opinions and I am open to changing mine.
Once you got your list complete, save the piece of paper.
Read it before you go to bed and before you start your trading session.
Rediscover what you’re capable of which is almost always much more than you think.
You have had the power to redefine your identity!
When you catch yourself affirming things that limit you like “I’m not made for this”, become aware and interrupt this pattern.
If you’re suspecting this won’t work, do it anyways for the sake of taking conclusions. Do it for one month straight, every single day.
This will help you remove your fears in trading and thrive in an uncertain environment because in the end: everything is fine and you survive even in the toughest market situations.
With love,
Sara
Whenever you’re ready, there are 3 ways I can help you:
1- Learn to use emotions in trading with my E-Book here
2- Learn my intraday trading system here
3- Elevate your trading performance with 1:1 coaching here.
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If you’re interested in elevating your trading performance and growing your trading returns, fill out this form and book a call with me.
Good points Sara! Fear is perhaps the strongest emotion. But it can be defeated. Not by us trying to shrink it, but by us expanding, just like what you said