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Realtraders,
Having received positive feedback on my first offering on this subject I have
been thinking further. I've also scanned the self-help books to see what is
being advised on the subject of fear. Unfortunately, what I find in these
books frequently reflects our culture's desire to avoid troublesome feelings.
Often, the advice says that fear is an impediment and just root it out and get
rid of it.
I don't believe it works this way. Fear is a valuable indicator giving
information that the trader needs. Two years ago I paper traded an optimized
stochastic system for 4 months. In those 4 months it accrued 200% profits.
But when it came time to trade it real time I was unable to pull the trigger.
Pop psychology would've had me pushing through the fear and doing it anyway.
But what I discovered under the fear was my lack of belief in the system. It
just didn't make gut level sense to me. It's a good thing I didn't trade it
real time. In the months ahead the system really tanked. It turned out it
couldn't handle the major trend changes that occurred. Two years later I now
am starting to trade another system that does make gut level sense to me.
There is no significant fear of pulling the trigger this time around, and the
system is now paying off in real time.
There are at least two possible pieces of information that our fear of pulling
the trigger can give us: 1) we are not psychologically ready to trade for
some reason, or 2) there is something wrong with the trade setup that our
unconscious recognizes. Either of these is crucial information. If there is
something wrong with the trade we need to discover what it is so the mistake
is not repeated. If there is something wrong with our trading readiness then
we need to acknowledge it and back off until it passes, or discover its roots
and do the personal readjustment necessary before resuming trading.
And how to know the difference between the two? Start off assuming both to be
true and look for the possible causes: What's wrong with this trade? Do I
really know the odds? Am I bending my systems rules? Am I taking in too much
or too little information? ... What's wrong with me? Too much stress with my
spouse or children or paying the bills? Have I done enough research to really
believe in my system? What's different now from when I've traded without the
fear. If I've never traded without the fear, then am I suited to trading?
Or, have I not really, really done my homework and my trading is more on the
side of gambling? Fear would be appropriate in this case!
My hope is that you will profit from an insightful look at the fear you feel
when you put on a trade. You might scale it from one to ten and then examine
how much fear you felt with trades that worked and those that didn't, and with
those where you followed your system and those where you didn't. See what you
can learn about yourself and how you trade. See if your fear knows something
that you don't!
Hmmm... Wonder what we could learn from our GREED?????
Psychologically,
Steve
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