Trading Fear: The Exact Steps to Overcome
I often send out an email asking traders what the biggest trading fear is holding them back from achieving their trading dreams and goals.
I love working with you and helping you overcome the different fears and problems that are holding you back from taking the next step, so that you can overcome any hurdles that may currently be in the way of achieving your trading goals.
When I send out this email, asking traders what their number one fear is, I get a wide range of really great responses as to why traders are not able to just take that next step into becoming consistently profitable, and the major fears they are struggling with in their trading right at the moment.
Without a doubt; however, the biggest fear I am being told by traders is that they are just plain scared to lose their hard earned cash, and to be quite honest, aren't we all scared to lose our money trading in the markets? And, the answer is Yes… until we build our trading edge and change our mindset.
There is One Big Difference Between Trading and Gambling – What are You Doing?
Once I started digging a little deeper into these fears, I began to notice a recurring mistake time and again that was being made.
A lot of traders are gambling, rather than trading Forex as a business. Forex is a business, just the same as any other. The only reason trades should be entered into it is to make a profit.
Whilst you may enjoy trading, and trading may be your passion in life, this joy and happiness that you gain from trading is a by-product from making trades or rather, it should be a by-product.
Retail traders (when I refer to retail traders, I mean those traders who are not professionals) enter trades for many reasons, and many are not great. A lot of traders have issues going on outside of trading that they let affect their trading, which effects their results.
For example, these traders may enter trades because they are bored and they want entertainment, they may enter trades because they are sad and they want the market to make them happy, or they may enter trades because they have just lost a few trades and they want to win back their losses to feel good again.
These are all trading decisions based on emotions and not on what is best for the business.
What is the Difference Between Gambling and Trading?
The difference between being a trader and a gambler is very simple and incredibly important.
- A trader is someone who has a clearly defined edge over the market. The trader will only ever make or enter a trade when their edge is present and the trade has the potential to make them a profit, so that their edge can make them money over time
- A gambler is trading on a live account with real money, but has no idea if they are profitable, has no idea if they have a successful strategy, and has no idea if they have an edge over the market, and so every trade is a bit of a guess and hope.
Just to expand a little further on the definitions of what a gambler and trader are, I think it is pretty clear on what a trader is.
He or she has a profitable edge over the market. They know that the method they are using works and is proven to be profitable. They do not have doubts about if what they are doing will work.
This means that even if they go through a string of losses, they do not worry because they have confidence that over time the edge will play out and they will make money.
The gambler does not have any of this. The gambler is literally gambling, and this is a HUGE proportion of the market, and more and more enter everyday.
The gambler thinks they are trading, but in reality they are using a live account with real money because they want to make a lot of money fast.
They huge problem is that they have no idea if they have an edge over the market. They have no idea if the strategy or method they are using is profitable or successful, and so every single live trade they take is the same as gambling. They may win some and get excited, but really they have zero idea if what they are doing will work long term.
They may as well be down at the racetrack throwing $50’s at the bookie because that is the same chance they have of making any money. I am not joking.
This trader has all of about zero chance of beating the trader sitting in the other corner who has taken their business seriously, got an education with a solid trading method, has an edge over the market, and now runs a lean business.
Who is going to take money from who? Pretty simple right? And who do you want to be?
Obviously, you want to stay well away from gambling and be the trader. You only want to trade when your edge is present and that is exactly what we are going to talk about.
Changing Your Mindset – Are You Risking Too Much?
If we are to make money out of trading, then we have to risk it. That is how it works. The most common fear however, is risking our hard earned money. The most common reason people don’t like risking their hard earned money is for the simple fact that they are just not ready to risk it in the first place.
This causes all sorts of doubts, worries and fears. A huge proportion of these emotions arise because the trader is gambling with a system or method they have no idea if it works or not. They get into a trade and immediately make trading errors that cost them money like cut their trade too soon because they are worried that if they don't they will lose more money, or they don't give the trade time to move into the profit target.
Traders are quite often feeling this massive fear or anxiety because they are trying to risk WAY TOO much. They are profitable and have an edge, but they are risking money they just cannot afford to lose like their rent money or their next mortgage repayment, and if they lost it, it would really cost the house budget or they are risking real money way too early before they are ready to.
Should You Start on a Live Account?
Inline with what I have just discussed above about gambling, trading with real money too quickly is why traders feel the overwhelming sense of “fear” that they are going to lose when entering trades. This is not a good thing when traders are trying to learn a method and become profitable traders.
I have read and heard all the hoo-ha about “You should trade with a live account with real money, so that you experience the live markets”, etc,. The fact is, there is a plenty of time for the live markets and gaining the experience in the live markets. The markets are not going anywhere and there will be trades tomorrow and the next day.
You DO NOT START in the live markets, blow your account, and then reassess what went wrong.
There is absolutely no reason to lose even a cent of real money in the markets whilst learning; not even a cent. What you should be doing is using your Demo charts to become a profitable trader with your method.
You should be using this to build confidence and faith in your method, and to build chart time. At the same time, you should be storing away every penny and dime into your live trading account that you have.
Get a Free Practice Demo Account Here
Students I have taught I advise not to move from their demo accounts until they have logged three months in a row of profitable trading. That is in a row, not just random profits.
Why? What does this do? It changes your mindset completely from being the gambler, to a trader. All of a sudden, you have faith and confidence in your trading method. Whereas in the past, when you had a loss, you would straight-away have doubts about your method. You would start to ask questions if the method or strategy actually worked. You would start to change things and change your method because you really had no idea what was profitable anyway.
Now that you have months of proven results and you know within yourself that YOU can actually do it, when you have a string of losses, you shrug it off. You now know that your trading method works because you have built confidence in it.
When previously, doubts would have creeped in after a string of losses, now you just keep pulling the trigger and keep the faith. This is a massive change in both your mindset, and how your trading results will look.
The Major Step to Beating Trading Fear
The step by step approach, from demo account to profitable live account, is the major step that you need to take because when you have a really good education, you have strong faith in your method, and you have an edge over the market to which you can build long term success.
I highly encourage you to find a proven method that suits you, such as price action trading.
Stick to that method without chopping and changing every two weeks.
Learn and study as much as you can about that new method in order to start creating an edge over the market whilst at the same time putting into action what you are learning on a free demo practice charting software, such as the free demo charts you can download here.
Go through the steps we have discussed in this lesson today to move from the demo account to the live account, and don’t worry what others say.
I would love to hear your comments and questions about what your biggest fears are, how you deal with them, and do you have any tips for others?
Joshy smart says
I started with demo, then I jumped to real with the mindset that I’d experience the live markets real losses with emotion..
I learnt my lesson when I almost blew my account. As you have rightly said, I was gambling.
Fear drove me back to demo because I wanted to be a real trader. I’ve read lots of book, and joined this awesome site: and am practicing price action.
I now have R:R on my demo account I treat it like my real money because my success or failure is equivalent to what I’d have done on my real account if I was still on it.
Some days can b rough makes me doubt if anything actually works… I’d never give up no matter how long it takes.
Thank you Jonathan
Johnathon Fox says
yes you are right; demo only works if you use it correctly and practice to be a winning trader.
If we practice on a demo making rubbish trades and managing in a manner we would not with real money, then we are practicing to lose and if we are losing on a demo, then this wont change on live.
All the success,
Sandi Rosenau says
It all makes perfect sense. Once you have given time with a demo account, you can see where your areas of more training is. You will be able to work out your fears. I found that when you use a demo account like the money is real and you trade with the proper rules in place. It will prepare you for a live account, with good money management in place. These were good lessons. learning to read charts is o important. I am just starting to understand price action trading. I will be using a demo account until, I feel ready to trade live. Thanks for you information.
Johnathon Fox says
yes; when you know you can make money on a demo it kills doubts and builds confidence in what you are doing so that when you actually trade with real money you don’t continually second guess yourself.
I’ve been following your guidance on Price Action trading for about 9 months now with great success. The biggest fear I had was knowing it would take a strong willpower to follow the trading strategy rules and not veer from them. Only by sticking to the rules would I be able to maintain consistency in the inconsistent environment of the Forex market. Staring up a huge mountain of learning, I chose 5 PA indicators and looked at only the major pairs. I set up a demo account and tried as hard as I could to only trade those setups – in order to test the PA theories. I noticed that when I stuck to the theories, my winning percentage was MUCH greater…which helped me to stick with the strategy. Watching my lot size (around 5% of my account total for each position), I was able to double my demo account in a few months. So I started a live account with minimal funds in the hopes of doing the same. So far, I am up 250% in 3 months! Again, it has taken consistency and determination to A) stick with the strategy and B) follow through with a small account in order to “test” the PA theory. The worst week I have had thus far was two weeks ago when I only gained 2% for the week.
So, my fear was that I knew it would be a hard and long road to train myself to only trade when I see one of the 5 setups at or near support or resistance. It was hard to sit on the sidelines when none of the setups I was looking for were present. Now I am adding to my account, so my weekly gain targets are increasing.
Anyways, great post and great site! Thanks for sharing your price action strategies and theories. They are definitely working for me!
Johnathon Fox says
Great Stuff Shannon!
If only I could bottle the discipline you have shown in your trading and give it to all traders, then the results would FAR, FAR different!
But traders don’t want to do the hard yards and get a proper education like you have. They would rather blow a few hundred bucks in the markets, then learning how to trade properly. They don’t want to trade a demo and become profitable first.
This means that when they get onto a live account, they have doubts about the method they are trading with and when they have a few losses they will crack and it will all go to poo because they don’t have any confidence in what they are doing. Because they don’t know if what they are using actually works over the long term or not they will make all the emotional errors that traders are prone to make when you are trading only for the short term and not for the longer term edge as we teach trade to trade with here.
Once again great work Shannon and keep it up!!!