One of the toughest obstacles to overcome in Forex trading is the “fear of failure”. The good news is that when you are just starting out in Forex trading fear of failure could be a good thing.
Now I know you may have heard that all fear is bad and will keep you from achieving your goals. For the most part you would be right on track, but let’s not forget that fear serves a purpose.
You see, it is natural for us to have a certain level of fear of the unknown. One of the greatest fears humans have is fear of death. Most people fear death because they don’t know what happens
to them after they die. This is completely natural.
Most beginning Forex traders have some level of fear of trading. They have this fear because they have a fear of the unknown; they don’t know whether they will make money or not. In fact, most
beginners fear losing money.
On the surface a beginning trader’s fear of losing money may seem like a negative thing. That all depends on how you look at it. It can be viewed as negative if the beginning trader’s fear is so
great that it keeps them from moving forward. On the other hand, a beginner’s fear of losing money is a positive thing. Why? Because for those traders their fear is founded in their understanding
of their lack of preparedness. Whether they want to admit it or not, deep inside they understand that they should not start trading until they:
Have money they can afford to lose – You can’t really trade effectively with “scared money”. Scared money is simply money that you can’t afford to lose. An example of this is if you take money that
you would normally use for the mortgage payment and start trading with it. It is quite logical to assume that someone trading in this foolish manner would expect to make enough money to cover the mortgage payment when it comes due. Anyone trading with money they can’t afford to lose should be scared because they are setting themselves up for failure.
Know what they are doing – It is quite natural to fear doing something that is new to you. This is actually a positive rather than a negative. This is the type of fear that can keep you from jumping into Forex trading in an unprepared fashion. In the long run this can save you a great deal of time, money, and grief.
Once you have prepared yourself to trade successfully, you may still have certain fears. One of the biggest fears for beginning traders who have already started to trade is the fear of losing trades.
It is human nature to want to be right and to not want to be wrong. In fact, if we had our way we would all simply choose to be right all the time. Unfortunately, this is not how things work in the real world, especially in the world of trading.
The fear of having losing trades is one aspect of trading that has derailed many new traders. This type of fear will have a negative impact on a trader’s level of success. Unless a trader overcomes the fear of losing trades, they will not move forward. Here’s a breakdown of how a fear of losing trades can cause a trader to simply quit trading a good strategy.
1 – Trader takes an interest in Forex trading
2 – Trader begins to investigate Forex trading
3 – Trader begins to learn about Forex trading
4 – Trader makes the smart move to educate themselves even more for a deeper understanding of Forex trading
5 – Trader opens a demo account to test out their trading ideas
6 – Trader has success with the demo account over a period of time and decides to open a real-money account
7 – Trader has initial success and their first 4 trades are winners
8 – Trader has the inevitable losing trade – The trader doesn’t feel really bad about this trade because, after all, it is just one losing trade
9 – Trader has another losing trade and then another for 3 losing trades in a row
10 – Trader starts feeling uncomfortable about the 3 consecutive losing trades
11 – Trader has another losing trade for a total of 4 consecutive losing trades
12 – Trader is not happy with the way things are going and is doubting the validity of their trading strategy
13 – Trader’s confidence is shaken and the decision is made to “wait and see” what happens next
14 – Trader has another losing trade and after 5 consecutive losing trades they are now confident that their decision to “wait and see” was the right one
15 – Trader watches as their strategy produces 3 consecutive winning trades. In this scenario these 3 trades would have taken the trader’s account balance to a new equity high
16 – Trader becomes disgusted and eventually decides to abandon a perfectly good trading strategy
17 – Trader begins their possibly never-ending search for the “perfect” trading strategy
In the above fictitious scenario, it wasn’t the trading strategy that failed the trader, it was the trader that failed the strategy. The trader let their fear of taking losing trades block their effectiveness as a trader.
As we can see, fear of failure can have both positive and negative consequences. Fear that keeps you from trading because you know that you are not prepared to trade is a good thing. On the other hand, fear that gives rise to negative emotions that keep you from moving forward is a bad thing. Until you have confidence in your proven ability to trade, your fear can serve you well by preventing you from trading in an unprepared fashion.
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