Panic Is Not A Strategy For Success
There was a time in my trading, when I was a total head case. It was before I received any sort of coaching… and I had started trading real money. Money that I worked hard to get, and that I really didn’t want to loose.
It seemed like I lived in a constant state of panic. I guess you could say it was my MO.
When I would get into a trade, instead of trusting my research and technical analysis, I would panic with each tick of the market, desperately hoping it would stay in my favor. When there was the slightest indication it may move against me, I would start sweating bullets.
Maybe you can relate.
So, as I thought about it… I came to realize (thanks to a great coach!) that feeling of panic deep down in the pit of my stomach is really rooted in two different forms of fear.
The first is the FEAR OF MISSING OUT on an opportunity. When there is money to be made, I for one don’t like sitting on the side lines. So when I first started trading, if an opportunity came along that I thought looked good, and that could bring me a fat paycheck, I’d panic that I might miss it. I didn’t want to look back with any form of regret, so I’d jump in right away. This lead to compromising on some of my rules, and in some cases was the first step to taking a loss.
The second is the FEAR OF LOOSING once I was in a trading opportunity. I would get into a trade because I didn’t want to miss out, and then the trade goes against me so I’d start panicking, and jump out of the trade for fear of loosing even more money.
It is a vicious cycle. But one I was able to break when I hired a coach. You see, I realized I was going to pay one way or another: Either by giving all my money back to the Market, or by hiring somebody to teach me how to avoid it. It was my coach who helped me stop the bleeding from repeated Market Wounds.
If you have ever let panic temporarily take over, leave a comment below and tell me how you beat it in to submission…
Jeff
3 Responses to “Panic Is Not A Strategy For Success”
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A couple of years ago I was getting into trades feeling what you described, but than I decided that I would get to the root of the problem and educate myself to eliminate such fear and emotions. I started listening to Dr Wayne dyer, Dr Deepak chopra, I also read a great book called (the power of the subconscious mind) by Dr Joseph Murphy, and I have been on this path since than, and for me it has helped me get to know myself and has helped me realize that everything as we know it is nothing more than just learning experiences to get to our next level in life, and from these experiences we learn to try not to repeat the same mistakes. I learned from the book (The power of the subconscious mind) The sub mind is habitual, and that we need to replace it with good habits and once we repeat these good new habits, than they become the new norm.
Good advice.I wrote on this subject almost exactly a year ago adding that the need for security enters into the mix and may be the underlying driver of the fear. It may be of interest to you and your readers. http://daytradingwithanni.blogspot.com/2009/01/fear-and-greed-or-is-it.html
And thanks for the Twitter visit.
I think we all went through those trading phases when learning the ropes.
I for one dropped my fear and greed when I set a plan for what I wanted from the markets. That is, I decided that I wanted a specific profit target and no longer needed to swing for fences or squeeze every nickel from every trade.
With stops and profit targets adjusted to the current market, how much I would “take home” or “pay” was now simply a factor of position sizing. If I need more cashflow; I up the capital balance and thus the position sizes I take on.
Thus, my risk remains the same and my target remains the same relative to te market.
Don’t have the extra capital? Just plug away with what you have because at a 5-10% average per day return it doesn’t take long to accumulate a balance that could accommodate anyone’s income requirement.
Now I trade a “set it and forget it” strategy. Once the trade is in, I shut off the computer and go do something else for fun or profit.
It’s much easier that way because I know the outcome(s) in advance.
Your option strategies are very similar in that respect and I use them exclusively for my equity trades.
So, I control fear and greed by establishing pre-determined outcomes, set the trade, then go have fun at something else while the market moves the way only it can predict.
Once in a trade, risk is the only thing I can really control. Controlling risk and accepting set profit targets leaves no place for fear nor greed to take hold.
Dave