How Fear Affects Your Trading by Jenny Taylor

There are different emotions when it comes to trading, however most of us struggle with fear, rather than with greed. 

How can we overcome the fear of trading in the stock market and taking expenses on plays? 

First off, start with a small amount of money, so that if you lost it all, it wouldn’t hurt you. Begin with “practice” money until you feel completely confident in your understanding of the system. If you follow this rule, it won’t matter if you do lose the small amount of money while you are practicing what you’ve learned. Even if you know the subject matter well, it’s hard to be successful right off the bat. Just like an athlete knows how a sport is played, knows all the rules etc, one cannot expect him to be successful at playing just because of the knowledge he has. Just like him, we must practice, apply what we learn, and hone our skills to become the best of the best in the athletic world, or in the stock market world in this case. So, give yourself some time to practice, follow the rules, use small amounts of “practice” money, and hone your skills until you feel confident with the system.


Second, you always need to know what your ‘game plan’ is, so to speak—what is your plan if the play does not move in the desired direction?  Will you use a percentage for your stop loss?  Will you place that stop loss on the trading floor? Or will you use an alarm to notify you if the stock starts moving the wrong direction so that you can watch it to decide if it is time to stop it out?  If you have learned the David Mitchell Stop Out Rule, will you apply that?  Choose your game plan, and then stick to it no matter how much fear is gripping you.


Having the rules in place and knowing what your plan is if the stock moves the wrong direction is the only way to control the fear. It will still be there, but it does not have to control you.


When I learned the David Mitchell Stop Out Rule and started applying that to my stock and option trading, that was when everything clicked for me. Fear no longer controlled my trades, which is what had been happening before that.  I knew what I needed to do no matter what and I stuck with the rule. I quit stopping out too early just because the stock was moving down just a little bit, I quit letting the 2 minute chart scare me out of plays.  I started following that rule instead and the rule helped me control my fear.


So be encouraged. If fear has been stopping you from making the money you should be making, these are simple ways to change that. Not to get rid of the fear, but to trade in spite of it. Apply your stop out rule AND stick to it, and you will control your fear.