How To Conquer Your Fear (And Follow Your Trading Plan)

I believe that I can say the following without equivocation… throngs of traders around the planet continue to do the same disastrous things over and over while continuing to expect different results. They are moving stops, chasing trades, doubling down on losers, exiting trades prematurely and just generally digging a major hole in their portfolios that they may never recover from.

The Definition of Insanity

This horrible situation has been accepted as the definition of “insanity”. In other words, by engaging in the same processes and trading mistakes consistently you will remain in that rut; you’ll remain in a trading funk because there is no way that your outcomes will change if you keep doing the same thing. Furthermore, there is something gravely amiss if you are actually expecting things to turn around without doing what it takes to make it happen.

The source of this definition came from Albert Einstein, who very astutely said, “We can’t solve a problem using the same thinking that created it.” In other words, if you want different results you must change something. But alas, change is extremely difficult for those who are caught in this precarious spiral. It is difficult due to the sheer amount of fear that is generated in these incidences.

Most people are familiar with fear. It is an insidious emotion that can stop you dead in your tracks; as in fear of pulling the trigger and taking that set-up that you identified in the price action. Or, it can cause you to impulsively jump into trades due to an intense fear of “missing out”. Of course, these are just two examples of scores of fear based behaviors that can and will get you in trouble.

Conquering Your Fear

So, what can you do about the fear that keeps you from following your trading plan and maintaining your commitments? How to overcome fear that keeps you from following your trading plan. Fear stems from a perceived threat that may or may not be real. Threat begins as a perception and a thought. In other words, when we have interpreted that an event is threatening our physical, mental, emotional, social or spiritual well-being we have given that event a meaning. Now, meaning is a crucial process that controls not only what you perceive but how you perceive it. For example, that price action is moving toward my stop and that means that I’m going to lose in this trade (the movement of the price action may or may not take you out and at this point it is only an opinion but it is often treated as a fact). In other words, the meaning here would be activated by a limiting or irrational belief about the inevitability of losing, and this in turn would prompt another limiting belief about what that says about you; i.e., “I’m a very poor trader and a loser because my stop loss was hit.” It often continues to spiral downward from there. So, what you are thinking is the genesis of the emotion that you experience…the fear.

Secondly, fear determines what you choose to do. This is where you become immobilized or act in erratic illogical ways that increase your risk and destroy your desired results. At this point it is important that you identify the thinking/beliefs that are fueling the fear. Here is an important question to ask; “What must I be telling myself or believing to feel this fear.” This introspective inquiry will help you ferret out the underlying fear based programming that created that belief and in-turn developed the fear response in the first place.

Once you have identified the limiting, irrational or negative belief you can neutralize and uninstall it from your thinking while also uncovering a polar opposite empowering belief to install and use in the future. This process is critical to successfully addressing the underlying motivations for rule violations. In order to take control here you must be willing to achieve and remain in the now. Being in the now will support your ability to be “self-aware.” Being in the moment and self-aware will help you to monitor your thinking and emotions as they occur, making it much more likely that you will notice and therefore interrupt the bad pattern of thinking, feeling and doing that often has become automatic…a series of bad habits that will continue to play havoc on your desired results.

Another critical point to consider here is that monitoring your thoughts while in the now helps you to become aligned in body, mind and emotions. If you are able to do this then you will optimize your internal resources and activate your A-Game which is where you always want to trade from. Even if you feel fear at this point, you will have positioned yourself to manage that fear and either compartmentalize it or by using a belief with which you have constructed and replaced the limiting belief with so that it no longer is a source of deviation from the plan. You could also avoid the fear – the best position to be in.

These are just a few of the ways to effectively cope with and manage fear based programming that often causes irreparable damage to your confidence and/or your account.