In today’s post, I’ll show you the top 7 fears of traders. Then I’ll show you how to break the grip of these fears in order to become a more successful trader.
In his first inaugural address (1933), Franklin D. Roosevelt uttered the now-famous line, “The only thing we have to fear is fear itself.” He went on to show that the struggle to climb out of the Great Depression was like fighting a war.
Aren’t these ideas true of trading as well? Traders are in a daily battle to come out on top of the market. And they must overcome their own fears to succeed.
FEAR #1 – SLIPPAGE
Traders are afraid their order will be filled at a significantly different price than when they placed the order.
If this fear is stopping you from trading, try thinking of slippage as a cost of doing business. It’s going to happen once in a while.
But if it’s happening to you all the time, there are two things to check.
First, if your computer is more than 3 years old, your hardware could be to blame. Please download our free Guide to Trading Computers and see how your setup compares to our minimum recommendations.
Second, check that your internet speed is up to snuff. Our free guide will cover this as well.
FEAR #2 – SELLING TOO SOON
Traders are afraid of missing out on the maximum possible profit because they sold before their stock reached its peak. Truth is, it’s just luck if you manage to sell at the absolute top.
The most successful investors – people like Warren Buffett – focus on buying at one price and selling at a higher price, without worrying about where the stock will go after they sell.
You’ll make your brain happier by taking the small but sure profit now, rather than risking it all to make a killing. As the best traders know, you’ll never go broke taking a profit.
FEAR #3 – BUYING BEFORE THE BOTTOM
This is just the flip side of selling too soon. Traders want to get in at the lowest possible price in order to end up with the maximum return. Unfortunately, it’s a statistical crap shoot to hit the exact bottom price.
We recommend having a plan for buying and selling and then sticking to it. For more help in planning your trades, check out our free e-book: Ultimate Guide to Trading Stocks.
FEAR #4 – MISSING OUT
Traders approach their fear of missing out in one of two ways: they hyper- (over) trade OR they become paralyzed and hypo- (under) trade.
In the first case, they take too many trades because they don’t want to miss out on a good opportunity. In the second case, they sit and wait on the perfect opportunity – which never seems to come.
The solution is to have a trading system that tells you why and when to buy and then tells you why and when to sell.
Our free e-book: Ultimate Guide to Trading Stocks will introduce you to the system we’ve used successfully for years.
Of course, there are other successful systems. Whether you adopt ours or not, I think you’ll find it interesting to see how we’ve laid out a system to avoid both hyper- or hypo- trading.
FEAR #5 – LOSS OF INTERNET CONNECTION
Losing your internet connection is a very real possibility for any trader. Fortunately, this situation can be handled with a little advance planning.
The key is to have a secondary internet connection ready to go. This could mean learning how to put your specific smartphone into tether mode, getting a mobile hotspot (like Verizon’s Jetpack), or signing up with a second internet provider.
But don’t just set up the secondary connection. Make sure you have a written procedure spelling out how to use it. Otherwise, when the time comes, you’ll waste valuable time trying to remember how to use the backup.
FEAR #6 – LOSS OF EQUIPMENT
Even the best computer hardware can be brought down by a lightning strike or other power surge. Even the best hard drives do fail from time to time.
This can be a major nightmare for traders who lose not only their hardware and their files but then lose trading time while they recover.
The first line of defense for traders is to have a backup power supply with a built-in power conditioner (to protect against surges).
The second line of defense is to back up your files nightly. At a minimum, back up your files to a (mostly free) service like Dropbox. But also consider a paid service like Backblaze or Carbonite. For a small monthly fee, they will create a complete mimic of your hard drive.
FEAR #7 – MISSING A TRADE WHEN YOU’RE AWAY
Traders often feel tied to their office and don’t want to travel for fear they’ll miss a trade.
Fortunately, most trading platforms (such as TradeStation) have solutions to this problem.
One solution is to export/import your user preferences from your desktop platform to your mobile platform, so your mobile setup is exactly the same. You’ll be able to keep trading without missing a beat.
Also, many brokers offer a mobile platform, suitable for tablets and smartphones. If you go this route, just be sure to try it out before you leave. In fact, I’d suggest trying it out a couple of weeks before you leave. Get comfortable with it before it’s your only option.
MY BEST ADVICE
I can sum up how to get over your fears in 2 words: Be Prepared. If you have a system or plan in place and documented what to do in every possible situation, you’ll always be in the best possible shape to get through it safely.
There are more trading computer tips like this in our EZ Trading Computer’s Buyer’s Guide. Check out: “How To Buy a Trading Computer” e-book.
We hope today’s Quick Tip helped you. If you have any questions, you can always give us a call at 800-387-5250.