Who doesn’t dream of making their fortune on the markets and retiring early? Whether you dream of living the luxury lifestyle or finding financial security for your family, the idea of making easy money and converting your present-day situation to a life of plenty is certainly very alluring.
Anatomy of fear
So what’s stopping you making that first move? The answer is fear, but you’re not alone. All investors, timers, and traders, however successful, experience fear.
Poor company performance, mergers, political instability, and weather can all make investors nervous and cause the value of assets to fluctuate. However, successful investors are not fearless. They have trained themselves to better handle those fears. You can too.
There are five basic fear factors that come into play. Let’s break it down.
- Fear of losing
This is the most basic instinct. We are afraid that we will make the wrong call. Aside from the money, winning at anything makes us happy, while losing makes us sad. The trouble is, this emotional fear of losing will cause the investor to hesitate at critical moments.
This causes the investor to mess up their timing. Whether you are moving funds between asset classes or buying stock, timing is everything. The investor second-guesses their strategy at the crucial moment and fails to press go on the deal, making a loss.
The issue here is allowing emotion to act on us in the first place. The investor should be focused on solid timing strategy, not vague feeling. Let others act on fear — you will act on strategy. Strategy allows you to weather emotional markets. Or, in other words, feel the fear and make the trades anyway, because you know your timing strategy is sound.
Psychology helps, too. An investor should be mentally prepared to take a loss. If you consider it part of the cost of doing business to take an occasional loss, it becomes less threatening. When coupled with solid strategy, this means that when you lean into a position, instead of worrying you are hurtling towards a potential loss, you can be confident you are on the brink of a success. This is what will help you pull the trigger when you need to.
- Fear of being wrong
It’s easy as a novice to compare yourself to someone like Warren Buffet and say, “Well I’ll never get to that level of expertise.” The truth is, everyone starts out somewhere, and everyone makes mistakes. Even the most wealthy investors have made some bad calls and lost money.
What is the difference between the wealthy investors and you? The wealthy ones were not afraid to be wrong on individual deals. They are taking a long view, watching their performance over time and not worrying so much about individual positions.
In other words: you will win some, and you will lose some. A successful strategy delivers an overall win over time. Today, getting started trading currency, crypto, bonds, and stocks has never been easier. Online trading platforms such as iq option login help take the doubt and the mystery out of it, putting the power right in your own hands.
If you cannot stand to be wrong about every single deal, then you are now trading from an emotional place rather than a strategic place. And trading from emotion will cause you to lose more often than you win.
- Fear of missing the trend
This is how bubbles happen. Here’s what’s going on with that. Trends will begin, and they will have their early adopters — those who took an educated gamble at the start —, and they will have their skeptics. The adopters and the skeptics both have sound strategies for investing or passing.
However, as the trend rises, something else starts to happen. The higher the trend rises, the more of the skeptics are tempted to buy in. Not because they suddenly have a belief in the stock but purely because they worry, they are missing a trick.
If you think about it, this is a highly dangerous position to take. It’s dangerous because, just like fear of making a loss, fear of missing the curve is an emotional fear of missing out. At this point the trader is not investing for sound reasons, but because they can’t bear the thought of others making money without them. In other words, the investor abandons sound strategy and rolls with their emotion.
The key to handling this fear is bringing yourself back to sound timing strategy. If you’re thinking of making a deal purely out of fear of missing the curve, then your timing is already too late.
- Fear of missing the peak
A good strategy spreads its bets across all rising trends. Past performance suggests that once a genuine trend gets going it lasts longer than most people expect, so the winning strategist will stay with the trend all the way up. Only once it starts to decline should you exit the position, because it’s far better to be certain the trend has peaked than to exit too soon and miss significant profits. This does occasionally mean waiting too long on some false trends and making the occasional loss, but as we have seen above, the key is not to sweat individual trades but have a successful overall strategy.
- Fear of fear
As you have seen, winning investors are not those who have no fear. Winning traders understand fear and manage it. Successful investors move from a psychological pattern of fear to one of confidence and combine this mindset with solid strategy.
When markets become emotional, solid strategy allows you to hold your nerve while others panic and make poor decisions. This means taking positions with accurate and precise timing. The unsuccessful traders are those who allow fear to sit in the driving seat and make the decisions for them.
So while it’s normal to have fears, the key is not to let them control you.
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