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How To Overcome Trading Fear

Author: Stelian Olar
Stelian Olar
All publications of the author

Just like greed, trading fear can be a real pain in the neck, holding you back from realizing your full potential as a trader. 

But what exactly is trading fear? 

Well, it can stem from a variety of sources - the uncertainty of the markets, the fear of losing money, the fear of being wrong, the fear of the unknown, the fear of missing out, and even psychological or emotional factors. 

But let's face it, fear can prevent us from cashing in on big opportunities and it can lead to analysis paralysis. 

Ask yourself, how many times: 

  • Do you hesitate to pull the trigger on a trade signal despite everything going in your favor?

  • You cut winning trades too early because you didn’t want to give unrealized profits back?

  • You didn’t honor your stop loss because you didn't want to lose money?

  • Or, you have been unable to get over a series of losses, and fear stopped you from taking the next trade?

You're not alone if you answered “YES” to any of these questions. You're part of most traders who have experienced the same thing. After all, fear has been a survival mechanism hard-wired into our DNA makeup.

What Are The 4 Types Of Fear In Trading?

To overcome trading fear, it's important to first understand what types of fear we're facing. 

Generally speaking, there are four common “fears” that traders of all levels will have to face:

  1. Fear of Missing Out (FOMO)

  2. Fear of loss

  3. Fear of being wrong

  4. And the fear of letting a win turn into a loss

Let’s explore this fear of trading, and learn how to tackle each one of them. With the right tools and knowledge, it's possible to turn fear into a catalyst for success.

How To Overcome The Fear Of Losing Money?

This fear is perhaps the most universal and understandable of all the trader's fears. Nobody wants to lose money, and the thought of potentially losing a significant amount can be a source of great stress and anxiety.

Have you ever held onto a losing trade, hoping it will turn around? 

Or hesitated to take a trade because you were afraid of losing? 

This is a classic example of how the fear of losing money can take control of our decisions. And, before you know it, you've missed out on profitable opportunities or even blown up your account. 

So, how to overcome fear of loss in trading? 

First off, only trade with money you can afford to lose. 

Second, limit your risk to no more than 2% on each trade. This way, even if you have a series of losses, you can still recover. 

And lastly, remember that trading is about probabilities and no one can predict the future with 100% accuracy.

How To Overcome The Fear Of Being Wrong?

Have you ever found yourself paralyzed by fear amid a trade? 

You're not alone. 

Fear can be a trader's worst enemy, especially when it comes to the fear of not being right. 

But what exactly causes this fear in trading? 

Well, for starters, we all want to be right. It's a cultural norm. But here's the truth: you don’t have to be right 100% of the time to make money in trading. Even with a trading system that only has a 40% win rate, traders; still can make money in the long run. 

The key is having a positive risk-to-reward ratio. 

So, how can you start trading without fear? 

Success in trading is not dependent on being right all the time, but rather on having a well-defined risk management strategy and focusing on having a risk-to-reward ratio greater than 1:2. 

How To Overcome The Fear Of Missing Out? 

The fear of missing out, or FOMO, is a common pitfall for many traders. It's the desire to jump into a trade without fully considering the risks, just to make sure you take advantage of a potential profit. But this haste often leads to regret.

Picture this scenario: 

You see your favorite currency pair bouncing off of support and you think to yourself, "I should have been on that train!" But before you know it, you're stuck in a trade that goes nowhere. Or, you jump in too early, before waiting for confirmation and end up holding on for dear life while the price moves against you

The key is to have patience and stay true to your trading strategy. Not every trade will be a winner, but the ones that are will be more meaningful and profitable because they were executed with confidence and a solid plan in place. 

So, instead of succumbing to FOMO, trust in your analysis and hold on to your plan. 

How to Overcome the Fear of Giving Back Profits? 

When it comes to trading, giving back profits can be a real gut-wrenching experience. It's natural to want to hold onto those profits and see them grow, but that's not always the best strategy. Instead, traders often find themselves with a difficult decision:

  • do they take their profits early and risk missing out on more potential gains,

  • or do they hold on for dear life and hope for the best? 

Unfortunately, both options can lead to disappointment. 

Taking profits too early can leave you feeling like you missed out while holding onto a trade for too long can result in those profits being given back as the market shifts. 

So, how do I get over my fear of trading? 

Have a solid exit strategy and take partial profits as the trade moves in your favor. Don't keep wondering "what if I had cashed out on my trades earlier?" Know what you want from the market and go after it. It takes discipline, yes, but you'll sleep better at night knowing you made the right trading decision.

Final Thoughts

Facing fear is inevitable, but the key is to not let it control you. Embrace it, understand it, and turn it into a driving force that propels you toward success. The key is to recognize the warning signs of trading fear and avoid falling into its common traps. 

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Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.