Psychology and Risk Management
• What to expect
• Risks
• Position sizing
• illusion of control
• Accepting critisism
• Paralyzed by fear
• Loss is a feedback, not a failure
• The flexible trader
• Focusing on the positive
• Short straddle
• The dynamics of greed
• The herd mentality
• Notes
Fear of Failure
Paralyzed by a Fear of Failure Atychiphobia is an intense fear of failure. Recently, Rohan made five consecutive losing trades. He is now hesitant to make another trade because his confidence has been damaged. Why should I try again? he asks himself. I’ll just lose one again. I don’t believe I can handle losing one more time. How we approach trading is influenced by our mindset and expectations. Rohan’s attitude has shifted as a result of recent failures, which have been numerous. He is shocked, and he expects to lose rather than succeed. His fear of failing has now rendered him helpless. He is having difficulty putting on a different trade. But in order to trade well, you must make the law of averages work in your favour.
Finding the fundamental presumptions that underpin this anxiety and disputing them is the most effective strategy to eliminate fear of failure. A fear of failure frequently has to do with a person’s propensity to avoid dealing with issues head-on. We have a tendency to think that it is easier to reject the presence of our worries than to face them. Thankfully, we can frequently overcome this fear by learning that facing our anxieties isn’t as challenging as we anticipate it to be.
The idea that one must be supremely competent, adequate, and successful is another fundamental tenet that underpins the fear of failure. Such a belief causes anxiety and fear, which in traders frequently results in hesitancy and self-doubt. It’s clear how we came to hold this belief.
If we have the mindset that we must always be successful, we will use all of our limited mental capacity worrying about the negative effects Paralyzed by a Fear of Failure, rather than concentrating on what we are doing right now to carry out our present trading strategy. The majority of the time, traders who think they must be really proficient worry about what they did incorrectly, what could go wrong, and how they will recover if they fail. These ideas detract from the present experience and make it difficult to accurately and consistently interpret current market behaviour. Realizing that these ideas underlie your fear of failing and the emotional repercussions of maintaining them are crucial.
You can overcome your worries by rejecting them and neutralising them.
Let go of your fear of failure if you want to succeed in trading. You don’t need to be flawless. One is destined to make mistakes every now and again, as any seasoned trader will tell you, and if you are concerned with avoiding them, you’ll be so anxious and afraid that you will make even more blunders. Therefore, keep in mind that it is not helpful to think that you must be fully competent, adequate, and successful. No trader can meet that bar, and ironically, if you do, you’ll struggle to regularly and profitably trade.