Fear is an intense emotion that gets the human body to respond with intensity equal to that carried by the fear causing stimulus. Despite a general negative consensus about fear, that was not what Nature intended it to be all about. You see, fear could be life saving for a person who is facing a potentially fatal situation by inducing a flight response. It is fear that helps humans to run away and get themselves to a safe distance that is far away from the threat to their life.
Unfortunately that cannot be said for forex traders. It does sound a bit strange but it is a fact that forex traders do experience a wide range of emotions during forex trading and fear is definitely a major one of them.
What do Forex Traders Fear?
Well they do have a lot of things to feel scared of and intimidated by. But in general the threats can be categorized as follows:
1) Fear of Losing Money
2) Fear of Missing Opportunities to Make Money
3) Fear of Making Wrong Decisions
Fear of Losing Money
It is but natural to feel anxious over losing money and in forex trading you are often dealing with leverage over 100-800 times your capital. More leverage means more risk and fear is a natural counterpart of risk.
The trouble is when a forex trader experiences losses repeatedly, because this is when he / she falls into a vicious circle of fear and losses. The past experience of losing money gets ingrained into the subconscious and develops into a crippling phobia overwhelming the traders each time they engage in forex trading.
Such traders often experience excruciating torment when entering or exiting trades which in turn can hamper and disrupt their trading decisions.
Typically these forex traders tend to place stops at very close intervals and this does nothing beneficial for them and on the contrary stifles the movement of the price action. And anyone who has dabbled in forex trading will know that the trades often pull back after entry and these traders tend to look at such pullbacks with great alarm. The result is that they scramble away with their trade and exit early which leaves them again in losses.
A described earlier, this only leads to a vicious never ending circle of loses, fear and more losses.
Tips to Counter This Fear
This sort of apprehension is dangerous and if you wish to continue forex trading you must take remedial measures. Here are 2 tips that can actually help you out:
1) Always trade on a demo platform before trading with real money.
Make sure that you learn all the basics at this time and also get familiar with the platform and the indicators / charts being used. Keep trading with demo account at least for 6 months with consistent wins before you fund your live account with real money
2) Try Minimizing Your Losses
Forex trading is a high risk venture and the only way to minimize your risk of losing money is to minimize the risk that you take. In simple words it means that you should not trade money that you cannot afford to lose.
Fear of Missing Winning Opportunities
Many noob forex traders fear losing out on winning trades. Though the forex markets are open 24X7, that does not in any way mean that you can trade throughout the day and night. Of course you need to select a couple of hours that are best for your trading.
Trying to keep track of all the opportunities often tempts the trader to enter the market at any price without any analysis or definite winning plan whatsoever, which in turn leads to losses. Instead of overtrading it is in the trader’s best interest if he focuses on the quality rather than the quantity. Carefully selecting qualitative trades can minimize your losses and in turn get rid of your fear of losing out on the winning opportunities.
Fear of Making Wrong Decisions
Wins and losses are an integral part of forex trading and no trader (even if you are an expert forex trader for past 15 years) can keep winning at every trade and get entirely rid of losses. There are many subconscious elements that have influenced us since childhood that shape our mental constitution in adulthood.
Fear of being wrong is also one of them and this fear can be a handicap while trading in forex. In order to get rid of this anxiety, your focus must be laser targeted on making money and not on being correct / right every time.
Trading is a probability game and there will always be losses. Being a perfectionist is only setting oneself up for failure. If you cannot take a loss when it is small because you have to be perfect, then this loss will often grow and grow into a much larger one.