How Best to Deal with the Fear of Loss When Trading online

Trading and business growth

A Secure financial future is the dream of many. Whenever you browse online for money-making ideas or read a ‘How to…’ that tells you what to do to make you rich, you must have come across online trading at one point. So, what is it?

Online Trading

Everyone wants to make it big financially. Online trading is the purchasing and selling of fiscal products via a platform created for this purpose by brokers. The platforms are online and they are run by brokers based online. They are available to anyone who is interested and has access to the internet.

However, thinking about joining the online trading community and actually doing it are two different issues. It is highly likely that taking the plunge will leave you jittery and you will want to quit before you even click that mouse. If you seek information on online trading from major trading communities like zulutrade, you will be in a great position to manage the jitters.

What causes the jitters?

  • Your inexperience for one. In spite of the many success stories you have read and heard, you know that it is not an ABC kind of activity. That makes you fearful.
  • You know you could lose money. You are not sufficiently prepared for that eventuality. What if you lose it all?
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You must lose in order to gain.

You need to reconcile yourself to this undeniable fact; you will lose money at some point. There are no two ways about this one. The sooner you accept it, the better it is going to be for you, and ultimately, the easier. The trick is in learning that even the best of the online traders lose money. That’s just the way this game goes. You must ensure that your fear does not run away with you; giving you insomnia and causing you to snap at everyone. If you are going in, then learn some of the things that may make you fearful.

Here is what you need to do:

  1. Overcome the fear of losing money by accepting that it is inevitable. Read about some big traders. Better yet, seek them out and speak to them. They will tell you the same thing.
  2. Do the math. No kidding. You will find that ironically, you can lose a good number of your trades and still make quite a bit of cash.
  3. Avoid risking more money than you need to. In simple terms, do not be greedy. If it is causing palpitations, insomnia and you are literally biting people’s heads off, then it’s too big a trading position. If it makes you think that if you lose, you are ruined financially, you have definitely overstepped.

You have heard that fear is a good thing, haven’t you? It is actually. Healthy fear – not paralysing, debilitating fear – is a good thing. It checks you. You should be afraid to lose all you have worked so hard to acquire.

Transform your fear into control.

You have control over each trade you make. You have two positives:

  • Size the position
  • Stop losses
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These are the tools at your disposal to manage risk, thereby giving you control of your money. You therefore need not fear that you are going to lose money as you can control whatever goes on with your funds. You can size the position up, decide if it is too big a risk and edit as you like.

Some questions you need to ask your self before placing a trade:

  1. What do I know about trading huge amounts of money?

It is important to get information. Learn as much as you can about market analysis, and how to trade in them. Without information, it is not prudent to trade. With information, you have an edge.

2. How do I know if a position is too big for my risk tolerance?

You need to learn some lingo, like per-trade risk. Once you have that down pat, you will be in a position to determine whether the position you are trading has the potential to wipe you out. What this means is you are better able to figure out if the amount of money you have traded is one that you are comfortable losing, should it come to that.

Before venturing into any positions, you must be very aware of your financial strength in order to work out how much money you can comfortably lose without going under.

3. Can I work out the math?

This is in reference to risk-reward versus cumulative winning advantage. For any number of trades that you make, there is the possibility of making losses on at least 35% of them. Experienced traders tend to lose even more; sometimes as much as 60% of the time. That notwithstanding, you can have more losses than wins and still make a lot of money in profits. That is the power of risk-reward.

It is okay to lose.

Accept that it is okay to lose. The best way to go about loss is to cut them fast and preserve your capital. Also, remember that your winnings will more than cover your losses. The more you trade, the higher your chances of winning and thus recovering your losses.

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Have confidence in your strategies.

It would make no sense to work out a strategy, then doubt it all the way. Map out a plan, stick to it and trust that it will work. Only be sure that you have done your research well. Knowledge is a weapon after all.

Also remember that if it keeps you awake at night or makes you irritable, you probably bit off more than you can chew. The best strategy is to always work with what you can comfortably lose.

Conclusion

The trick in being able to accept that the inevitability of loss lies in training yourself to accept that it happens, and seeking information from players in this industry, as well as searching for information from websites that can give you some insight into online trading.

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