The Psychology of Fear in Trading
To Overcome Fear of Trading the markets, our human emotional responses such as anxiety and stress produce the need for such things as alcohol consumption, smoking, and indulgence of food. Such activities are compensatory or defensive mechanisms that are inspired by our psychological needs.
Insecurity, for example, may stimulate certain types of economic behavior, such as the accumulation of material possessions, as a form of compensation. Irrational fear may cause investors to liquidate stocks, futures contracts, real estate, personal collectibles thereby causing market crashes. Insatiable greed may stimulate excessive buying of stocks and other investments regardless of price and regardless of potential return.
Each of these positions is deterministic. They are unacceptable lines of reasoning to overcome fear of trading. They take an extremely narrow view of humankind. These positions fail to consider the fact that human behavior is composed of inputs from all of the senses and virtually every aspect of the environment.
Emotion and Psychology of Trading
Just as emotion and psychology alone cannot be seen as the stimulus of economic activity, we cannot view economic activity as the sole cause of human behavior and emotion. Fear is probably the most significant emotion for traders. Many traders struggle with this emotion and fear can stop you from applying your hard learned technical skills.
Significant trading losses often lead to emotional distress and turmoil and lead to fear of trading the markets. trader may become paralyzed and unable to enter the trade or act in other fear-based ways. After all, traders are human and naturally fear that which causes pain and they cannot overcome fear of trading ever.
Have you ever questioned why it is so difficult to trade even when you have solid technical skills? We at Trading Education Blogs hope to help traders understand how fear can affect their trading and offer practical techniques you can use daily to combat the common emotional pitfalls in trading.