A few weeks ago, Mike Lamothe was in the middle of making a trade when he read a tweet from one of his trading mentors that made him second guess his decision. A trading fear sunk in and he nearly didn’t move forward with his trade because of that fear of making the wrong decision. The tweet was from a trading mentor that inspired him and that he looked up to, but Mike’s instinct and trading plan and preparation was in contrast with his mentor’s. Even after years of trading, and now coaching others in trading, even Mike still battles with trading fears!
What we came to realize is that everyone battles with some kind of trading fear and it doesn’t matter if you are a beginner, intermediate or advanced trader. These fears like to sneak up on you during those key pivotal moments when you’re trading.
This helped inspire our recent Trader’s Mindchat Show episode where Mike and I discussed 3 key ways to combat trading fears!
Here are 3 Key Ways to Combat Your Trading Fears:
1. Awareness
Mike says that Awareness is the first and most important step to combating trading fears. You need to first figure out your trading beliefs, and this was one of the reasons Mike wrote “The MARA Mindshift Guide.” You need to first identify those fears in your trading and what is triggering that fear.
Ask yourself, “Why am I afraid?” but make sure to frame the question in a positive way. If you ask out of anger, Why the hell did I make this mistake?, your brain will search for an answer in that same tone. It may respond, for example, Because you’re an idiot. That got you an answer but not the kind that’s going to serve you or your trading!
We’ve all heard that negative voice in our head before so to prevent the “jerk”, as life coach Mel Robbins calls it, from coming out of the woodworks, be sure to ask yourself the right questions in a constructive way.
In Mike’s case when he was second guessing his trading decision, he asked, “Why am I looking at what other traders that inspire me are tweeting or doing with their trading in the middle of the day?”
His brain came back with “validation.”
Next he needed to go 7 layers deep because that first answer is just the start.
Mike says you need to keep asking “Why, Why, Why” like a toddler, and you’ll go further down the rabbit hole. It could lead you to something from your childhood. Perhaps, Mike was looking for validation from his mentors because he lacked getting validation from his elders or teachers when he was a kid. By peeling back the layers of the onion it will help you get to the root cause, and then closer to the truth. “To get weeds out of the garden you must get to the roots!” Mike says. He adds to this mental exercise with pen and paper. It will help get these thoughts out of your head and into the real world. It’ll be far easier to for you to analyze them that way.
Next, take a look at what you wrote down. Ask “Is this belief serving me now and in what ways did it serve me in the past?” If the belief was from childhood, it likely turned into a habit without us realizing it. Habits and beliefs that served us as children may or may not be serving us now. The only way to know for sure is to ask the questions and do the exercises.
2. Preparation
In the book “Letting Go: The Pathway to Surrender” by Dr. David R. Hawkins M.D. he says, “We when stop being afraid of fear, we notice that it is just a feeling.” He goes on to tell the story about his fear of public speaking when he was a medical intern. At the very thought of getting up in front of people he choked up, afraid he would fail out of pure fright. His limiting belief was that he couldn’t speak in pubic, so he avoided it at all costs. Finally, he couldn’t avoid it any longer and had a speaking engagement. He started to dissect the fear and realized what is the worst thing that could happen? Well…he was afraid of being boring. Then he thought of the countless boring speeches he had heard throughout his life. What was one more? Needless to say, despite his fear, he got up to speak, having written out the speech, and read it word by word. At the end of it, his friend said, “That was technically a good paper but boy, it sure was boring.” But Dr. Hawkins didn’t care. He had faced his fear, and each time it got better and better.
This is a great example of preparation and why it is the second way to help combat your fears. By being prepared you can figure out ways to best manage your trade and cut your losses. Mike wrote about 4 key exit strategies to help you prepare in his blog post here: Four Exit Strategies You Need for Every Trade.
He says that having a game plan and a support team will help speed up your learning curve but you can’t eliminate the element of pain in any type of growth. You need to expect losses. There is a huge difference between reading a book and actually experiencing trading for yourself. Mike’s coaching service MARA Elite can help make the process be quicker and less painful for his members but the reality is that if you want to become a full-fledged trader you need to understand the path toward growth may feel uncomfortable from time to time. Having clarity will help you determine the path to get where you want to go, and being prepared will help eliminate some of the fears that might be holding you back.
3. Action
The third step to combatting your trading fears is Taking Action! Fear in itself is trying to prevent you from taking any form of action toward your goal. It takes courage to take action and face your fears. Having awareness and a game plan will help (as mentioned in the earlier steps) and will help alleviate some of the fears. Even though you are still dealing with the unknown, by having these tools in your back pocket you are now better prepared for the unknown. Nothing happens without action. If you are a baby bird, and you have awareness that you need to fly, and you know how to fly by flapping your wings…you still need to take that step and start flapping your wings. You still know that you can land flat on your face but if you don’t take that first step you are right back where you started.
Some Fears Can Serve You
Some fears are actually helpful so it’s not about the total elimination of fears. It’s about knowing what these fears are and how you will best handle that situation when those fears crop up.
An example of a good fear is a fear of risking more than you should without proper knowledge or preparation of the trade. Maybe then you should listen to that fear that is telling you not to bet the house on a long shot!
There’s the story of a man who reached out to Mike after a major blow-up. We’ll call him Tom. Tom saw his account grow from 100k to over 1M trading bitcoin. Unfortunately for Tom, he got greedy. He thought it would continue rising forever and didn’t have a stop loss, profit target, or any kind of a plan in place. When bitcoin started to fall in January of 2018, Tom kept saying “It’s going to come back up” but after many months and price dropping all the way back down to where he originally bought it, the pain became too great and he sold. He had a million dollars…but then it was gone. Tom hadn’t learned any of the basics yet. He wasn’t aware of his beliefs or habits at the time. Even a simple trailing stop would have helped him nail down the majority of his fortune.
Developing a trading mindset takes consistent effort and there is no end point to it. If you are planning to be in the trading game a long time you need to continue to do this kind of work.
Think of a martial artist. The best have drilled the basics thousands of times. If you want to be the best trader you can be, drill the basics thousands of times. Schedule blocks of times for yourself to work on your trading skills. If you’ve yet to do a trading beliefs exercise, grab a copy of the MARA Mindshift Guide. It will walk you through the steps you need to take. The first time you do a beliefs exercise, you’ll likely find it challenging. Maybe even a little scary. Have courage! Life shrinks or expands in proportion to ones courage.
For more on how to Combat Your Trading Fears, Watch the Full Trader’s Mindchat Episode Here…
To continue crushing it with your trading, check out the following MARA blog posts:
Four Exit Strategies You Need for Every Trade!
Top Ten Trading Highlights from Adam Sarhan
The Four-Walled Prison of a Trader’s Mind
Melissa Lamothe is a bestselling author and co-host of “The Trader’s Mindchat Show” with husband Michael Lamothe. Melissa has 15+ years of marketing and writing experience and is the marketing director/content supervisor for Mara Wealth.