Fear is a word that all of us hear in our day to day life on regular basis. It is also felt by the traders in stock market. The traders face different types of fears in stock market. In this article we will be discussing about those types of fears. Imagine if a trader turns on the news and finds out that there is a steep fall in the market due to an unexpected sell off. Now, consider the kinds of feelings that a trader will get in his mind after seeing that news. A trader after seeing that news can do only two things. Either a trader can square off his positions based on the market sentiments or the news can be neglected. But, in both the cases fear can’t be removed from the trader’s mind. The trader will be very tensed about losing the money invested in stock market.
So, now let’s start the discussion about the kinds of fear:
1. FEAR OF MISSING OUT:
Imagine a trader is continuously monitoring a stock. And he/she is not getting any proper signal either to buy the stock or sell it. Now, this kind of situation will definitely lead to a condition in mind of the trader that he/she might miss out the opportunity of making money in this stock. This is known as fear of missing out. This is the most common type of fear experienced by the trader.
As a trader one needs to know that he/she has to be quick and decisive in making the decisions. They have to quickly identify when the strategy suggests about the point of entry or exit in a stock. Some also take it as the fear of losing money, i.e. many think that they might lose their money if they get into a trade. But, this kinds of fear can be removed from one’s mind either by doing paper trading or by using many apps which gives us a lot of virtual money when we sign up. This virtual money can be used on the app for trading. These are some useful methods of removing the fear of missing out.
2. FEAR OF LOSING:
Their are certain traders in market who will always doubt the strength of the trend of market. Their this doubt is due to the fear of losing, the fear which keeps on tapping them at the back of their mind, that they might lose money, as the trend might not be so strong. There is not a single trader in this world who has only earned profit in all his/her trades. They all have booked losses at some point of time. But, what keeps them safe is that they take the risk that suits their appetite. They do not take risks that might disbalance their financial cycle. One needs to be confident to overcome the fear of losing. The losses that a trader books will give him/her the learning that cannot be found in any book of this world.
3. FEAR OF LOSING PROFIT:
Unfortunately, what most of the traders do in stock market is that they book quick profits and let their losses be wide. They do not cut short their losses. Instead they just cut short their profit, this happens due to fear of losing profit. Lots of traders tends to equate their net worth with their self worth. They just put in all the money in stock market to get lots of profit and becoming rich very quickly, and be a champion. What they forget here is that they might even book losses in stock market. So, one should decide the investment amount very carefully and strategically. One should not square off his/her positions, in case of profits, unless and until there is even a slight chance of trend reversal. This will help them get good profit.
4. FEAR OF WRONG DECISION:
For some persons it is very important to be right in all the decisions that they make. But, what they forget is that they also are humans. And no human on this earth has ever made all the decisions right. Same is the case with traders in stock market. They just wanna get profit by making all the right decisions. One should not be fearful of making wrong decisions. In market that are placed with calculated risks. Even if the decision goes wrong a trader will be mentally prepared for the loss that he/she would incur. So, one should not be fearful about making decisions. But should always take decisions based on the calculated risks based on their risk appetite.
As a market trader one should must move from fearful mindset to a mental state of confidence. It is very important for a trader to have faith in oneself and in the decisions made by him/her. It is observed that typically when a trader ignores his/her strategy and exits the trade that is the time where a new trend starts.