After losing my job and almost all of my savings during COVID-19 pandemic, I started to study and practice trading in the stock market to earn my livings and support my family. Now, around after two years of regular practices I have learned technical analysis i.e. chart reading properly, got a clear understanding of the trading strategy, and a trading setup with genuine accuracy.
Still I am failing to trade because of fear. My fingers are getting frozen whenever I am trying to place trade. What should I do to overcome this fear?
Share your insights and experience so that other can learn and overcome their fear.
There should be another source of income which is regular so that even if trading doesn’t work out your monthly expenses are taken care of. This way your psychology won’t get affected negatively.
Your account size should be in accordance with your risk appetite. So start small. Risk should be 1-2% of your total capital. Eg. If you trade in bank nifty option buying, the capital required for 1 lot is around 10k. And considering the volatility you have to place a sl of atleast 40 points, which is around 1kâ‚ą. So your account size should be atleast around 50kâ‚ą to trade in 1 lot in option buying in banknifty. You can calculate the same way for if you trade in any other instrument.
If that also doesn’t help you then you should start from scratch. Trade in intraday equity with a capital 5k-10k. Profit/loss will be 50-100₹. Don’t seek profit. Seek learning. Once you get comfortable in this then start adding capital slowly & steadily.
From my trading experience of 5 years, I can say that not having a source of income other than trading works against you, because no matter what your strategy is you cannot earn consistently month on month from trading because, in some market conditions, your strategy will lose your edge.
Even if you by some chance able to make money month by month by trading withdrawing that money will disturb the whole compounding.
So my only suggestion is to have some source of income which covers at least your basic bills and then you will yourself feel the difference while trading.
Work on psychology and risk management. Trading with own capital, fear will definitely come but once you start trading with whatever profit you have earned, then fear will reduce to extent.
You need to have a proper capital management system in place. Trade with a fixed amount of money, and withdraw the rest. Spend only budgeted expenses, rest you save through tax saving schemes.
Having a side income in trading is very important to improve your trading and most impt psycology.
This days not only trading normal business also needs side income like FD,RENT etc so money can be compounded and Business can be more healthy
Find a part time, I probably say drive an auto. Don’t bother about ego, nobody cares how you make money. This takes desperation out of equation
Second part is just use a small account, trade it seriously, try to make 6%. Even if you lose, it doesn’t matter, you need to get over those emotions. That’s what I would say
First select one stock in the range of Rs 50 to 100. Do day trades with a target of Rs 200/- daily. Let it be one or two stocks only. Daily there is a high and a low. Try to make use of it judiciously with candle stick pattern “Helkin Ashi”.This could only aid your financial situation. You have to seek an alternative job or find other avenues to generate income monthly.
From studying online, I have come to known to categorize fears associated with trading in following categories -
Fear of the unknown
Fear of losing
Fear of being wrong
Fear of missing out
Fear of giving back profits
My issue is that I can clearly identify the candlestick patterns, support and resistance, direction, and entry points. Yet I am failing to execute the order. Either I am not placing any orders or for most of the times I am cancelling the order I am placing. The weird part is that for the most of the times I placed correct trade. If I would have taken those trades, I would have made profits only.
My losses are coming from cutting the trade after entering as soon as the price is pulling back against my trade. Again the weird fact is that for the most of the times I placed correct trades.
I don’t know how to overcome these fears. I am trying my best though. Having another source of steady regular income would help for sure.
1 is integral to trading, future uncertainty will always be there even after a trader achieves good profitability.
Rest are irrelevant. We will have losses, we will be wrong, we will not get every move, we will give back profits. This is also integral to trading. Edge is proven only after all of this we still have : profits - loss = good positive number.
This is how trading works, its probabilistic, out come of any 1 trade and even a series of trades in short run is very much random and we have no control. It takes a lot of time and experience for this kind of mindset to sink in, and further in my case it only happened once i actually had concrete proof of edge.
Have you backtested this ? How many trades have you taken ? Do you really know for sure that what you are trying to do has an edge in backtest? Do you understand that edge fully and know your numbers ?
Without that, you are supposed to have psych issues. Mind knows.
For some reason, we tend to overestimate our analysis when not trading/paper trading but as soon as live trading starts reality bites. I have seen this a few times when i was struggling. So you got to test your rules without error and be sure that it works. And you have to do this yourself.
Make a clear cut plan - no ambiguity. Don’t change this plan midway when testing it otherwise that never ends. And only way to know if a set of rules has an edge is to test it without error and then see the numbers.
Cut down capital and position size to something you don’t care about ( or least possible ). Then just execute. Don’t look at pnl, dont care what happens, only focus on execution. A famous trader traded with only 1 lot for over a year and eventually turned the corner in this way.
Only when you have data for say a year or more, look at the numbers and see if you have edge. Even 1 year is not really enough even for intraday but generally it should give some indication. Multiple years backtest + say a year of forward test would be much better.
If no edge, then change system. Advantage of backtest is that you can do an imperfect but still valid test much more quickly. If there is no edge in backtest, then there is no edge for certain. But reverse is not quite true, live trading is worse than backtest, but atleast you will have some proof that it might work.
Yes, we cannot depend on trading for salary type income. Not possible as we can have long periods of drawdowns.
So you need a source of income or some sort of support system to pay the bills. Having large capital can also help.
Even after you become profitable, dont consider trading as salary substitute. Its more of an investment substitute and at best you can hope for is yearly salary and even that is not guaranteed - markets are competitive and they can change.
Since there is money on line, creating a mindset where you aren’t bothered about the outcome of the trade is the hardest part and it is the most important thing to master if you were to have success in markets.
The Innerworth module on Varsity has great content which you can learn from on trading psychology.
I understand. This is tough situation but the only clear cut answer is, You have to first find second income source (find a job) and then try trading in stock market, that is too with small quantities, take only one trade in a day with proper money management and risk management, and Write down every trade and after 100 - 200 trades you will be having clear idea and some confidence too.