“I freeze every time I look at the screen. I get seized up with fear!” She said to me. I was afraid she was going to cry.
“I really want to trade. I really want to make money. I hate not having my money make money for me. But I can’t.”
She was smart so that wasn’t stopping her from making a fortune in stocks. She was frozen in fear.
What are you afraid of, I asked her.
“I’m afraid of losing money,” She said.
“Really? How much do you think you will lose if you do a trade?”
She thought for a minute, “I think my worst loss would be about $1000.”
Would you be fearful if you loss was only $10?
“Of course not! That would be silly!” and she giggled.
How about $100?
“No, that would be OK.”
So what you are telling me is that losing $100 doesn’t freak you out but losing $1000 does. Correct?
So cut your risk to just $100. You don’t have to risk $1000 on trades, and, if it freaks you out to lose that much then you should reduce your risk until you are comfortable.
She took the advice and became a successful investor. She slowly increased her risk over time.
Fear is one of the most critical problems that traders face. Fear of losing money.
I first learned this principle back in the 1970’s. The idea was that you were so nervous and anxious about a position that you had that you couldn’t sleep. The words of wisdom I heard were, “sell down to the sleeping point.” In other words, if you can’t sleep, make your position so small that you can sleep at night.
I’ve been sleeping like a baby ever since…
Fear is such a big problem that I recently put together an amazing course on the Psychology of Massive Wealth. I reveal two different methods to conquer fear. Not only fear of trading but fear of anything!
Learn more about the course here.