Posted by: Bevan | March 27, 2008

Fearful Trading

Something I’m trying to be very aware of is trading fearfully after my drawdown.  I was in touch with the market and making good confident decisions beforehand, and trying to do that again is difficult with the constant fear of losing in the background.  As well as that, trading is obviously much more difficult with a lower account balance, as the amount to be risked on each trade is much lower.  As Alexander Elder says in Trading For A Living:

“Some losers will lick their wounds and wait until the pain fades away. Then they will return to trading, having learned little.  They will be fearful, and their fear will further impair their trading.  Very few traders will begin the process of change and growth.  For these rare individuals, the pain of hitting rock bottom will interrupt the vicious cycle of getting high from winning and then losing everything and crashing . . . you can start developing the descipline of a winner”.

I believe I am in the second category.  I believe strongly that I’ve already demonstrated the ability to observe the market and trade effectively, and that I now have a strong impetus not to make silly mistakes and omissions in my risk management.  I think its a matter of building the confidence in my own ability again, which will get stronger obviously as I see the results of my success.

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