When you have relaxed conversations with many traders you’ll find the shared experiences invaluable. Whilst sharing thoughts on; brokers, economic sentiment, strategies etc. is fascinating, one of the most intriguing aspects is how we overcame the barriers we faced on our journey towards proficiency and profitability. Some of these barriers are incredibly difficult to overcome, some are self inflicted, one of the most potent is the fear of ‘pulling the trigger’, quite simply being afraid to put a trade on…
It’s worth closely examining this debilitating trader issue as it inevitably strikes most traders at some stage in their trader metamorphosis. However, looking for remedies is not a simple process, given that it’s generally the complex issues of the traders own personality that are the root cause of the problem.
The most common fear preventing pulling the trigger is position size. The stress of potentially losing money can lead to ‘trader paralysis’. The remedy is simply, reduce your size to a position where you feel more relaxed. For example, if you have an account of €10,000 then instead of risking the recommended 1-2% of the account per trade, choose a lower figure, perhaps 0.3%, bearing in mind that at this level the returns will lower and you may struggle to build any critical mass to your account. However, the losses will also be proportionality reduced. Once your confidence is restored slowly build up your risk gradually, perhaps adding 0.2% more risk per week/month over a set target/period of time.
There is another slightly more complex issue that can prevent pulling the trigger and it relates to not having enough confidence in your edge. That lack of confidence could also directly relate to an overall lack of experience. There can be times were you have absolute confidence in your strategy, (you’ve back and forward tested it to profitability) but given your lack of experience you still don’t have the ‘experience confidence’ to follow through. What do we mean by ‘experience confidence’?
There is no replacement for ‘doing’ in our industry, it’s impossible to put a figure on how many trades you must have executed in order to have gained the ‘right’ level of experience to lose your fear, particularly if you favour swing trading versus scalp trading. Perhaps a measurement of time or hours of immersion would be more appropriate. What is undeniable and frustrating in equal measures is that trading is not a profession that arrives easily as a skill, we have to exercise incredible patience to become proficient. The emotional intelligence required is considerable.
It’s quite a common experience for your understanding of; the market, your edge, your overall market intelligence to be ahead of your experience, you get ahead of your own learning curve. It’s actually not a fault, on the contrary it displays your level of overall dedication. Similar to a superb youth footballer at academy level, you may have all the raw skills, but lack the unconscious competence that can only arrive through playing the game, which in our situation is the experience of market participation.
Source: FX Central Clearing Ltd, (http://blog.fxcc.com FXCC Blog)