Adrian Reid answers the question of how to overcome fear of losing in trading. He identifies three moments fear arises: (1) when entering a trade (uncertainty about rules and fixation on the single trade), (2) during the trade (fear of losing unrealized profit or accepting a loss), and (3) at exit (fear about closing too early or missing further gains). Reid's central recommendation is to shift focus from single-trade outcomes to the trading process—running rules, managing portfolio and exposure, and thinking in terms of the next 100–1,000 trades—which reduces fear if one has confidence in their system. He notes his own experience of taking thousands of trades over decades to illustrate the relative insignificance of single trades.
How can I overcome the fear of losing in my trading?
Let's face it, as traders, you know, why are we doing this where we're trading for one specific purpose mostly to make money. And, but the fear, the flip side of that, if we get it wrong, is that we lose money. And when we're placing a trade, the fear comes up in, in two places or three places. Actually, the first, the first time the fear comes up is when you're about to hit the button, the buy button, to enter your trade. And the fear at that point comes from not being certain about your rules. And it also comes from thinking about this particular trade and how this one trade will go. So the first point of fear is when we're entering the trade. The second point of fear is during the trade. Depending on what's happening, it raises some emotion in us. So let's say our trade goes into profit. We start to be fearful often that we're going to lose that profit and so we want to grab it and take that profit off the table. Or if the trade moves against us, we start to be fearful that we're going to have to bank a loss and face the fact that we made a bad trading decision. Okay, so the fear of losing our profits or facing a loss comes in when we're in the trade as well. And then the third point of fear is when we come time to exit the trade. Now, all this assumes that you have entry and exit rules. If you're just trading haphazardly, then, you know, there's nothing but fear. But when you get your exit signal, the, the next point of, the next driver of the fear is, am I making the right decision by closing this trade? I'm fearful of missing out on profit by holding onto the trade. Or I'm fearful that, you know, I, my signal is not, is not going to be accurate. It's not going to give me the maximum profit. Maybe I should hold on and hope that it's going to go up. Or maybe if, if I get a sell signal and I'm in a loss, you know, I'm afraid that if I sell now, I'm going to miss out on the gain, you know, so there's three points of fear that trades that come up for traders, generally when you're placing a trade and all of them come down to one thing, they all come down to focusing on this particular trade and this trade outcome. Because what happens is we're placing a trade and we put a bit of ourselves, a bit of our judgment, a bit of our ego into that trade. And if that trade is profitable, then we pat ourselves in the back and say, yeah, I'm a good trader, I made a good decision, right? But if the trade is a loser, we go, oh God, made another bad decision, lost money again. Are you with me on this? Because it's the focus on the current trade and the trade outcome, whether that trade makes money, that most often causes the fear when you step back from the money. And instead of focusing on whether or not I'm making money or losing money in this particular trade.
What happens is you can start to focus instead on the process, the process of trading. See, we as traders, we place trades, but the process of trading, which is running our rules, running our scans, placing many trades, managing the portfolio, taking trades on and off as they hit our different exit rules, allocating capital between systems or between rules, managing our exposure, all of those things. That process is actually the most important thing to focus on. Because when you focus on the process and you think about the next hundred trades or the next thousand trades that you're going to take in that process, the fear of loss, particularly in each individual trade, goes away. Because each individual trade is pretty much meaningless in the context of the next hundred or the next thousand trades, or at least it should be okay. If you're fearful of this specific trade and you just can't get past that, chances are the reason is that you have too much exposure on that trade, or that trade is giving you too much risk, or you don't have faith in your process, right? So when you have a fear of losing, you got to step back from the trades that you're making, look at your process and think about the next hundred or the next thousand trades. And if, when you think about that, if you're confident in that process over the next thousand trades, then the fear will generally dissipate. But if you look at that process of, and the, the idea of the next hundred or next thousand trades and you have a complete lack of confidence, it's probably because you don't have a good system that you have confidence in, right? So you don't have a set of rules that you know make money. And we're going to talk more about trading systems and why that's so powerful and important later on. But you need to separate yourself from the individual trade outcomes and, and that will go a long way towards eliminating the fear of placing trades and then also taking trades off. When I'm placing, I mean, I've taken thousands and thousands of trades over the last couple of decades. Thousands of them, and each one individually is pretty much meaningless. And if I make a loss, that loss is pretty much meaningless. It's so small, it doesn't really matter in the context of the portfolio. And if I make a gain, most of the time, the gains, okay, yeah, they're great. But that gain is not the be all and end all. It's not. There's no one trade that's going to make me rich, and there's no one trade that's going to make you rich either. So we've got to stop thinking about those individual trades. And if you do that, the fear will go away.
