Fear, in particular, is the most primitive of our emotions. It is the mother of biologic survival. That is why a trader must learn how to manage fear, or it will continue to overwhelm the impartial, disciplined, patient, and courageous kind of thinking upon which successful trading is built. Although fear will never be eliminated from a trader’s psychology, its intensity can be regulated so that it does not sweep the mind away in a cascade of negative thinking that leads to catastrophic results. Once managed, fear can be directed to help build an effective methodology for risk management. The problem with most traders is that they attempt to push fear aside or ignore it. As we will be seeing shortly, this fear has a lot to do with avoiding looking into the mirror at ourselves and facing our own personal demons.
Traders can deceive themselves and others, but they cannot deceive their trading account. It is the measure of how effective the organization of the self is in trading – not the stories you tell to yourself or others. Traders must learn to honor their internal struggle with their fears. To do this, the fear must be approached – not avoided (hesitation of entering trades) or attacked (impulsive trading). When the trader approaches his fears and learns from them, he or she opens the opportunity to re-organize him/herself into a more effective trader.