3. Managing Emotions Archives

Have You Lost Too Much Money, No Confidence?

This is a trader question from email.

Ivan says:
-Hi Neal,

I need a piece of advice.

When I started trading, I lost a lot of money and now have some problems to enter the market. It is some sort of mental problem. How to overcome it?


Neal responds:

Trading will always be risky. There is no way to trade without risk. so we must learn to accept risk, and to control it.

Unfortunately beginners have the greatest chance of failure, because their knowledge is lacking and their skill is non-existent. So it is common for beginners to lose a lot of money before they gain enough knowledge about risk control and survival.

Once a trader has had major losses, there is damage to the trader’s confidence. Patterns of fear are developed, because the pain of a large loss is so severe. Excess fear causes bad behavior, because our brain is trying to avoid future pain. This can cause the trader to avoid taking trades, to get into a trade late, to get out too early, to avoid placing a stop-loss etc. There are endless ways that fear can cause bad trading.

We have to tolerate a certain amount of fear because of the risk involved. Without risk, no gain is possible, no profits can result.

So how does a fearful trader recover, and start to trade more comfortably? How does a trader regain the lost confidence? It takes time, and experience.

First, eliminate the risk. If you can trade without risk, you can monitor your progress, and build confidence as your results prove to be positive. You can do this within a demo account. Take as long as necessary. After a few months, review the results, do you have confidence in your strategy, in your trading techniques?

Once you develop some confidence, you can begin to trade using risk capital. Once again, control the risk! Start with minimal leverage, and small positions. The goal is not to make huge profits. Focus on technique and strategy. Focus on building confidence. The goal is confidence, not large profits.

After some time, you will have enough confidence to take larger positions, and to use more leverage. Always monitor your fear and stress. If you are too uncomfortable, reduce the risk! You do not want to have another mentally devastating event. The goal is survival, building confidence. Take your time, this is a long-term project, not an overnight miracle!

-Neal. (FibMaster’s Fibonacci Trading Desk)


This is a trader question from the Fibonacci Trading Forum.

Justin says:
Hi Neal,

I appreciate you continuing to work to help us become better traders by helping us hone our skills. Here are the biggest things that affect my trading:

What do I struggle with the most?
Overanalyzing – I add Fiblevels on monthly, weekly, daily, 4 hour, etc to try and find the Fiblevels to ensure I don’t miss a level – Then question if the probability of the price action getting there so I slip into “analysis paralysis” and watch the trade slide right on by.

Neal responds:

Analysis Paralysis can be a real problem! If there is doubt about price reaching your profit objective, how about giving it a try, then exit if there is a trigger against your position? That way you are in the trade all the way if it gets there, and you exit with a smaller gain or loss if the trade stalls earlier. If you have enough confidence in the trigger, at least give it a chance?

Also, this issue about the minor (lesser) Fibonacci levels getting in the way, stopping your trading, we should discuss this in a live member webinar soon. This is a common error, I can help you with that.