Fear is a powerful emotion that can not only be detrimental to traders but can have a large and lasting impact on their profits. Day traders essentially make decisions about buying and selling stocks on a daily basis if markets are open. To successfully make these decisions, traders must be brave, attentive, and unshaken throughout different market scenarios. One of the major factors that can hinder these decisions is fear.
Fear can have many different impacts on day traders. The most obvious impact is that fear can stop traders from making a trade, even when the indicators suggest it would be profitable. Fear causes traders to second guess their decisions, leading to missed opportunities and a potential fall in profits. Fear also can cause traders to make decisions out of panic or anxiety rather than their research, which can also lead them to make sub-optimal trades and frequent losses.
Day traders can also get sucked into behavioral trading, where they buy and sell based on emotional decisions rather than what would be the most profitable decision. This behavior can be driven by fear, such as if a particular stock has a long run and traders start to worry they will miss out, leading them to buy it while it’s still increasing or even after it has peaked.
Fear also leads to over-exposure and risk-seeking, which can cause losses if traders are wrong. Fear of missing out can cause traders to take bigger risks than normal, seeking out risky investments with no strategy or data-based plan of action simply because it is the “in” thing to do. This can prove to be not just unprofitable, but catastrophic if the stock takes a downturn.
And finally, fear can lead traders to become overly concerned with the stock prices themselves and not with the trading strategies they have in place to respond to certain market scenarios. Fear can often drive short-term decisions, where traders make decisions that are only beneficial in the short term but are not beneficial to their long-term strategies and strategies.
In summary, fear can have an extremely negative impact on day traders. Fear can lead to missed opportunities, poor decisions, over-exposure, and risk-seeking, all of which can have a lasting and detrimental effect on returns. Fear can also prompt traders to become too focused on stock prices and not on their trading strategies. For these reasons, it is essential that traders are able to effectively manage fear if they are to succeed in day trading.
If fear is taking you down, consider joining the group “Coaching With Cliff” here at Live Traders. Conquering our fears is something we work on everyday in the group. Why struggle on your own when you can work with 70 like minded traders?
More information about the group can be found at the following link: https://livetraders.com/groups/detail/2b144965-1248-4117-a8e0-be3f70c5725d
