I have been asked several times lately by new traders how to overcome the fear of placing trades. Called in the MOJO room FOPB = Fear of Pressing the Button. Another is FOMO = Fear of missing out. All common 4 letter metaphors for the dreaded mess up.
Just today with CBIO and UVXY and even CBLI to BUY people cant PULL THE TRIGGER - which transcends into the same TENDENCY TO BE PARALYZED AND NOT TAKE LOSSES AND OBEY YOUR STOPS WHEN IT IS TIME TO SELL. PRETTY CRAZY WHEN YOU THINK ABOUT IT. WELL DO SOMETHING TO CHANGE IT!!
One bad trade takes away 5 good ones and takes you back 2 days to make that back. So stay on course follow rules and it will make trading much easier and less stressful.
Today we saw the setup, but couldn't quite pull the trigger. The setup worked just as they planned, yet they missed the trade. I never have this problem. In fact, as I have said before, I had quite the opposite problem. However, having talked to many traders, I do know a little bit about this topic. Lets discuss a little thing known as paralysis of analysis.
The term ”paralysis of analysis” refers to over-analyzing (or over-thinking) a situation, so that a decision or action is never taken, thus paralyzing the outcome. Paralysis of analysis occurs in all parts of life, not just trading. Perhaps you have a great idea for a new social media site, but you don’t know how to go about getting started. You don’t know how to get the patent, or how to recruit investors for your idea, or whatever. So you are stuck, basically paralyzed and at a standstill. You will never be successful and never fulfill your dreams if you don’t figure out how to overcome this fear. Being paralyzed is great for new traders because you want to take the time to learn before placing trades. You cannot blindly follow a trader and expect to make money. You have to know the concept behind the trades and understand why the trade is being placed if you want to be truly successful. However, once you have taken this time to learn then how to do you muster up the courage to actually push the “buy” button and put your plan into action?? Well…..
The first thing that you must remember as you start to overcome this fear is that there is no perfect way to approach trading. Each individual must find an approach that is perfect for themselves. There is no perfect strategy that will “always” work in the stock market. Always doesn't exist.
Learning to treat trading as an art form rather than an exact science is how you learn to be successful You enter stocks that have the highest probability setups, and you exit stocks when those setups don’t work, with your capital still intact. This is the key to success in trading.
Like the character Sonny from Into the Badlands a show I watch on AMC ... he trained his whole life way beyond the skills of the average person ... who thinks they can beat him ... watch today's MOJO show you'll see what I'm talking about ...
The way that we teach you to overcome this analysis of paralysis at bulls is by following the 4 steps below:
1. Master high probability setups and know how they should act
If you are trying to read every book out there and use every indicator that has ever been placed on a chart, then you are without a doubt over analyzing this business and just going to run into a wall of confusion. Start by learning 1 or 2 setups and figure out what they are supposed to look like and how they are supposed to act. Start out just trading this setup.. then slowly add in another and another until you have a complete arsenal.
2. Start by taking small positions in the trades.
Trade the stock as if it were a normal position size. This will help you get your feet wet and get more comfortable with placing actual trades.
3. Have a game plan for the stocks you enter.
Know what type of trade it is that you are entering and what you expect out of the stock. If the trade doesn't go as planned, then sell the stock and move on. There are always other trades just around the corner. Cutting losses quickly on setups that go against you can be your greatest friend.
4. Keep a trade journal
Review your trade journal at night. Discuss everything in the journal why you want to enter the trade, your target prices, what that market is doing, what the sector of the stock is doing, your risk reward in the trade etc.. This will really help you to understand your trades and become a better trader.
Today's MOJO show ... watch how we nailed this CBLI trade: