Monday, December 11, 2017

Remove Anxiety from Your Trading | Trading Psychology

Today’s trading psychology question is…

“I had some big losses in the first chat room that I joined early in my career, and because of that, I find myself feeling scared before I enter a new trade.  I know you’ve talked about dealing with our emotions, but it seems that everything I do in trading seems to freak me out in some way.  I want to make this work, I love day trading, but this is keeping me on a simulator and I can’t get any progress without some help.  How do I stop being so scared before I take a live trade?”

So the question was… how do I avoid being so scared when I take a live trade?

Great question, and definitely something that most traders deal with after suffering a large loss early in their career.  This is also one of the big reasons why I never recommend using LARGE stops (and large positions) early in your career, and why you always need to have a daily loss-limit as part of your trading plan, which I’ll go into more detail later in this video.

In today’s video I’m going to give you a strategy for dealing with anxiety that comes with trading. 

Anxiety is what happens when fear attaches itself to everything around us, and a LOT of traders suffer from anxiety because they got some bad advice when they began their career, and it robs them of the opportunity to become a successful trader.

Just like someone who gets into a bad car accident the first week behind the wheel, and they struggle with anxiety every time they drive a car many years later…

…a trader can easily make some small mistakes that result in big losses, and they too will have the same challenges getting back on the horse again, even years later!

I’m going to give you a strategy to deal with this today…

But before I go into today’s lesson, I want to remind you to subscribe to this channel, and make sure you adjust the settings in YouTube to alert you ever time I post a new video… and if you really want to stay in-tune with what’s going on here at SchoolOfTrade, join our mailing list on the homepage of our website, or in the upper-left corner of my blog at

Now, let’s get into the strategy…

Fear is a completely natural response to the threat of danger.  It triggers our “fight or flight” response, which instinctively tells us to either run away or attack.

As I discussed in a previous lesson, we often interpret certain situations in trading as a threat (because there’s money on the line), when in reality, they aren’t threats, they are just part of the business.  This is the key determining factor between stress and distress.

The big concern is that we start treating normal, everyday situations as threats, which quickly turns into what we call “anxiety”.

With anxiety, everything we encounter triggers the “fight or flight” response, but the danger we fear is only in our minds, rather than in real life, and it prevents us from accomplishing any meaningful goals.

If you find yourself consistently scared to take the next trade, you are most likely suffering from anxiety, which is an issue that we need to address head-on before it robs you of this amazing opportunity that we have as traders.

We have to ask ourselves… is this threat real?  Or is this threat just something I am making up in my head?

Let’s say for example…

I’m watching Crude Oil trend lower in the overnight session, telling me to focus on selling-opportunities up in my ‘battle zone’ with a target going back to re-test the low.

Price begins to retrace off new lows, makes a ‘2-legged correction’, tests a key level of resistance, and begins to move lower.

Quickly, I scan my entry rules… looking for confirmation that this is a valid trade signal within my trading plan.

It doesn’t take long before I realize that the retracement off the lows caused a rising support trend-line on the chart, and thus, I don’t have a clear line to my target, disqualifying the possible trade.

I quickly decide that, although I want to make money, my job is to follow my plan, and I skip the trade, just in time to see the market reverse and move higher.

In this situation, my entry rules told me that this trade would be less reliable, and therefore, I avoided the trade, and avoided a loss. 

In other words, there was a REAL danger of loss, and I had to take action.

But now let’s say that a similar situation happens…

Crude Oil is trending lower in the overnight session, price rotates back up to the high of a bear channel, tests a key level of resistance and begins to set-up for what appears to be a perfect opportunity to short the market back down to the channel lows.  Something I’ve seen a million times before…

I check my entry rules, and quickly confirm that this is a good set-up within my trading plan, and I begin to move my fingers over to my mouse and get ready to place the order…

…but then something happens… I start thinking about a similar trade that I took yesterday, which looked almost identical to this one.

I pause for a moment, my heart starts beating faster, my palms get sweaty, I’m getting tunnel vision now, and I start searching for a reason to skip the trade, and in my delay, a perfect signal candle appears on the chart and the market moves quickly back down to the low, leaving me behind, and running down to where my profit target SHOULD have been waiting.  A missed opportunity to grow my account.

Let’s examine these two situations…

In the first trade example, I found a trading opportunity that did NOT fit my rules, and I used a valid FEAR of a loss to alert me to skip the trade, which prevented me from losing money.

In the second example, I found a solid trading opportunity, but a recent loss allowed my emotions to do the trading for me, and the FEAR of a loss prevented me from taking action, and it cost me some much-needed profits on my account.

Do you see how fear can be used in both positive and negative ways?

·        When there is a REAL threat, fear is an ally. 
·        When the threat is only in our MINDS, the fear is an enemy.
·        When this fear becomes attached to every trade we take, it becomes ANXIETY.

Anxiety is the consistent effect of fear on normal situations, that pose no real danger.

Notice that I never try to ignore these emotions, because as we’ve learned in previous lessons (when used correctly), emotions are our friends, and it’s impossible to completely remove them from our trading.

So, how do solve this anxiety problem in our trading?

First, remember that our feelings and emotions are signals that we need to follow. 

Think of your emotions like one of those warning lights on the dashboard of your car.  Some warning lights tell you to get your car serviced soon, while some warning lights tell you STOP driving altogether.

No matter what the level of urgency, we don’t cover-up the flashing light with a piece of duct tape, do we?  No, we take the car to a mechanic to make sure it’s fixed before we continue driving.

Our emotions are the same thing, telling us that something is wrong, but most of us just slap some duct tape over it and keep driving… wondering why we break-down on the side of the road a few days later.

If you’re nervous before you take a trade, that’s your signal, and it’s probably because you either…

·        Don’t have a proven plan that you trust, or
·        You’re risking too much on this trade (you fear the big loss), or
·        You’re allowing a recent loss to determine the results of the next trade you take (like in the example I used before). 
o   Remember, trading is all about the law of large numbers, so each trade is separate from everything else, and we have to be disciplined to avoid that common trap!

When we get nervous before we take a trade, the first thing our minds want to do is remove that psychological pain, so it’s natural to want to avoid that trade to escape the possible pain that may come afterwards… but that also prevents us from experiencing the pleasure of a winning trade.

And even more importantly, if we let a previous loss prevent us from taking the next trade, we rob ourselves from the potential of getting further in our trading career.

Say it LOUD

Here’s a trick that I use in my trade room to help my clients remove the anxiety from trading…

If I feel anxiety before I enter a trade, the best way to handle it is to say out loud… “I don’t feel comfortable with this trade.”

Then follow-up with saying… “and here’s why I don’t feel comfortable.”

When you use this simple exercise, it’s easy for you to begin seeing the REAL reason why you’re suffering from anxiety.

For example, if I say… “I don’t feel comfortable about this trade… because I can see there is a support level in the way of me reaching my target.”  That is a good use of fear.

But if I say… “I don’t feel comfortable with this trade… because my last trade like this was a loss, and I don’t want to lose money again” …well then, I know the bigger problem. 

The bigger problem is…I haven’t invested enough time with my strategy to trust it’s effectiveness over a large batch of trades, because if I had, I wouldn’t be allowing a previous loss to prevent me from taking the next VALID trade, I would be eager to make that loss back.

One of the most effective ways to avoid this pitfall is to talk out loud while you’re trading.

In other words, talk your way through each trade, say it out loud, as if you’re telling someone else…

Say it like this…

“I see the trend is down, I see we’re testing resistance, I have a good pattern set-up, I have the space I need to earn a good risk/reward, adding the order, there’s my signal candle, there’s my trigger point, getting filled, and we’re off… place my stop, place my targets, take my screenshot, update my journal, breath.”

Talking yourself through this process will make it easier for you to see for yourself that you have everything you need to take a trade… or… you don’t have what you need, and you should avoid the trade.

If you start to hear yourself saying… “I don’t know… maybe… well… the last trade…”  STOP… this trade either shouldn’t be taken because it’s outside your rules, or you’re allowing fear to cloud your judgement and you have a bigger problem of not trusting your strategy enough to be risking money at this point in your career.

Use a Checklist:

Here’s another strategy that will help remove the anxiety from trading…

One of the things that will make this even easier is to use a checklist.

I provide a checklist to all of my clients, and review each of the rules OUT LOUD before we take a trade.

Think about how effective that is…

If I’m in-tune with the market, if my mind is ready, my rules are ready, I’m physically ready, and I can take the trade.

But if I’m out-of-tune with the market; If I’m distracted, or I’m rushing, or the market moves too fast, or the set-up doesn’t fit my rules, SAYING THIS CHECKLIST OUT LOUD will force me to slow it down, and really understand the trade that I’m taking.

Remember, fear is natural, especially when there’s money at risk, and a simple checklist, read out loud, will make it easier for you to make decisions for the right reasons, and never out of anxiety.

We’ve covered a LOT in this psychology lesson, so let’s do a quick recap.

Feeling fear before you enter a trade is completely natural, because there is money at risk and an uncertain outcome.

But our jobs as traders is to define what type of fear it really is.

Is it the fear of the unknown?  Or is it the fear of a low probability set-up?

We want to use fear to avoid those bad set-ups, but we need to manage the fear that threatens to keep us out of high-quality trading opportunities.

Sometimes, we let fear control everything in our lives, and we begin to associate fear with almost every situation we encounter… which is called anxiety, and that will prevent us from having a successful career in ANYTHING we do, not just trading.

Our job then, is to determine which types of fear are GOOD for our trading, and which types of fear are BAD for our trading.

One suggestion I gave you would be to create a list of your entry rules, making it easier for you to literally SEE proof that this is a good trade.

Another very important suggestion would be say those rules OUT LOUD while you’re looking for a trade. 

Saying them out loud seems to make it more REAL for the trader, like you’re working with a coach that’s looking over your shoulder.


So, here’s your homework… create that list of entry rules, and just like in previous lessons, I would recommend that you list those entry rules in the order in which you’ll use them.

Once you have your list of rules, I want you to say them OUT LOUD while you’re trading. 

Imagine yourself working with me, looking over your shoulder, helping you along, analyzing the market and hunting for those opportunities when you can use those rules to enter confidently in your next trade, focusing on the process of trading, not on the profits or losses along the way.

You’re never going to remove the emotions from your trading, but through this strategy, you will begin to develop confidence in your rules over time, and you will soon realize that confidence isn’t the removal of fear, it’s knowing that you can perform at your best, even when faced with the fear of uncertainty, which is what day trading is all about.

And last, but not least, please remember, if you don’t have rules to follow, or if those rules are producing negative long-term results… then you have a different problem, you need a better trading strategy, like the strategy I provide to all my clients here at SchoolOfTrade.

Wrapping things up… I’ve taken too much of your valuable time…

I hope you found a ton of value in today’s trading psychology lesson…

…and I would love to hear from you about additional topics that you’re struggling with as traders.

Do me a favor…drop me a comment below this video with any topics you’d like to see me cover in my next psychology video…

…make sure to give me a thumbs-up if you found value, subscribe to the channel if you’re not already, and please don’t forget to share this video with a friend who can benefit as well.

Guys…It doesn’t matter what market we trade, or the strategy we use, even the most experienced & successful traders battle with their emotions when there’s money on the line.

And don’t forget, you can find me every morning @ 8:00am EST working hard in my trade room with all of our members here at, I have a great free trial on the homepage of our website, I publish my Nightly Newsletter every evening on my blog before 8:00pm EST, and I’m excited to see you again soon on my next trading psychology lesson.

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