(Video: Market coach Doug Hirschhorn, PhD, discusses how to fight the fear that can grip traders in the face of a massive selloff like the one that occurred Thursday, May 6th.)
Many of my clients are "afraid" or are experiencing "fear." Fear is not always a bad thing, though. In fact, for traders, feeling fear is not a problem, as long as they don't panic and allow it to drive them out of or in to trades.
Among the fears traders face:
- Not making enough money in these huge market moves
- Missing out on big trades
- Getting caught on the wrong side
At times like this, top traders see opportunity when others crawl into a hole because they are frozen by their fears.
Traders who keep their cool make money from the fear (i.e. shorting oil). Others keep their head and cut positions so they don't get blown up (Greece and the ripple effect). Still others are waiting patiently for the moment to strike, like a sniper.
So how can all traders think like the top traders when it comes to fear?
- Lay out the data and look at it from an objective point of view.
- Pay attention to where the disconnects are because others are trading based on fear.
- Keep positions smaller with wider stops; be ready to get bigger quickly the moment the uncertainty starts clears up, which it always does.
Think better, invest smarter.