Fear of Failure Paralysis

You have just made five consecutive losing trades. Your confidence is shaken, and now you are reluctant to make another trade. You begin to think, "Why should I try again, I'll just lose again, and if I do, well, I don't think I can take it." Outlook and expectations influence how we trade. If we recently have experienced a series of failures it changes our outlook. Rather than anticipating a win, we now expect failure. We become paralyzed by the fear of failure. We have trouble putting on another trade. 

When trading, it is sometimes necessary to get the law of averages to work in our favor. That can often mean making trade after trade to determine if our strategy is faulty or if market conditions have changed. It is necessary to counteract the fear of failure and to motivate ourselves to press on in the face of setbacks.

Identify the core assumptions that underlie your fear and refute them. Many times a fear of failure concerns your tendency to avoid facing problems head on. Rather than face our fears, we tend to believe that it is easier to avoid dealing with them by denying their existence. Fortunately, we can often beat this fear by realizing that facing our fears isn't as difficult as we expect them to be.

A second assumption that underlies our fear of failure is our belief that one must be thoroughly competent, adequate, and achieving. Holding such a belief produces fear and anxiety, which for traders often produces hesitation and self-doubt. It is easy to see how you developed this belief. While growing up, whether it was at home, school or work, you often faced adverse consequences for not being capable. Consequently, over time, you learned to believe that you must be thoroughly competent, adequate, and achieving in everything that you do. If you believe that you must always be competent, you will waste all your limited psychological energy mulling over the negative consequences of failing, rather than focusing on what you are doing now to implement your current trading plan.

Don't let a fear of failure interfere with your trading success. You don't have to be perfect. As any seasoned trader will tell you, one is bound to make mistakes occasionally, and if you are consumed with avoiding them, you'll be so anxious and fearful that you will make even more mistakes. So remind yourself that it is not useful to believe that you must be thoroughly competent, adequate, and achieving. No trader can live up to that standard, and ironically, if you try to, you'll have difficulty trading profitably and consistently.

Reprint of 2005 PrudentTrader Newsletter