Published On: Thu, Feb 1st, 2018

Getting Rid of Your Anxiety of Losing Money Trading Live

Among the most common depictions of investing is the frenzied buying and selling on the stock exchange floor in the midst of wild hand gestures and yells. Floor traders are in a desperate rush to try and conclude the execution of their trading orders before the closing bell rings at exactly 4pm.

Too many people let this picture determine how they feel about investing in the stock market. They end up losing out on great opportunities because they allow negative feelings, rather than facts, to influence their decisions on whether or not to invest in the stock market.

However, there’s really no good reason for you to be afraid of investing in the stock market, provided you have all the right information.

Numerous successful investors have used stock trading as the primary means to achieve their long-term goals of financial independence. And just like you, these are people with day jobs, families and other interests that they still need to attend to even as they trade shares on the stock market.

Understanding your fear of live trading

According to a study conducted by Gallup, nearly half of US citizens report that they have invested in the stock market. Impressive as that number may appear, it is in fact the lowest in about 20 years. Moreover, the millennial generation is especially averse to investing in the stock market. A survey by Bankrate reported that only a third of US citizens between the ages of 18 and 35 have money in the stock market.

Fear is among the reasons behind the low participation rates above. More specifically, people are afraid of three main things:

  • Political uncertainty
  • Stock market bubbles and subsequent crashes
  • Losses due to lack of knowledge

When you look at all the above fears in totality, they make up one huge fear: the fear of losing money.

photo 401(K) 2012 via Flickr

Unfortunately, many people fail to realize that when they don’t invest, they’re losing even more money in the way of potential profits that they would have made. When you stash your money in a savings account or a money market account, you only get a return of about 0.5%. The returns from a 2-year CD might be around 1.3%. These rates of return are far outpaced by taxes and inflation, which eat into your purchasing power.

On the other hand, a good investment strategy in the stock exchange typically performs well enough to beat inflation and taxes by a huge margin.

The power of a well-documented, testable, replicable investment strategy

Needless to say, all successful investors and investment managers have an investment strategy that is well-documented, quantifiable and replicable. However, a majority of stock market investors move from one trade to the next without creating a strategy and measuring its success.

Having a documented and testable strategy that is built upon your investment goals and knowledge leads the consistent good performance of your investment. The strategy also helps you avoid making poor emotion-driven investment decisions. Most crucially, a good strategy eschews a scattered portfolio that lacks a guiding objective.

Make sure you can articulate your investment strategy as a process that leads to the achievement of your long-term investment goals. A good strategy will ensure that you’re still moving in the right direction even in chaotic times when you’re most prone to making poor emotion-driven decisions. High-profile investors such as Timothy Sykes are a testament to the value of sticking to a strong strategy.

In case you fail to meet your objectives or the objectives change, you can review your investment strategy and make improvements to ensure you meet the objectives. That way, your actions will always be targeted. Such a strategy is what sets apart successful professional investors from mediocre stock market investors.

Overcoming your fear of live trading

The following are some additional tips successful investors used to deal with their fear of losing money when they started live trading on the stock market.

Improve your understanding to dispel your fears

Learn as much as you can about the stock market. Learn about the history and workings of not only stocks but also other investment vehicles, such as bonds, mutual funds, futures, and options. Find out the risks and the fees associated with all these investment options and use that information to formulate an investment plan in which you can be confident.

Even after you learn about stocks and start investing, don’t assume that you have all the knowledge that you need. Make sure that you continually build up on that knowledge at every opportunity that arises. Good investors are always on the lookout for opportunities to improve their investment strategy.

Take action in spite of your fear

You need to realize that even the most successful stock market investors made many mistakes when they were just starting out. If you go in expecting that you’re going to win every single trade you make, you’re bound to be disappointed. Allow some room for failure because only through some failure do you gain experience.

Make an allocation for long-term investment

To make a good judgment on how effective your live trading strategy is, track the performance of your investments over a period of one year or longer. Long-term strategies have consistently outperformed short-term strategies when it comes to making the most out of the stock market.

Develop a healthy relationship with loss

The best way to develop a healthy relationship with loss is to at first limit your investments to an amount that you are ready to lose. Make sure you don’t invest money that has been earmarked for your regular monthly expenses. Doing so raises the stakes so high that it will be difficult to avoid making an emotion-driven decision, rather than a facts-driven one.

Final thoughts

It is certainly not easy to deal with the anxiety of potentially making losses while live trading on the stock market. Finding the courage to get started is among the hardest steps to becoming a successful live trader in the stock exchange.

However, you can dispel your fears by building a strong knowledge base of the market, taking action in the face of fear, creating and sticking to a long term strategy, and limiting the risk associated with loss in the early stages of your investment career.

Author: Charlie Brown

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