Causes of fear in a novice trader
Many novice trader today are attracted by the opportunity to make good money on Forex trading and significantly increase their income. However, the very reality of earning is often called into question due to the various fears that plague inexperienced traders. A person who is far from understanding the basics of technical analysis and does not yet have experience in Forex trading may be afraid of making mistakes, which, in turn, inevitably lead to unpleasant consequences in the form of losses and failures.
However, if you adhere to such a philosophy, then there is a risk of not getting close to truly profitable Forex trading. It turns out a vicious circle: a novice trader is afraid to take the first step, and this protects them not only from incorrect behavioral algorithms, but also from gaining valuable experience, which in the future could serve as the basis for profitable trades. What should a newbie trader do in this situation? How long does it take to study the theory of Forex trading, read specialized books from experts, or start trading under the influence of a minute impulse?
Before answering this question, we invite our readers to think about the psychology of fear generation in newbie traders. Perhaps, if you manage to better understand the work of your own psyche, the roots of many problems will be exposed and you will clearly realize what exactly prevents you from conducting profitable Forex trading. It is no secret that all people have different characters and personality traits, but the mechanism for the emergence of certain fears associated with trade is based on general principles. Let’s take a closer look at what are the main fears a novice trader usually faces.
So, as psychologists and economists agree unanimously, there are four such fears. It is known that fear accompanies a person since ancient times, therefore neuroscientists distinguish this emotion as one of the most primitive and at the same time strong in its destructive effect on the psyche, because at such moments the “fight or flight” mode is activated with the release of large doses cortisol and adrenaline, which begin freely circulating in the blood, causing too much stress. When a newbie trader starts trading Forex, most often there are fears such as:
Fears of Novice Trader:
- fear of your own delusion;
- fear of missing out on a truly profitable trend;
- fear of losing existing profits from successful transactions;
- fear of losing the entire deposit.
The main mistakes made by novice trader
In some cases, fear is not only the cause of incorrect actions on the part of newbie traders, but also a natural consequence of some mistakes. Before you start trading Forex with confidence, it will be useful to thoroughly familiarize yourself with the theoretical part of the trading process, namely, with the statistics of common mistakes. As they say, you need to know the enemy by sight, or, in other words, understand what the emotional component of your personality is capable of. Experienced traders with impressive experience in Forex trading strongly recommend that beginners understand the essence of their erroneous strategies that give rise to the fear of trading.
Below we list the most “popular” and frequently occurring mistakes that lead novice traders to a state of panic and despair. Taking the proper measures in a timely manner can put an end to the formation of a vicious trading mechanism, which will prevent the development of fear of Forex trading. This will naturally save valuable resources such as your health, time and of course finances. It is known that the negative impact on the human nervous system also causes somatic problems, so the desire of novice traders not to waste their nerves is quite understandable.
There are several major mistakes in Forex trading, and at the heart of all these mistakes is a banal fear, but with some nuances and accents. In addition to the above reasons for the appearance of fear, a novice trader is also subject to the risk of making predictable mistakes that prevent them from fully trading currencies. It is logical that the list of errors is headed by unjustified, clearly inflated expectations of a novice trader, and then such errors as:
Novice trader errors:
- overestimation of one’s strength and confidence in easy success;
- “inhibition” of mental activity when opening a position;
- attempts to control processes or phenomena that are initially beyond the control of the trader;
- pessimistic attitude when predicting potential profits;
- the desire to close the order exclusively “in the black”, the complete prevention of closing the deal “in the red”;
- a novice trader considers themself a loser in advance in any scenario.
As we can see from this rather large list of failed psychological attitudes, all the actions given here, or simply the initial attitude itself, sets the newbie trader at failure. The brain processes information in such a way that even a potential failure is regarded as a threat, and the threat inevitably entails an intense feeling of fear. A kind of trading phobia appears, so an urgent problem looms before a novice trader: how to get rid of fear and start trading in Forex?
Elaboration of erroneous algorithms for a novice trader
Thus, you now have a basic knowledge of what factors trigger the chemical reactions in your body that are responsible for fear. In addition, you have just familiarized yourself with the main mistakes that any novice trader risks to make. Now our task is to literally “dissect” each of these erroneous algorithms of action and thinking in order to discover the root cause, which becomes an insurmountable barrier on the way to successful Forex trading. Let’s pay attention to how your psyche works in a specific scenario.
If a beginner trader has overestimated expectations regarding their trading strategy, the size of the expected profit or the success of Forex transactions, then, of course, such an ideological position contains the risk of future disappointment. It should be understood that absolute success without even the slightest loss or error is an illusion. Adhering to the ideology of perfectionism when trading Forex is a thankless and dangerous task for the psyche of a novice trader. It is important to give yourself the right to make mistakes and to perceive failure not with a panicky feeling of horror, but calmly and rationally as something useful for gaining experience.
The second in our list of erroneous algorithms of behavior and thinking was the so-called “inhibition” of the mental activity of a novice trader. Vague and unformed fears about the upcoming Forex transaction in a matter of moments turn into the strongest fear, which is why the consciousness “freezes”, like a computer program that does not have time to process the data or does not have the necessary power for this. A novice trader in these moments is driven by the fear of the unknown, which is also one of the most ancient and instinctive types of fear. It’s no wonder how often trades fail at this stage.
Another problematic point that needs to be disassembled into its components is attempts to control any events, processes, phenomena that initially cannot be subject to the control of a trader, especially a beginner. If a trader, in their subjective opinion, may believe that a significant amount of money is at stake for them and they are very afraid of losing it, then often in such situations an irrational desire to take market processes under sole control is activated, and this is a priori unrealistic. Experts warn: this erroneous algorithm of actions is based on a strong fear of losing money, and this, again, reduces the quality of Forex trading.
A pessimistic attitude when making a profit forecast is also extremely erroneous for a novice trader. If you immediately succumb to despondency and do not allow the slightest possibility of making a profitable trade on Forex, then in such a decadent mood, a novice trader pays less attention to important aspects when making a deal with a currency, even their short-term future is seen in gloomy tones, so a person with such thinking literally from the very first steps dooms their trading strategy to failure. As a rule, a pessimist trader considers failure to be a natural and only expected result, but does not dare to dream about profit, because fear remains the main emotion here.
Let’s move on to a detailed study of the next erroneous strategy. A novice trader is so afraid to commit at least one wrong action that they might give themself a difficult installation to close all orders “in plus”. Perfectionism in itself can be called rather a positive character trait, since people who are accustomed to doing any job with the highest quality and with the greatest efficiency, in general, are the ones who drive progress. However, in the context of Forex trading, such an ideology is not always welcome, because a novice trader deprives themself of both the elementary right to make mistakes and the opportunity to transform negative experiences into positive and constructive ones.
Finally, our list of erroneous behavioral algorithms ends with a complete, total pessimism not only in predicting hypothetical profits, but also the general low self-esteem of a novice trader, his absolute disbelief in his own success. This type of novice trader is notable for the fact that fear acts as a background component for them when trading Forex. They are afraid of miscalculating profits, they are confident in the luck of experienced traders, but they themself do not believe in even the rudiments of analytical skills. Of course, if you immediately think that luck on Forex favors only a select few, and you consider yourself a loser, then this creates a distorted understanding of trading processes.
Is it possible to get rid of fear and start trading Forex?
We have come close to the key issue of our today’s review. Is it possible, in principle, to overcome all these fears that hinder trading Forex so much? It will be useful for novice traders to learn how to overcome their psychological complexes and incorrect attitudes in order to fully experience how interesting and exciting currency trading on Forex can be. Understanding the mechanisms leading to failure, consciously approaching the reasons for your fear are already important steps towards the correct perception of Forex trading.
Perhaps the most extreme consequence of fear for an inexperienced trader can be a condition similar to reactive psychosis. Agree, this is already a rather serious psychosomatic manifestation of the fear mechanism, in which a person needs the help of a qualified specialist. Obviously, it is better to prevent the occurrence of such a condition initially than to buy antidepressants later and go to psychotherapy. It is known that in moments of loss of control over their own behavior, a novice trader is able to commit illogical, chaotic and absolutely impulsive actions that only bring losses.
When planning a Forex trading, a novice trader should share the principles of competent money management. This includes advice not to rely too much on leverage. If you are looking to make a big deal, then leverage can be somewhat justified. On the other hand, an excessive amount of leverage increases the risks and the degree of fear. If you understand in advance that you can seriously miscalculate, then it is better not to fuel your anxiety and use reasonable leverage. A rational and balanced approach to Forex trading, control of your emotions and impulsive wishes are universal advice for novice traders who strive for informed and profitable trading.