• Fear of losing money.
• Fear of losing a trade.
  
• Fear of giving back profits.
• Fear of leaving money on the table.

Fear induced trading can often lead to paralysing indecision and unforced errors that an otherwise rational trader would never make. Of course, the ability to act and trade in a rational manner is of paramount importance to those who desire consistently profitable results.

So how do we cut out the fear?

Many traders wrongly assume that the way to beat fear and irrational trading is to meditate one’s self into a zen-like state before switching on the charts and and taking hold of the mouse. Very often however, the real nub of the problem is typically much more basic. Usually, fearful trading is brought about by two things; A lack of confidence in one’s self and one’s edge.

Ask yourself now, honestly. Do you have an edge? Can you prove it?

• Have you back tested and forward tested this edge?
• Have you simulated this edge in live markets across varying market conditions?
• What is the size of your average winning trade compared to your average losing trade?
• How many of your trades are winners?
• What is your risk/reward ratio per trade?

All these questions are vitally important in the pursuit of rational, consistent trading. If you cannot answer them, or if the answers are not satisfactory, then you may wish to carefully reconsider whether you do indeed posess an edge in the markets or not.

Posessing a quantitatively verifiable edge is only one half of the equation. The other half is the issue of self confidence and your own ability to consistently execute your edge according to your own trading plan. It is surprising how many traders inexplicably deviate from their proven edge and trading plan through a lack of discipline, often the result of lack of proper training and preparation.

How do we instill self confidence in our trading?

The answer is deceptively simple. Practice, practice and more practice. Practice in a risk-free environemtn until executing that trading plan becomes an automatic and effortless expression of yourself, until you know exactly what to do and when to do it. This is the same principle as used by every elite performer who spends hours perfecting their techniques. The boxer trains in a gym, a chess champion spends hours in solitary practice, and the trader hones their skills on a simulator. This topic of simulation has been covered in more detail in my previous article.

Unfortunately, there is no shortcut for the discretionary trader. It takes a lot of effort and a lot of practice to develop enough confidence in yourself and your edge. Eventually though, if you persist with quantifying your edge and perfecting your ability to execute it consistently, you can and will reduce the effects that fear has on your trading. Well drilled soldiers perform best in the heat of battle. Now it is up to you to drill down and prepare yourself for the internal battle against fearful trading.

Until next time, good trading to you and I hope this article was helpful.

sam@efuturevision.com

Most new futures accounts last three months. A shocking statistic? Not that shocking perhaps, when you consider that most new traders approach the markets by opening an account, funding it, then immediately jumping in at the deep end of the pool with a half baked trading plan, no proven edge, and a lack of proper risk control. It’s only a matter of time before this trader blows his account.

I will be honest with you. As a new trader, when you step on to the playing field that is the futures markets, you are competing against the very best professional traders that London, Chicago, New York and Tokyo have to offer. They are vastly more capitalized than your average independent trader, and they spend every day living every tick. What’s more, they will eat you alive if you are not well prepared.

The most common argument I hear against simulated trading is that it doesn’t teach you anything about what it’s like to have real money riding on a trade. Quite right. I completely agree. Simulated trading can never account for the emotional aspects of using real money. At this stage of your learning however, that is completely irrelevant! Think about it, if you can’t demonstrate your edge and consistently make money from a simulated account, what hope do you have of making money from a real account?

When using the simulator, your goal is simply to achieve a level of discipline and consistency which will provide you with enough confidence in your edge and yourself to make a smooth transition to trading your real money account. Prove to yourself that you have an edge! Don’t have an edge yet? Why not use one of the high probability eFutureVision set-ups such as the 9/30 or 3X along with a simulated trading environment to accelerate your learning curve.

By making use of the simulator as your trading gymnasium, you are taking the same course of action as the world’s elite sportsmen and women who practice and train for years on end before taking their sport to competition level. A professional sprinter may only spend 10 seconds running his race, but how many hours of his day are devoted to achieving the optimal start out of the blocks? It is the small details that make a big difference.

I recommend that you spend anywhere from 4-6 weeks on the simulator as an absolute minimum. When you can sustain consistently profitable results over this period of time without major draw downs, you may begin thinking about making the transition to real money. Perfect practice makes perfect.

If you need suggestions for a good trading simulator, my choice would be NinjaTrader. It’s compatible with most popular datafeeds, it’s free, and it provides you with both an excellent simulation engine and perhaps most importantly – it tracks your performance metrics. Ensign software also has a good simulator function called Playback.

Please send any feedback or questions about this article to sam@efuturevision.com.