Building confidence of an Independent trader

Confidence is a mindset of trading without fear, that you are not scared of taking a position under the right circumstances, and when you do, you believe it will work. There will be times when things don’t go according to plan, but you will go back and have a look at them after the event you to explore where and why you went wrong, and that will be the lessons that you can learn.

Many traders have the emotions of fear and greed, and that emotions will be made use of by smart money, to induce them to sell on fear and buy on greed. Fear, greed and confidence are related in a sense that fear and greed are the effects, while lack of confidence is the cause.  Therefore to manage emotions, the logical countermeasure is to build up confidence.

Symptoms of fear:

• Jumping into unplanned trades because you fear being left out

• Hesitate in pulling the trigger because you fear the prospects of a loss

• Cut winners short in fear of giving prof its back, affected by noise

• Hang on to losing trades because you fear taking the real loss

• Feeling helpless about trading results

• Fear of missing out on trade

• Afraid to pull the trigger on a trade

• Feeling paralyzed once in a trade

• Living in denial about results

• Rationalizing poor results

• Chasing big moves only to find you bought top and sold low

• Not taking stops

• Take small gains to “catch up”, market leaves you behind

• Winners turn to losers and then you get out

• Wanting to get back at market

• Experiencing large mood swings; big highs, deep lows, anger and /or depression

If all these are very often, then the investor lacks confidence.  This type of traders are likely losers if they are trading over a long term, because they dare not trade when others are fearful, and they trade with the herd chasing the market with hope.

Now how to build confidence?

Looking at a bigger picture, I have developed a conceptual model for traders to build up their confidence in managing successful trades, as shown in the map below:

"Confidence and fear are states of mind that are similar in nature, only separated by degree. As a person's level of confidence increases, his or her degree of confusion, anxiety, and fear dissipates proportionately. This confidence would naturally develop as people learned to trust themselves to do whatever needed to be done, without hesitation."    ... Mark Douglas, The Disciplined Trader